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The stamp of approval that's helping Aussies shop ethically

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There has been a recent upswing in the number of businesses that are joining the B Corp movement. B Corps are an independently certified, voluntary global standard, but is it a model for kinder, gentle capitalism, and can making a mission part of business strategy mean stronger returns?

What is a B Corp?

It is a company that has identified sustainable and ethical practice for communities, customers and the environment. The idea is that by integrating good ethics into business as usual, companies create profit that's rooted in purpose. A B Corp is a company that is certified by a non-profit organisation called the B Lab as meeting rigorous standards of social and environmental performance, accountability and transparency.

b corps outland denim
Outland Denim is one of 260 B Corps in Australia. Photo: Outland Denim

How does a company qualify as a B Corp?

First, a company has to have been around for at least 12 months. Companies fill out a B Impact Assessment to evaluate their company's performance against environmental and social performance, and gets tips on how to improve their practices in those areas. The B Impact Assessment is done on a scale of 200 points, with a minimum of 80 points needed to qualify.

If a company has at least 80 points, the B Impact Assessment is submitted for verification to B-Lab, a global non-profit that enforces the organisation's standards.  The standards for B Corp certification are overseen by B Lab's independent Standards Advisory Council, which reviews the assessment in a process that B Corp says can take from two to six months.

Once the assessment is certified, companies are invited to sign B Corp's Declaration of Interdependence, they have to sign the B Corp agreement and pay their certification fees, which are based on company revenue. B Corp certification has to be renewed every three years.

How did the B Corp movement start?

B Lab was co-founded in 2006 in the US by Jay Coen Gilbert, now B Corp's chief executive. Coen Gilbert previously owned basketball apparel company AND1, but sold it in 2005 and launched B Lab the following year.

He told Forbes: "Our vision is that one day all companies will compete to be best for the world - best for workers, best for communities, and best for the environment. Together, we will build an inclusive economy that creates a more shared and durable prosperity for all."

What's the difference between a B Corp and a Benefit Corporation?

You sometimes read of B Corps and Benefit Corporations. A Benefit Corporation is a legal designation in 30 US states and Washington DC. Benefit Corporations share many of the same social and environmental aims as B Corps, but not all Benefit Corporations are certified B Corps, and vice versa.

Coen Gilbert worked with a lawyer to come up with the proposal for Benefit Corporations as well as founding B Lab.

How many Aussie companies are certified B Corps?

There are currently more than 3000 B Corps in 64 countries across more than 150 industries. In Australia, as of August 2020, there are more than 260 B Corps.

These include Australian Ethical Investment, FutureSuper, Wealth Enhancers, GlamCorner, Emma & Tom's, KeepCup, Jasper Coffee, and one of Meghan Markle's favourite jeans brands Outland Denim. Globally, the B Corp community includes Ben & Jerry's ice cream, and Patagonia.

Does being a B Corp actually make a difference?

This is an interesting question. In a Harvard Business Review article in 2016, authors found that businesses seek B Corp certification as a way of authentically establishing the credentials for their environmental and social performance to avoid charges of "greenwashing".

There is also a case to be made that focusing on long-term environmental, social and community issues that are important to a business can help minimise risk and increase return.

That having been said, B Corp status is voluntary, and pursued by companies which are, presumably, already focused on social and environmental activities within communities, so self-selection bias may come into consideration.

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Rachel Alembakis is the Managing Editor of FS Sustainability, a Rainmaker title that examines how investors and companies integrate environmental, social and corporate governance issues into their decision-making processes. She has more than a decade's experience covering investment issues for a range of publications in Australia and overseas.
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