Find out what B Lab means by ‘complexity’
The B Corp movement of businesses is on a mission to transform the global economy and we recently hit an important milestone with B Lab certifying its 5,000th business across the globe.
Now spanning almost 80 countries across 154 industries, and with over 400,000 workers, all passionately led and coordinated by 13 regional global partner organisations, this community is growing at an exponential rate after 16 years of steady movement building.
As the number of businesses looking to join the B Corp movement continues to expand, we must continue to make room under the B umbrella, and that means making room for businesses of all sizes and varying complexities.
Around here, we talk about ‘complexity’ a lot — from the challenge of trying to transform the vastly complex global economic system to the nuances of creating a set of independent, rigorous standards to govern the movement. But what do we mean by a ‘complex’ business, and how can you tell whether or not your business can achieve certification?
Image by Brenkee from Pixabay
Key requirements for becoming a B Corp
First things first, there are three key requirements that any business looking to certify as a B Corp must meet:
- Performance requirement — Currently, B Corps must complete the B Impact Assessment and earn a verified minimum score of 80 points, and meet B Lab’s standards that define social, environmental, and governance best practices for businesses.
- Accountability requirement — B Corps must legally and holistically consider stakeholders in the company’s decision-making, codifying the commitment to operating a business with more than profit in mind, when the vast majority of companies are structured to do the exact opposite.
- Transparency requirement — B Corps must have a visible public profile on our B Corp Directory with full documentation to back up their responses during the verification stage.
Another thing to bear in mind is that only for-profit businesses can meet the performance and accountability requirements, meaning that B Lab does not certify business divisions, brands, or units individually. For example, we do not certify a specific department or supply chain unit of a business, we will only certify the business as a whole.
Every B Corp that has certified since 2007 — no matter its size, scale or geographic location — has met all three of these requirements, with additional rigour for large enterprises and multinational companies, including a risk screen, a mandatory site review, increased transparency requirements and more.
Not sure if your business is ‘complex’ or just large? Certification approaches are categorised into ‘Standard’ (covering Small and Medium enterprises), ‘Large Enterprise’, and ‘Multinational Corporations’. Learn more about our Large Enterprise approach.
Why all of this complexity?
We are living through a moment in history where corporate behaviour matters more than ever. And big challenges call for big solutions, which means all of us need to play our part.
As an increasing number of companies of all sizes are evaluating how they can improve their social and environmental performance — and make it ‘official’ through B Corp Certification — a natural tension begins to emerge between the desire to ‘exclude’ companies in particular industries and the need to ‘include’ those businesses for their potential to transform culture, behaviour, and their industries for the better.
Just as the issues we face as a society are complex, so too are the businesses trying to solve them.
And just like every business that is trying to navigate these uncertain and challenging times, the B Corp movement is consistently evolving and continuously improving thanks to a wide range of stakeholder input.
If we are to achieve our vision of an inclusive, equitable and regenerative economic system, we need more and more (if not all) businesses to be held accountable for reducing their negative impacts and generating more positive outcomes for people and planet.
As the B Corp movement grows, the diversity of businesses being attracted to certification has increased, meaning we are coming across more ‘complex’ businesses who want to improve their impact and pursue B Corp Certification.
What constitutes a ‘complex’ business?
For the purposes of B Corp Certification, B Lab considers a business to be ‘complex’ if it meets any of the following criteria:
- The company is or has subsidiaries (i.e. it is a business entity or corporation that is fully owned or partially controlled by another ‘parent’ or holding company.)
- Operates under a franchise model
- Has other affiliated entities (different parent company)
- Sells the same brand or product as their parent or sibling company
- Shares a website with a company who is not certifying
- Shares operations with its non-certifying parent or sibling entity and cannot independently report the necessary data to complete the BIA
- Company operates in one of the industries detailed on our Controversial Issues page (e.g. bottled water, defence, for-profit higher education, pharmaceuticals)
- Operates across two or more industries, e.g. Retail and Consulting
- Operates across more than five countries
- Has an annual gross revenue exceeding US$100 million
If your business is seeking B Corp Certification, and meets one or more of these criteria, we encourage you to get in touch to confirm your eligibility before you begin the BIA to determine the most appropriate certification pathway for you.
An example of a ‘complex’ business
Below is an example of a business that is considered to have a reasonable level of complexity. It has numerous operating entities, holding entities, and its operations are spread across several different companies and regions.
For companies like the imaginary ‘Delicious Foodz Pty Ltd’, with anything from one subsidiary to a franchise structure — they may only want part of its entire structure certified. So, it is important to understand the implications of a complex or group structure on the B Corp Certification process.
For example, recently Certified B Corporation, Unilever ANZ, it was not as simple as completing the B Impact Assessment in isolation. Instead, due to its complexity and the fact that they wanted to certify independently of their parent entity (Unilever PLC), Unilever ANZ had to go through additional steps to apply for B Corp Certification. With operations in multiple countries and a global market presence, among other things, Unilever ANZ is classified as a ‘complex’ business for the purposes of certification.
If you are a subsidiary, or are a company with a subsidiary, franchise, or any affiliated entities, please visit B Lab’s Certification Guide for Related Entities to find out more and reach out to our team for further guidance.
