In the past year, Generation Investment Management, Bridges Fund Management, the Social Stock Exchange and WHEB Asset Management have all become certified B Corps.
B Corps are described as for-profit businesses that have social and/or environmental outcomes as part of their mission.
The movement, which started in the US a decade ago, came to the UK last year and since a number of well-known investment managers have adopted the model.
Speaking to Responsible Investor, Darryl Mootoosamy, Community Builder at B Lab UK, which supports UK-based B Corps, says the idea of the movement is to try and celebrate companies that are trying to be forces for good. “This means getting them to measure their impact. It’s not just meant to be a box-ticking exercise but also an education piece.”
He continues: “More broadly, we can’t just rely simply on non-profits or government to clean up social problems. Business has to play a part and that is what we are trying to exemplify through this community.”
Sustainability fund manager WHEB decided to go through the B Corp certification process after being introduced to it by a client.
George Latham, CIO and Managing Partner, says: “We went to a few B Corporation events and found out a bit more and felt empathy with the story behind it and impressed by the certification process.”
B Lab was co-founded by Bart Houlahan. In the early 1990s he led a popular sports clothing company AND 1 which strove to be socially responsible, for example paying its workers in China a living wage and ensuring they had a safe environment.
But after it became public, it caused a change in the firm’s corporate culture. “It was not easy back then – and it is only getting better now – to both make profits and be socially responsible, especially as a public company,” Houlahan wrote five years ago.
In 2005, the firm was sold to American Sporting Goods. “When you get to the point where you are ready to sell a company….legally, the only thing you consider is to maximize shareholder value. This is not a lament. We were paid full value. But it felt like I lost a limb to watch all of our commitments to employees, to the environment and to the community, be stripped from the company within six weeks of the sale,” says Houlahan.
The experience led him to co-found B Lab with partners Jay Gilbert and Andrew Kassoy; they lobbied US state legislatures to ease regulations around public companies to create benefit or “B” corporations.
In the US, it is not possible in a normal corporate form for senior management to make decisions that take into account anything other than shareholder interest. So some states in the US, including New York and South Carolina, have passed benefit corporation legislation that broadly allows a company to put the interest of employees, client and stakeholders, alongside those of shareholders.
However, in other countries, such as the UK, corporate law is less rigid around shareholder primacy, so the B Lab promotes B Corp Certification where companies must first pass a test and then change their articles of association.B Lab UK worked with law firm BWB, also a certified B Corp, to develop the legal language.
WHEB’s Latham says the certification process, which involves a scored test, has helped it frame its business development.
“The questions it is asking us are great pointers to processes and structures we might want to put in place, and how we want to develop ourselves as a business.”
One question prompted WHEB to re-write its overall business mission statement. “It was co-written by all members of the team,” says Latham. “And it was a great way of enfranchising everyone in the business, and developing a mission statement that is more than just words put on a sticker somewhere. We genuinely live through it, and it’s created something that has been a really powerful tool for the business.”
B Corps have to recertify every two years and the questionnaire evolves over time through collaboration with the network.
However, there has been criticism that the B Corp movement’s arrival in the UK is just another label, in a sea of similar initiatives seeking to highlight socially-motivated businesses.
“Jargon-heavy and a little clubby,” said one observer. “I know of companies who only became B Corps as they supplied to [certified B Corp] Ben & Jerry’s.”
Latham disagrees that it will be just another label. “As an organization, B Corps is very well-funded, so it doesn’t seem to be trying to grow member numbers as a primary motivation, diluting its authenticity.” Latham says cost wasn’t a barrier to certification, which gave him more confidence that it is robust and there is no monetary conflict of interest.
“I feel that is important and potentially quite powerful for us, as it can be quite difficult in this world to mark out those who are genuinely authentic in the way they are approaching these issues. As these ideas become increasingly popular, it is too easy for anyone to grab the language, without making genuine attempts to change. The way the B Corp certification process is set up it is hard to achieve unless you have really embedded stakeholder values.”
While the B Corp certification takes off in the UK, its government is looking at creating its own version of the benefit corporation.
The move has come out of a government mission-led business review chaired by Legal & General CEO Nigel Wilson. One of its recommendations was to explore the introduction of a “benefit company” status in English law.
Mootoosamy describes it as a halfway house between the B Corp certification as it would simply entail a change of articles of association without the regular assessment and scoring.
Executive director at B Lab UK, Katie Hill, who formerly was a social investment advisor to the City of London Corporation, is working on this initiative with government.
“How the reporting will look and whom they will report to is still being discussed,” says Mootoosamy. “But it’s in the pipeline and will give companies that are not ready to commit to B Corp status a route to demonstrating that they care about a broader stakeholder model and not just shareholder primacy.”