ESG in practice: Are B Corps really better?

For Sarah Lawrance FCPA, business is more than a tool for generating profit.

The founder of accounting firm Hot Toast sees it as a vehicle for meaningful change, and that’s why she set out to achieve B Corp certification, which designates that a business meets a high standard of verified social and environmental performance, transparency and accountability.

“It made a lot of sense for our business to go through the process of B Corp certification, because it not only aligns with what we are trying to do at Hot Toast, it also aligns with what many of our clients are doing,” says Lawrance. 

“We've been providing CFO advisory services for a long time and conversations have been coming up around carbon accounting and impact reporting, and how we make sure that our business is not just about putting profit first.

“It just felt like a natural next step to go through the process of becoming certified, but I have to say, it wasn’t easy. It takes a lot of work and commitment.”

Better business with certifications 

With growing stakeholder expectations around ESG performance, more organisations are seeking to certify their business practices. 

Along with B Corp, other certifications include Climate Action, an Australian Government program that drives voluntary climate action by Australian businesses, and 1% for the Planet, which connects environmental organisations with companies who pledge to give 1 per cent of their total sales to the cause.

B Corp certification is issued by US-based not-for-profit organisation B Lab, which launched in 2006. 

To achieve certification, companies must score at least 80 points in a B Impact Assessment, which is an evaluation of their positive impact on everything from procurement practices to team diversity. 

They must also change their corporate governance structure to be accountable to all stakeholders and exhibit transparency by allowing information about their performance to be publicly available on B Lab’s website. 

Fees associated with B Corp certification vary depending on an organisation’s annual revenue. To date, more than 8700 organisations have achieved B Corp certification across 101 countries in more than 160 industries. 

 

"If it makes sense for your business because it aligns with what you are trying to do in the world and at a team level, I think it's a really healthy, great step to start the certification process."

 

To maintain certification, organisations must update their B Impact Assessment and verify their updated B Impact score every three years, or after a change of company ownership or initial public offering.

Hannah Meade, director at climate change and sustainability consultancy Anthesis, describes the B Corp certification process as “rigorous”. 

“The reason Corp certification is so highly regarded is that companies need to provide documentation to support their responses to the Impact Assessment, then it is verified by B Lab. This means that companies need to pull a lot of data together to be able to support their claims, and this takes time.”

Andrew Davies, CEO of B Lab Australia and New Zealand, explains that the verification process is vital to achieving certification. 

“We require documented practices and, as businesses get bigger, we will also do things like onsite interviews of employees or customers, and look at external sources of information, so we do our own due diligence on the organisation as well.”

Why greenwashing is in the spotlight

While B Corp certification is widely regarded as the gold standard certification in sustainability, its legitimacy has been questioned. Davies says that larger businesses come with complex histories and people's perceptions of them are similarly complex.

“We believe any business can, and should, be better,” he says. “When you've got large multinationals accepting the accountability that comes with something like a B Corp certification, that accountability is real, and it requires them to recertify every three years and to disclose huge amounts of information. That, in itself, is a pretty radical act in the modern economy.”

Davies adds that B Lab is currently shifting to a model of “mandatory minimums” to reflect the increasingly complex view of what constitutes “sustainability”. 

 

"We believe any business can, and should, be better."

 

“You really do need to have minimum quality standards of performance across the whole business,” he says. 

“That's a change that we're baking into our new standards as well. There's been an incredible rise in conversations and expectations around sustainability in the past five years, and, absolutely, we have to stay at the front of that.”

Consider your business goals

For Lawrance, the process of achieving B Corp certification allowed her to reflect on her business goals.

“It took us about a year to become certified,” she says. “I had to really think about the policies that we have in place and the extent to which we are a diverse business and support the local community and do the right thing by the environment. 

“We needed to be able to provide evidence of this, so if you are just in it as a marketing exercise, you won’t get very far.”

Lawrence adds that while B Corp certification aligned with her mission for Hot Toast, it has also made it a better business. 

“We've now got the framework around it, which means that we can be kept accountable,” she says.

“If it makes sense for your business because it aligns with what you are trying to do in the world and at a team level, I think it's a really healthy, great step to start the certification process.”

“Even if you just do your own B Impact Assessment, which is free, it’s a really useful exercise to see how your business aligns with your goals around the environment and social responsibility,” adds Lawrance. 

“It helps you to see if you’re walking the walk.”

_{Disclaimer: This article should not be considered as legal, tax or financial advice and may not reflect the views and opinions of CPA Australia.  CPA Australia does not warrant or make representations as to the accuracy, completeness, suitability or fitness for purpose of this publication and disclaims all liability and responsibility for any acts or omissions made in reliance of this publication. Readers should seek their own professional advice that takes into account their own personal circumstances.}