2 B or not 2 B: Why brands seek B Corp status

The question of what a for-profit company’s purpose is might seem straightforward. It’s...for profit. But brands are beginning to recognize that earning said profit depends on more than churning out products and services, as people are increasingly considering a company’s impact on things like the environment and its workers before making a purchase.

Lucky for them, companies that don’t fashion themselves entirely as profit-hungry, soulless types can try to prove their virtues through the burgeoning B Corp movement. Created by the nonprofit organization B Lab in 2006, “B Corp” is a status a company can apply for to certify that, in addition to turning a profit, it prioritizes making a positive impact on the world through things like environmental action, community engagement, and labor practices.

To date, B Lab says it has certified more than 4,000 companies in more than 70 countries. They include brands like Patagonia, Allbirds, Amy’s Kitchen, and Ben & Jerry’s.

At a briefing this week about B Corps for Congressional staffers, Andrew Kassoy, the cofounder of B Lab, said that the idea behind B Corps is rooted in stakeholder capitalism, or the notion that companies’ obligations should extend beyond their shareholders to include stakeholders like their workers and the environment.

TCHO, a company that sells organic and fair-trade chocolate, earned its B Corp status in September. It says that central to its application were its efforts to responsibly source cacao beans and labor. For instance, the company set up “Flavor Labs” around the world as part of its TCHO Source program to allow farmers to make and taste the chocolate from the beans they produce, something many farmers don’t actually get to do.

“We’ve always been proud of the steps we’ve taken to maintain sustainability efforts through our TCHO Source Program, and B Corps standards were aligned with what we have already been doing,” Laura Sweitzer, Source program director at TCHO, told Marketing Brew.

The movement is not without critics. For example, journalist and political pundit Anand Giridharadas has cautioned that, while B Corp status is sure to attract companies actively trying to make a positive social impact, behemoth corporations are unlikely to try to meet the qualifying standards.

“It’s a great thing, but it’s fundamentally voluntary. What this does is it means that if you’re an already good, virtuous company, you may be motivated to get into this club. But if you’re Exxon or Pepsi, you’re not going to be in this club,” Giridharadas said in an interview with Big Think.

Checking all the boxes

Onlookers might dismiss the B Corp movement as a marketing ploy—a way for companies to put on a fancy sticker to show the world that they care about more than just profit. But B Lab and the companies it certifies argue it’s not an easy label to earn or maintain.

“The process was extremely time-consuming. It took time to compile all the necessary documentation that they require,” Sweitzer told us. “The biggest challenge that we faced was compiling over 10 years of TCHO’s sourcing and sustainability records that complied with B Labs’ application standards.”

That said, B Corp companies do often use their status to display their values to customers. Sweitzer said TCHO displays the B Corp logo prominently on its packaging and marketing materials. Many companies that have achieved the distinction also display the logo on their websites.

In order to become a certified B Corp, companies have to hit a mark of at least 80 out of 200 on the B Impact Assessment, an online tool that evaluates a company’s impact on its workers, customers, community, and the environment.

The assessment asks questions about the amount of on-site renewable energy a company’s offices use, or the number of full-time workers who are reimbursed for continuing-education opportunities, in addition to several others.

“If you just see this as a label, you’re not going to actually reach that 80 bar. It requires legitimate dedication to mission and true positive performance,” Holly Ensign-Barstow, B Lab’s director of stakeholder governance and policy, told Marketing Brew.

B Lab also imposes legal requirements to become a B Corp. The requirements vary by jurisdiction, but usually involve structural changes such as amending a company’s articles of incorporation—the legal documents that establish a company and its structure—to include making a positive impact on the environment or society as part of its mission. A company could also become a benefit corporation, which is a separate legal designation issued by some state governments.

Ensign-Barstow argues that those requirements compel companies to view B Corp status as not just a label, but rather as a set of obligations. According to Ensign-Barstow, this ultimately means a company is giving its directors a fiduciary duty to consider impact on stakeholders like the environment and workers, in addition to shareholders, and is a way of discouraging companies from seeking B Corp status as a way of “greenwashing.”

“They have to adopt a legal status that makes them legally accountable. … So it’s not a light thing that we’re asking them to do,” she said.

A commitment

Companies have to recertify every three years by retaking the assessment. They also pay an annual fee ranging from $1,000 to $50,000, depending on their annual sales. Companies making more than $1 billion per year could have to pay more, based on their size and complexity.

B Lab says it can take six to 10 months to process a company’s application, which involves validating responses to the B Impact Assessment and verifying legal requirements. About a third of applicants actually achieve the certification, according to the org’s website.

Ensign-Barstow said it’s typical for companies to begin the assessment process and realize they won’t meet the mark, but still use the tool to identify areas of improvement.

Bombas, a company that sells socks and other apparel, said that its model of donating one item for every item purchased was central to its B Corp application, which was approved in 2017. Walker Stole, Bombas’s senior manager of sustainability and corporate responsibility, told us the application process was “illuminating” because the company had to take a deep look at everything from its operations to product development to community engagement.

“As a relatively early-stage company, we used the assessment as a tool to help us identify key areas for development and improvement, and define how we want to run the company,” Stole said.