15 August 2019

Becoming a B Corp

The number of companies touting B Corporation certification – which ranks the ethics of for-profit companies – is growing. For Toast Ale, getting certified has also been a handy way of getting both staff and investors on board.

When Toast Ale was set up in 2015, it had a clear social mission: to reduce food waste. Its beer is brewed using surplus bread from UK bakeries while its profits are donated to Feedback, a charity that campaigns for a sustainable food supply chain.

Two years into running the business, co-founder and brand officer Louisa Ziane decided it wasn’t enough for Toast to simply tell its customers what it was doing – she wanted an independent party to prove it. She decided that Toast would become a B Corp.

‘It’s good practice to have third-party verification of any claims you’re making,’ Ziane says. ‘The whole point of setting up Toast was to address an environmental problem. But for somebody drinking our beer, they don’t know what we say is what we do. So having a respected organisation ensure this is true [is important].’

For Ziane, the most compelling aspect of becoming a B Corp was the fact it requires organisations to make a legal change. As well as being assessed on their social and environmental impact, B Corps in the UK are required to update their Articles of Association to state that directors are not only operating in the interest of shareholders, but in people and the planet, too. ‘[We now] have a fiduciary duty to make decisions on the basis of that “triple bottom line”.’

B Corp’s unexpected advantages

Becoming a B Corp had some additional unexpected benefits, too. Ziane says the form that Toast had to submit, which quizzes business owners on everything from their supply chain partners to their employment policies, encouraged the founders to think about how the business should operate in the long run.

In order to get extra ‘points’ on the assessment, Toast introduced policies on things such as maternity leave, whistleblowing and employee equity schemes – things startups often don’t think about until they have been around for a while and are much larger. Toast now has a staff handbook too. ‘It felt like we were a real business rather than a little project,’ Ziane adds. ‘It filters through into who we are and into our culture as well.’

Ziane says this is not only good for existing employees: having specific policies in place also makes it easier to sell the company when interviewing potential hires.

It’s been a draw for investors, too, who see B Corp certification as evidence that a certain level of due diligence has been done. When Toast raised £1.4m in May 2018, ‘[our] investors saw it as valuable, because somebody’s been through the entire way [we] do business. It’s like an MOT.’

A six-month journey

Applying for B Corp certification doesn’t have to cost a lot – Toast paid £500, although fees are tied to turnover figures – but the process takes a significant amount of time.

Ziane says it took Toast six months from October 2017 to May 2018, and that she was juggling the application alongside her day-to-day duties. ‘For most tiny businesses [this process] is an addition to either the production functions, or branding and marketing,’ she warns.

Next time, it should be easier. Ziane is plotting Toast’s renewal application (companies are required to re-certify with B Corp every three years) and hopes to score higher on the assessment. ‘We’re already confident [our score will be] significantly higher,’ Ziane says. ‘One of the key things is not just to try and get top marks, but find those areas that are really important anyway for you as a business.’


Breaking down the process

Chris Turner, executive director at B Lab UK, breaks down the benefits of becoming a B Corp.

Setting time aside to fill out an in-depth assessment, gather evidence and formalise business practices may not sound like the best use of time for the founder of a fledgling business.

Chris Turner, executive director at B Lab UK, says it needn’t be so laborious. In fact, he argues, smaller businesses have an advantage over big organisations when it comes to the B Corp application: a smaller team means the information required can only ever be so many degrees away from the founder.

A business planning tool

The questionnaire, which runs through every aspect of how a business operates, is also a powerful tool for entrepreneurs looking for a roadmap to build their business against, regardless of whether or not they go on to pursue certification.

‘Ultimately, the smaller you are the easier it is to design your business around the assessment,’ Turner explains. ‘I’ve run a few startups in my time, and I can honestly say [the assessment], as a framework for mapping out all of the different things you have to think about when you’re creating a business, is incredibly comprehensive.’

According to B Lab, approximately 50,000 businesses have logged in to use the assessment in this way – a huge number compared to those that have gone on to get certified. Turner also challenges the misconception among small business owners that the process is ‘really hard, complicated or inaccessible. ‘It is a long and in-depth assessment, because that’s what gives it its credibility, but actually if you’re a founder you’ve got all the information you need to complete the assessment at your fingertips.’

Green attracts green

It’s estimated that B Corp businesses grow quicker than their non-certified counterparts. In February 2018, year-on-year data showed that UK B Corps grew at a rate of 14% compared to the country’s GDP growth rate of 0.5%, which suggests customers are actively choosing to spend more money with ethical businesses.

Turner notes the benefits extend beyond having an excellent marketing message, though: ‘Making such a clear and consistent commitment to purpose and impact is actually really powerful for not only attracting employees but retaining them as well,’ He adds that ‘as any [founder] knows, the people are the most important aspect of the business.’

Founders seeing dollar signs should be careful, though. If it provides no real strategic benefit for a business, certification can fast become a distracting, laborious process. ‘If you’re going through the motions it probably will become a burden, because you won’t see why you’re doing these things,’ says Turner. ‘It’s designed for businesses that want to model a new way of doing business, that can [hopefully] benefit us all.’

That, Turner says, leads to the key question a business needs to answer before pursuing B Corp certification: ‘Do you think your business is part of the solution?’