From Patagonia to Ben & Jerry’s, thousands of businesses globally have chosen to get certified as B Corporations—or companies that balance profits alongside people and planet by meeting high standards around environmental and social sustainability, and making a legal commitment to consider all stakeholders.
There are over 4,000 certified B Corps today across over 150 industries, including plenty of startups. More and more investors and companies are embracing ethical approaches to doing business for the long-term benefits, and even early-stage companies can get the ball rolling on B Corp certification.
500 Startups recently spoke to consultant Eliza Erskine to discuss the benefits of B Corp for startups and gain a deeper understanding of the process and requirements. Through her firm Green Buoy Consulting, Eliza specializes in helping early-stage companies implement sustainability into their business models and strategies.
As the ranks of B Corp companies grow, many new members are early-stage companies, says Eliza. There is currently a sizable queue of B Corp applicants lined up, with wait times during its review process ranging from six to ten months—a trend that didn’t exist pre-COVID-19. “It was like six weeks,” says Eliza. “I think that really speaks to how popular it’s gotten.”
B Corp is open to any for-profit business. The certification is managed by a group called B Lab and looks at the strength of a business across social and environmental performance, public transparency, and legal accountability.
The multi-step process starts with an online assessment called the B Impact Assessment. It includes a range of questions based on B Lab’s designated impact areas, and awards points based on a company’s responses. A company must achieve a minimum of 80 points on the assessment to apply for B Corp certification, at which point it may be required to provide supporting documentation for responses to the assessment–for example, energy bills as proof of energy consumption.
Eliza recommends aiming for at least 85 points as a buffer, in case points are nullified during the review process. The impact assessment is usually the most time-consuming part of getting certified, as it’s quite comprehensive. The time needed to complete the assessment varies, but a first pass usually takes three to four hours. Eliza suggests breaking it up into chunks. “It’s definitely not something that is sort of a one and done,” she says.
Post-assessment, companies meet with a B Lab analyst to discuss results. B Lab will then ask follow ups, collect additional information, and conduct a background check. For certification, a company will need to make legal changes such as adopting a benefit corporation structure and amending governing documents (legal requirements vary by company). B Lab also then collects a fee (starting at $1,000) for the certification, with pricing based on a company’s annual revenue (which means it’s generally more affordable for early stage companies).
Benefits to Startups
There are plenty of reasons to consider B Corp, but for starters Eliza says there is growing evidence that purpose-led businesses grow faster than the national average and excel at customer retention due to alignment with the brand. They also have proven to be more resilient during economic downturns, including the pandemic. For early-stage companies B Corp certification can be a validation of a startup’s values and the actions they’re taking to support people and the planet–even if they don’t have a dedicated sustainability team. “The certification process is a great way to cement those practices and prove that you’re taking action,” says Eliza.
Another key reason she sees companies getting certified is to help with hiring and retention, because increasingly people want to work at companies with sustainable missions. There are even B Corp job boards now. Partnerships are another reason for startups to consider certification, as some companies prefer to work with other sustainable businesses. Eliza points to a colleague who runs a marketing and design studio and works exclusively with B Corps. “She wanted to become a B Corp herself in order to kind of set that standard,” says Eliza.
Crucially, B Corp is making it easier for startups to get certified, with an option aimed specifically at early-stage companies. Called Pending B Corp, it’s only open to businesses less than 12 months old. This allows companies to complete the assessment using best estimates based on the limited information they can gather. Pending B Corp requires a $1,000 initial fee, and companies can then submit their impact assessment after one full year of operation.
Currently, there are over 100 companies that have received Pending B Corp certification.
Questions and Concerns
A frequent question Eliza gets is whether certain industries are a good fit for B Corp. She thinks businesses should come at this question from a different angle by instead considering whether a B Corp certification is a true reflection of company culture. “You are legally saying we are going to incorporate people, planet and profit,” says Eliza. If that makes a founder nervous, it could be an indicator that B Corp isn’t necessarily a good fit, regardless of industry.
Overall, the barriers to getting certified can be high. It takes time and effort to navigate the process, and some companies are hesitant to become a legally designated benefit corporation. According to Eliza, roughly 40% of applicants successfully reach certification. “B Corp is the way that it is for a reason,” says Eliza. “But it also means that once you’ve completed it you’re in this sort of specialized crowd.”
Meanwhile, there are cases where it’s too early for some companies to pursue B Corp. Pending B Corp makes that less of an issue, but Eliza finds some founders may want to wait until they’ve started hiring.
Exploring the B Impact Assessment can serve as a useful tool to map things out, even if a company is not ready to pursue certification. It’s free to use and provides a long list of metrics and insights into the framework. That can be a good way to prepare for certification and learn how to incorporate sustainability practices. Plenty of businesses do just that–Eliza reported that around 200,000 companies have used the assessment to date.
Tips and Tricks
Startups should lean into their specific ESG strengths when pursuing B Corp and not worry too much about whether ESG elements are off-the-charts across an entire business. “If your employee benefits or engagement are really strong, use that and then build from there,” says Eliza. The impact assessment is designed to evaluate strengths.
It’s important to remember that B Lab wants to help. “B lab is very interested in having as many companies certified as possible,” says Eliza. You don’t have to be an ESG expert to successfully pass the assessment. B Lab’s website is full of FAQs and resources, and the assessment has explainers for each question. The assessment is transparent in the sense that you can see how much each question is worth as you take it, and responses are confidential and editable. Eliza also recommends reaching out to B Lab if you have questions.
Eliza says it can be helpful to have multiple team members working on the certification together, however it’s good to have a point person. Sometimes it can also help to get expert assistance. That’s where someone like Eliza comes in. As a consultant she finds that B Corp certification can get lost in the shuffle of competing priorities at a startup and that outside help can speed things up.
Another good resource that we recommend for startups interested in B Corp is this paper produced by B Lab, which explores the case and process for adopting benefit governance.
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