Hazel Sheffield talks to businesses going through the B Corp process about their challenges, questions and ambitions. How essential is it and what are the business benefits?
By the time brothers Jonathan “JP” and Alex Petrides founded AllPlants, a vegan meal box service in 2016, they already had years of experience in startups. JP had started Africa’s first mobile bank, M-Shwari, and co-founded Penda Health, a chain of health centres in Kenya. Meanwhile Alex, his younger brother, was working as the brand director of Propercorn. He spent six years growing the brand from pipe dream to ubiquitous corner store snack.
They wanted AllPlants to be for-profit, believing that would make it easier to attract staff and the capital to scale fast. But they feared outside investors influencing the values of the business. Petrides was a big fan of Patagonia, the eco-conscious outdoor clothing manufacturer whose founder, Yvon Chouinard, wrote a treatise on a more sustainable capitalism called “The Responsible Company”. Later editions of the book include details about B Corps, or for-profit companies that have been certified by the non-profit B Labs to have high standards of social and environmental performance, accountability and transparency.
Petrides instantly saw the benefits of accreditation: he would no longer have to weed out investors who did not get his vision. When AllPlants became a B Corp, the founders rewrote its articles of association, so that the board and management would no longer be responsible just for maximising financial returns, but also for maximising returns for its community and for the planet. “We had been talking about people and the planet for ages, so the fact that it was enshrined in the articles of the company made all the difference. We could say to investors: ‘This is what you are signing up for: this is never going to change.’”
“The idea is for continuous improvement,” says Louisa Ziane, co-founder of food waste brewery Toast Ale. “It should be something that becomes part of the business.” Ziane described the process as “rightfully quite challenging”. “In theory it doesn’t take a long time to answer questions if you’re a small business and someone has an understanding of the entire business. If you’re a bigger company and you’re having to pull in data from different departments, it might be more challenging. It really spans the entire business.”
Paul Miller is the managing partner and chief executive of Bethnal Green Ventures, Europe’s leading early stage investor for tech for good companies – many of which eventually become B Corps. He says the process of becoming a B Corp has two main benefits: one, it’s the most rigorous and well-understood way of showing you are a mission-led business and two, it’s an external assessment of how to improve. Bethnal Green Venture is also a B Corp since 2016. Miller says when B Corps first came to the UK around 2016, people were initially apprehensive about what investors might think. “People worried that investors might think of it as fluffy and not about delivering maximum shareholder returns – but actually it’s gone the other way. More and more investors see that being a B Corp is a good thing in terms of competitive advantage.”
As the executive director of B Lab UK, Chris Turner has seen this shift for himself. Rather than businesses asking why they should become a B Corp and worrying that it will hurt their bottom line, most understand that there is a strong business case for becoming more engaged in sustainability. “It’s now not a case of why, but how,” he says. “The B Corp community in the UK started, as with anything, with the early adopters, the sustainability consultants and the very forward-thinking businesses. Now the really exciting thing that happened last year is that we really made the shift into the mainstream.”
Petrides says B Corp accreditation gave him the confidence to raise venture capital after initially doubting that the fundraising route was compatible with his business. “When we were doing the seed round, I had people I really wanted involved and when I turned to the slide that said we are going to become a B Corp, you could tell they didn’t get it,” he says. “They said it would be hard enough to make a profit anyway. So it was easy to sort our investors right up front.” In March, AllPlants raised £3.4 million through crowdfunding, smashing its £2 million target on Seedrs within 48 hours. An additional £1.4 million was raised from a total of 1,824 investors, including VC firms such as Felix Capital and Octopus Ventures.
Turner from B Lab UK says big benefits start to emerge when large companies engage with the B Corp framework. “We’ve seen [this] with Danone and The Body Shop, and multinational businesses embarking on this journey. The amount of work that they need to do in order to embed the framework into their business and reach the threshold to certify speaks to the sort of the profound shift that we can have there.”
In 2019, Toast Ale joined with 500 other B Corps that pledged to reach net zero carbon emissions by 2030. Ziane says it was significant that Toast, which only has ten employees, was able to join a much bigger movement including Patagonia, the Body Shop, Ella’s Kitchen and Bulb in pursuit of a significant goal. “It will take more than one company to find the right way to do it,” Ziane says. “Now we’re working with other B Corps to look at how we move together.”
Toast had always taken a collaborative approach. But Ziane liked the idea that B Corps were a community of businesses trying to change the world in different ways. “At Toast we use surplus bread to brew our beer to reduce food waste and consumption of virgin barley. All our profits go to charity. That’s the internal approach that we have taken. But it needs to be a movement, and that’s very much how B Corp operates, it’s primarily a certification scheme but it’s also a community of businesses who share the same ideas about how business can be a force for good.”
The system is not without its limitations. Bethnal Green Ventures works with early-stage startups who are often not yet eligible for accreditation. “We invest so early, it’s actually quite hard to become a B Corp from day one because you need a certain amount of data to go through the process,” Miller says. “Our approach is that we encourage our portfolio companies to get themselves ready for it.”
Then there are those who believe that a fundamental tension exists between profit and purpose. “We believe that inevitable tensions will always manifest between the competing priorities of maximising profit versus operating fairly, sustainably and in the interests of all stakeholders,” says Peter Holbrook, the chief executive of SEUK, the national trade body for the UK’s 100,000 social enterprises. Social enterprises, unlike B Corps, are set up with a primary purpose to achieve public or community benefit through trade. Holbrook says that social enterprises go one step further than B Corps, whether they are tackling homelessness or the climate emergency, because the whole business and importantly, the majority of profits, are used to help further their social and environmental purpose. “If you’re a social enterprise, you can also choose to be a B Corp,” he says. “But few B Corps are regarded as actual social enterprises.”
While only a few hundred of the 5.8 million small businesses in the UK are registered B Corp, thousands are using the B Corps assessment criteria to improve their business, Turner says, attracted by a spectrum of benefits that range from internal improvements, a supportive community and a global movement that is recognised by customers and investors alike. “B Corps are part of a long term shift – they are the leaders when it comes to demonstrating the way that business should be done,” he says. But he has a message for businesses thinking of signing up: “Don’t do this just for the business benefit – do this because you believe it’s the right thing to do.”
Hazel Sheffield is a former business editor of the Independent, and the founder of farnearer.org, a reporting project documenting local economies emerging in response to austerity, Brexit and the coronavirus.