Looking to certify independently of a parent company or wider group?
Certifying as a B Corp is a significant undertaking for any business, but even more so if you are classified as a ‘complex’ business.
Generally speaking, if a company is deemed to be ‘complex’ by virtue of having multiple entities or a cluster of entities, they can pursue B Corp Certification independent of the wider group. But first, they must meet what we call our ‘Complete and Distinct’ eligibility criteria. While we encourage you to reach out to our Certification Team anytime, at a glance, these criteria are:
- Legal Accountability: Businesses who want to certify must have a separate legal structure that can adopt B Lab’s purpose and stakeholder governance requirement, which includes oversight and accountability for its operations.
- Executive Accountability: The business must have the equivalent of a Chief Executive and an executive team who are accountable for its operations, reflected as such in the company’s profit and loss statement (P&L).
- Product Control: The business must control the formulation, design and sourcing of at least 90 per cent of product sales or revenue.
- ‘Complete and Distinct’ Reporting Accountability: The certifying business must have a separate and consolidated P&L that encompasses all operations.
The intent of these ‘Complete and Distinct’ eligibility criteria is to ensure that companies have control over their products/services and impact, and therefore can be held accountable for them. To be eligible, entities must function as a ‘complete’ business, all the way from executive accountability to day-to-day management over the company’s operations.
What do you do if you have subsidiaries or related entities?
Using the example in the above corporate structure, if ‘Delicious Bites’ wants to certify independently of its parent (‘Delicious Foodz Pty Ltd’) and sibling entity (‘Delicious Drinks’), it can — but only if it is assessed as being ‘Complete and Distinct’.
Because ‘Delicious Bites’ has subsidiaries (‘Snacks 4 Doggos,’ ‘Snacks 4 Humans’ and ‘Snacks 4 Life’), with help and guidance, they would be able to apply for certification after an initial ‘Discovery and Scoping’ exercise.
During that Discovery and Scoping process, businesses like ‘Delicious Bites’ are asked to provide information about the entity/entities that want to certify, along with a corporate structure chart. They must also answer other questions, including:
- The level of shared operations with sibling/affiliated entities;
- Employee split by country;
- Latest annual revenue figures;
- Any brands sold by each entity;
- Industry/sector the entities operate in.
This information is then reviewed by our Global Certification & Verification team to determine whether the business is eligible and the possible path forward for certification.
It figures that the process to assess the eligibility of a ‘complex’ business is itself a little complex! You can always reach out to our Certification team for support and guidance.
What happens after the Discovery and Scoping process for a complex business?
The Discovery part of the process confirms whether or not a company is eligible to certify as a B Corp, and — if they are — what approach they should take. (Remember: Certification approaches are categorised into ‘Standard’, ‘Large Enterprise’, and ‘Multinational Corporations’.)
The Scoping part of the process determines how we might aggregate and report on the various subsidiaries owned by the company (if applicable). This is because sometimes companies with various subsidiaries must complete one B Impact Assessment for each company, while other times there might just be one BIA required. The Scoping process also helps us determine which entities must complete B Lab’s purpose and stakeholder governance requirement, and which entity/entities can use the B Corp badge, once certified.
What do we mean by ‘additional requirements’?
Another critical part of the Discovery and Scoping process is that it helps outline any ‘additional requirements’ that a business must fulfil as part of B Corp Certification. These additional certification requirements may include:
- Transparency Requirements: Companies may be required to have their B Impact Assessment made public on their B Corp Directory Profile (with sensitive information redacted) as a condition of certification. These ‘Transparent Assessments’ are quite common for complex businesses such as T2 and Nespresso.
- Site Review: Companies may be required to undergo a site review as part of their assessment verification. The site review process is a deeper level of verification, which helps B Lab to guarantee the credibility of our certification by ensuring the validity of a Certified B Corporations’ assessment answers.
- Affiliated Company Certification Requirement (ACR): A certifying company that shares the same name or brand as the parent entity may trigger what is known as the Affiliated Company Certification Requirement or ‘ACR’. This requires that the parent entity make a visible commitment to achieving B Corp Certification within three years and complete the certification within six years of the company’s certification date.
- B Movement Builder Participation Requirement (BMB): If a subsidiary or affiliate company in different countries shares the same brand/trading name as the parent company and has an annual revenue of over US$1Bn, it will trigger the B Movement Builder Requirement — a collaborative coalition of leading multinational companies that catalyse the global movement of business as a force for good.
Image by Sami Abdullah from Pexels
After all this, is certification worth it for complex businesses?
While how complex a company is can certainly impact their eligibility to certify, and the approach required, we would argue that any measures to improve your positive social and environmental impact are worth it. The challenges of our time are too great to sit idly by.
If you are, or think you are, a ‘complex’ business and you are considering B Corp Certification, we highly recommend reaching out to B Lab early in the process — before you even start the BIA, to ensure you are on the right path.
Knowing what’s in store can give your business the best opportunity to plan and allocate resources accordingly, and potentially avoid the need to make costly changes to your assessment down the track.
No business needs to walk the path of purpose alone.
If you are unsure if your business is large or ‘complex’ and you are wondering what your next best steps are, please reach out to certification@bcorporation.com.au anytime.
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