B Corp certification overhaul mandates minimum performance in 7 areas

Key takeaways:

• B Lab published the seventh edition of the Certified B Corp standard.
• The update raises the certification bar for companies with more than 1,000 employees or $350 million in sales.
• Certified companies will need to demonstrate improvements against baselines to keep their status.   

B Lab Global published a 683-page revision to the B Corp certification standards that requires companies to meet minimum performance thresholds across seven environmental, social and governance topics and commit to continuous improvement after certification.

The sweeping overhaul released April 8 was required under the nonprofit’s governance policy and comes after four years of consultation and more than 25,000 feedback comments. 

This seventh edition of the standard raises the bar for participation, as more large organizations seek the designation. It also integrates and recognizes methodologies used by other nonprofits focused on ESG frameworks including the Science Based Targets initiative, the Global Reporting Initiative and Fairtrade International. 

While most of the almost 10,000 Certified B Corp companies are small or midsize organizations, multinationals including food companies Bonduell and Danone, apparel designer Patagonia and cosmetics maker Natura & Co. have earned the certification.

“The goal here is to create a diverse movement of companies across size, industry, revenue and region to prove that stakeholder capitalism is not just profitable but preferable,” said Sarah Schwimmer, co-lead executive of B Lab.

Companies following the stakeholder capitalism model aren’t solely focused on shareholder value, they also recognize the interests of customers, employees, suppliers and communities.

No brushoff for equity and inclusion

The seven topic areas highlighted in the updated Certified B Corp guidelines, winnowed from nine topics in the original draft, include a required focus on justice, equity, diversity and inclusion — an area where many large and well-known U.S. corporations have walked back commitments in the past 12 months. Dropping this policy was never considered during the update process, Schwimmer said. 

“This is a moment for business leaders to step up and continue to hold strong to what business can and should look like,” she said.

Here are the areas where companies must pass minimum performance thresholds to earn Certified B Corp status under the revision:

• Purpose and stakeholder governance, including a well-defined mission statement and a structure that ensures all stakeholders have a voice in environmental and social performance.
• Climate action plan that supports emissions reductions in line with holding global temperature increases to 1.5 degrees Celsius; large companies must have validated science-based targets.
• Human rights strategy that includes processes for preventing negative impacts in their supply chain and taking action when abuses occur.
• Fair work policy that supports fair wages and incorporates worker feedback.
• Environmental stewardship practices, including a focus on using circular economy models to minimize negative impacts.
• Justice, diversity, equity and inclusion principles for both their own workplace and the communities in which they do business.
• Government affairs and collective action, which centers on how the company advocates for policies that create “positive social and economic outcomes”; large companies are required to share country-by-country tax reports.

“In the previous version, companies could achieve certification by overindexing in a few impact areas, potentially offsetting poor performance in others,” said Ashley Orgain, chief impact officer for household cleaning products company Seventh Generation, a Certified B Corp. “The revised standards now require companies to take meaningful action across all impact areas, encouraging a more holistic approach to social/environmental performance. We see this as a positive development for impact and for accountability.”

Extra requirements for large companies

The revision raises the certification bar for large multinational companies, a move made in response to growing calls for B Lab to be more selective in its certification process. 

The nonprofit has already made some concessions. For example, it revoked the B Corp status for ad agency Havas over complaints about its client relationship with fossil fuel behemoth Shell.

At issue for many critics is B Lab’s policy of allowing individual operating businesses of multinationals to certify rather than requiring the entire company to meet the requirements. “There’s a legitimate debate going on about the use of the B Corp logo,” Orgain said.

Dr. Bronner’s, which earned its first B Corp certification in 2015, said in February that it won’t renew its status when it expires in September because of this policy. This is the culmination of a multi-year campaign advocating for a revision. 

The company explained: “While some food, personal care and textile companies certified as B Corps do take responsibility and certify all major supply chains to credible eco-social certifications, including our esteemed partners at Patagonia, they are unfortunately a minority and this is not required by B Lab, most glaringly in the case of large multinational companies and their enormous supply chains.”

Dr. Bronner’s earned the highest B Corp certification rating to date in 2022, with a score of 206.7. Under the current system, the average score of companies completing a B Corp assessment is 50.9 – the minimum for certification is 80.

The revision published this week layers additional requirements for companies as they grow, based on the number of people they employ or revenue (whichever is larger). Companies with more than 1,000 workers and more than $350 million in sales must:

• Publish a time-bound plan to trace environmental and human rights impacts of their highest-raw materials
• Provide data about their gender wage gap
• Include environmental and social performance targets in executive incentives

Continuous improvement required

Current B Corps due to re-certify in 2025 may submit using the sixth version of the standards until June 30; they’ll need to move to the new ones in 2028.

Companies that have never certified under B Corp have until Dec. 31 to certify under the old requirements.

The cost to certify starts with a one-time fee of $150 for companies with less than $500,000 in revenue, along with a $2,000 annual membership. B Lab doesn’t publicly publish the cost for companies with $1 billion in revenue; it depends on the complexity of the business.

“We want as many companies as possible to come with us,” Schwimmer said. “We are giving them this transition period to adapt and learn.”

B Lab anticipates that adoption of the new standards will pick up first in Europe, where the B Corp certification assessment could be used as a framework for companies to comply with the European Union’s sustainability and ESG reporting mandate.

B Corp Certified companies will need to provide performance updates against their baseline during their certification period. Those disclosures will require third-party assurance. The details of that governance are still being finalized, Schwimmer said, and are likely to vary from region to region.