B Corporations – The Business World’s Version of ‘Certified Organic’

 In Business Law

B Corporations – The Business World’s Version of ‘Certified Organic’

Fair trade labelling, organic certification, and LEED (Leadership in Energy and Environmental Design) designation are some of the labelling and rating systems that we are commonly exposed to today. A similar kind of certification is now available for corporations – entities that primarily, and often solely, have profit-making motives. Corporations that are conscious of their social and environmental impact can now get the business version of organic certification by becoming a Certified B Corporation, or “B Corp”. B Corps are for-profit companies, certified by B Lab (a third-party, not-for-profit organization), that have met “rigorous standards of social and environmental performance, accountability, and transparency.”[1]

Today, there are approximately 1,728 Certified B Corps in 50 countries across 130 different industries. Well-known companies like Ben & Jerry’s Ice Cream, Patagonia, and Etsy are Certified B Corps. Canadian B Corps include Beau’s All Natural Brewing Company Ltd., Bullfrog Power, and the Business Development Bank of Canada.

How can my company become a Certified B Corp?

In Ontario there is currently no benefit corporation legislation that would enable a company to directly incorporate as a “public benefit corporation”. Therefore, the B Corp certification process through B Lab is the step that your business should take if it wants to be recognized as an accountable company with a positive social and environmental impact. Note that even if in the future Ontario enacts “public benefit corporation” legislation, B Corp certification through B Lab will remain a separate and independent rating system that any business – whether or not governed by benefit corporation legislation – can apply for.

If you have an existing business in Ontario or are about to incorporate a new one, there are two main steps you will have to take to become a Certified B Corp. The company must meet: 1) performance requirements; and 2) legal requirements.

The first aspect of the performance requirement is that the company will have to take a B Impact Assessment, which assesses the company’s impact on stakeholders such as its workers, suppliers, the community and the environment, and also looks at best practices regarding the company’s mission and governance. Following this, an assessment review with B Lab staff will be completed and supporting documentation will be requested. A score of 80 out of 200 points is required to gain B Corp certification. After the review, additional documentation may be requested, a confidential disclosure questionnaire must be completed, and background checks will be conducted.

In Ontario, the legal requirement of B Corp certification has two components. First, a company’s Articles of Incorporation (“Articles”) must include language that makes directors legally obligated to consider all stakeholder interests, other than solely shareholder interests. Stakeholders can include, but are not limited to, employees, suppliers, consumers, creditors, government, the local community, and the environment. Second, shareholders must be able to hold directors and executives accountable to this higher standard of conduct. B Lab provides specific language that a company can use to amend its Articles, although legal advice should be sought when doing so. It is important to be aware that whether or not your business is provincially or federally incorporated, both the Ontario Business Corporations Act (OBCA) and the Canada Business Corporations Act (CBCA) consider an amendment to a company’s Articles to be a “fundamental change” which will require authorization by special resolution.

Once B Corp certification is granted a company will sign the B Corp Declaration of Interdependence and Term Sheet and pay an annual fee based on the company’s annual sales. To maintain its B Corp status, a company will have to update its B Impact Assessment every two years and score the required 80 out of 200 points.

Why should my company become a Certified B Corp?

After reading this you might be thinking, why bother getting B Corp certified since there are fees to be paid and various steps that a company must take to gain this status? First, with B Corp Certification, your business will be able to attract a new and growing class of investors, known as impact investors. Impact Investing – investments in companies that will offer a financial return while generating a positive social and environmental impact – has gained significant popularity in the past years. Additionally, becoming B Corp certified provides companies with access to a GIIRS Rating, a ratings system that gives investors comprehensive ratings on a company’s social and environmental impact, thus enabling a B Corp to gain greater exposure to impact investments and increased credibility. Finally, now more than ever, consumers are aligning their purchases with their values and are demanding increased corporate accountability and transparency. Having B Corp status will enable you to differentiate your company from the rest, attract these consumers, and as a bonus, belong to an international community of businesses who are using the market to positively impact our planet and those living within it.

[1] What are B Corps?, online: B Lab <https://www.bcorporation.net/what-are-b-corps>

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