B Corps: Are they social enterprises?
9 Jun 2022
You may have noticed a recent upsurge in B Corps. Or maybe you’ve just seen a capital B on some packaging and wondered what it’s all about?
So, let’s get to it – what’s the difference between social enterprises and B Corps?
What is a social enterprise?
“A business that is driven by making a difference to communities or the environment. The communities could be a community of interest or geographical community. As with all businesses, they will compete to deliver goods and services. The difference is that social purpose is at the very heart of what they do and profits they make are reinvested towards achieving that purpose.” (From our glossary)
According to Social Enterprise UK, social enterprises should:
- Have a clear social and/or environmental mission set out in their governing documents
- Generate the majority of their income through trade
- Reinvest the majority of their profits
- Be autonomous of state
- Be majority controlled in the interests of the social mission
- Be accountable and transparent
In terms of legal structures, ‘social enterprise’ is an umbrella term and covers Community Interest Companies, Private companies Limited by Guarantee or by Shares, Charities, and others – there is no specific legal form.
What is a B Corp?
B Corps on the other hand, are defined by B Lab as:
“Businesses that meet the highest standards of verified social and environmental performance, public transparency, and legal accountability to balance profit and purpose.”
From its inception over 15 years ago, the global B Corp community now spans 13 Global Partners & Market Builder regions, 79 countries, 154 industries, over 400,000 workers — and now 5,000 B Corps. In the UK, B Lab UK launched in 2015, so it’s even newer here.
Companies must demonstrate that they generate most of their revenue from trading, that they compete in a competitive marketplace, and that they are not a charity or public body. According to Green Economy Law, businesses must also meet the following criteria to be certified:
- Exist for at least one year and report annual revenue
- Score at least 80/200 points in a rigorous B Corp assessment
- Include the B Corp legal framework in their articles or certificate of incorporation (if they’re incorporated)
- Sign the B Corp declaration of interdependence and
- Pay an annual fee that varies based on revenue
Let’s break this down a bit.
The B Corp legal framework allows companies to protect their mission and ensures that the company will continue to practice stakeholder governance even after leadership changes.
Companies and other business forms wishing to become a B Corp in the UK will need to have or adopt governing documents which include a commitment to a ‘triple bottom line’ approach to business. In practice, this is likely to mean having a clause which states that it exists to promote the success of the business for the benefit of its shareholders, but also to have a material positive impact on society and the environment.
So, what’s the difference?
As B Corp UK puts it on their own website:
“B Corps are for-profit businesses that have made a commitment to create a material positive impact on society and the environment through their operations. Companies certify as B Corps by earning points on the B Impact Assessment relating to how they do business, and whether their business model addresses a particular social or environmental need, and have their score independently verified by B Lab.
Whilst there are some social enterprises that also certify as B Corps, the majority of B Corps in the UK would not self-classify as social enterprises under the UK definition. B Lab’s focus is building on the powerful examples of social enterprises and extending it to support mainstream businesses that give the same rigour to their social and environmental impact as they do to their financial returns.”
One key difference is that B Corps undergo a rigorous certification process, and the results are transparent. (You can see the score of any B Corp on the B Corp directory.)
So, are B Lab simply making traditional businesses more socially focused, albeit using their own criteria? Surely if a business must address a particular social or environmental need, they’re a social enterprise? Or is the difference that they don’t have to reinvest their profits, and can instead pay fees to B Lab?
To become a B Corp you must pay a one-off submission fee of £250, and then an annual certification fee to B Lab. Certification fees range between £1,000 and £50,000 depending on a company’s annual sales. This may not sound like much, but for a company just starting out the extra expense may be hard to justify.
From reading about the certification process and criteria, I am reminded of organic farming standards. Many farms may call themselves organic, using practices that are sustainable and refraining from using chemicals and pesticides, but they may not be able to afford the lengthy and expensive process of becoming certified. Therefore, they won’t be able to display the logo on their website or products. For the consumer, it’s a quick and easy way to ensure that they are making an ethical purchase, but for the business owner – particularly those just starting out – it can be one expense too far.
Is it for me?
As Corey Kohn writes, there are benefits to being a B Corp. It’s good for marketing – a quick and recognisable way to show the world what you stand for. It also gives you access to a wide network of other B Corps to share best practice and knowledge. Perhaps most importantly, “B Corp certification provides a set of standards to make you better at what you are already setting out to do.”
For some, the data-driven nature and global network of B Corps may be appealing. But is this kind of certification aimed more at traditional businesses trying to increase their ethical credentials? Do social enterprises need to conform to such stringent standards if social good is already at the core of what they do?
What do you think? Would you brave the lengthy application process and fees to join this growing movement, or are you comfortable in the knowledge that your social enterprise makes a positive difference already? Tweet us @SchSocEnt