To B Corp or Not to B Corp: What the Ethical Business Certification Means for Brands

An investigation into what B Corp certification is and what kinds of apparel brands it makes sense for.
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A backpack from Cotopaxi, a certified B Corp. Photo: Cotopaxi

A backpack from Cotopaxi, a certified B Corp. Photo: Cotopaxi

If the popularity of the oft-memed phrase "there is no such thing as ethical consumption under late capitalism" on social media is any indication, there is a widespread sense amongst many millennials that capitalism as it currently exists is broken. And while some may use that adage in a fatalistic way that implies that we're basically screwed no matter what we do or how we shop, others see it as an invitation to try and reimagine the way economies work and businesses are run.

The founders of B Lab, a non-profit organization dedicated to seeing business used for social and environmental good, fall into the latter category. Started by the three entrepreneurs who created basketball gear company And1, B Lab has spent over a decade championing a third-party certification called B Corp sought out by purpose-driven fashion brands like Eileen Fisher, Patagonia, Allbirds and Kotn. It's also helped create an entirely new legal structure for companies that want to bake their mission deeply into their financial DNA.

"The idea of creating a new corporate form came out of really early discussions with many B Lab partners around the question of what we as a global community think are the 'operating system flaws,' if you will, of capitalism," explains Director of B Lab Kim Coupounas on the phone.

Since its founding in 2007, the B Corp community has swelled to include over 2,600 companies worldwide, and its logo shows up on everything from ice cream to socks. So what is B Corp, when you really get down to it? Whether you're a consumer looking to understand the label on your clothes or a brand determining whether B Corp certification is right for you, this guide should help you out.

What is B Corp certification?

On the simplest level, B Corp certification is a stamp of approval for companies that have proven their commitment to doing good. It's awarded by B Lab to companies that have met "rigorous standards of social and environmental performance, accountability and transparency," according to its website. Once companies earn B Corp certification, they can use that stamp of approval to attract customers, future employees and investors.

B Corp certification is sometimes confused with Benefit Corporation status, which is connected, but not the same thing. Both were created by B Lab to promote more ethical business practices, but the former refers to a certification much like Fair Trade or Bluesign, while the latter is actually a kind of legal financial structure, like being an S Corp or LLC. 

"Benefit Corps are taxed just like a C or an S corp, but they require a higher level of transparency and accountability," says Coupounas.

In countries or states where Benefit Corporation status is a legal option, B Corp candidates must incorporate as Benefit Corporations as part of their commitment to making their company's primary goal about more than just the bottom line. But since this status isn't available everywhere, and since some companies incorporate as Benefit Corporations without ever receiving B Corp certification, the overlap between the two isn't all-encompassing.

What do brands have to do to get certified?

Brands prove that they deserve certification through a few different steps. First, they take the B Impact Assessment, which is available for free online. The assessment is essentially a questionnaire that asks about every detail of how a company operates. The questions are broken down into five categories. The first, governance, asks questions about how the company is run, probing to see if the board of directors annually reviews environmental performance or whether the CEO's compensation is tied to achieving certain environmental or social metrics. 

The second, workers, deals with whether workers are paid a living wage and asks if there are measures in place to promote their health and safety on the job. The third category, community, inquires about topics like women and racial minorities having ownership in the company, and whether the company's suppliers are screened for their own social and environmental impacts. The fourth section deals with the environmental impact, and asks companies to account for their greenhouse gas emissions and raw material sourcing. The final section, dealing with customers, asks if brands have proper channels in place to listen to customer feedback. 

Once a company fills out the assessment, it is awarded a score out of 200 points. A score of 80 or higher is necessary for a company to be eligible for certification.

"It sounds easy but is not," Coupounas explains. "Most companies taking it for the first time, which are already sustainability-minded if they've opted to take something like this, come in in the 30s." 

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Once brands have taken the assessment and hit the minimum 80 points, a B Lab team member will connect with a brand rep to go through the questions and ask for documentation that proves what a brand has claimed about itself. The highest point-earning questions are given a special audit to make sure brands can back up their answers. After a company has met all those requirements, it is required to modify its legal DNA so that its social or environmental goals are taken into account along with its financial goals. (This where the Benefit Corporation status may come into play.)

While the B Impact Assessment was created specifically in service of the certification, it outlines best practices so thoroughly that some brands use it as a benchmark long before seeking certification. Nisolo, a leather goods brand that received B Corp certification in 2017, first took the assessment three or four years prior and discovered that it was about 6 points short of being eligible for certification.

"Taking that kind of baseline assessment was like, 'Okay, now we can really be aware of where we can be doing better in our business in order to get certification,'" says Nisolo Impact Associate Matt Stockamp on the phone. 

Athleta is one of the largest B Corp certified apparel companies. Photo: Athleta

Athleta is one of the largest B Corp certified apparel companies. Photo: Athleta

A brand's certification fees depend on the size of the company too, as B Lab employs a sliding scale that charges brands as little as $500 a year if annual sales come in at $150,000 or less, all the way up to $50,000 or more for multibillion dollar companies. Stockamp says that the relatively accessible pricing is part of what convinced Nisolo to pursue B Corp certification before other comparable certifications.

"We were thinking about getting our factory Fair Trade certified down in Peru, but the cost just didn't make sense at the time. It was going to cost us around $30,000 or $40,000 to get it all set up," Stockamp says. "And we love what Fair Trade is doing — we use a lot of their guidelines at our factory — but B Corp made more sense because it was just a lot more attainable."

What's the point of certification?

There's a host of benefits to B Corp certification that motivate companies to undergo the rigorous process of data-gathering and auditing it requires. According to Athleta's chief marketing officer Andrea Mallard, B Corp is a great "symbol that you want to be held accountable for how your actions impact everybody," and thus is helpful for communicating a mission that goes beyond greenwashing. Nisolo's Stockamp adds that the resources B Corp provides, from outlining best practices to creating a community of like-minded companies with which to compare notes and collaborate, are worthwhile in and of themselves.

Cotopaxi's CEO and founder Davis Smith was advised by his lawyer not to incorporate as a Benefit Corporation from the get-go because the idea of "giving away money before you've made money" might turn away investors, but he says raising capital has never been a problem for the company. If anything, Cotopaxi's B Corp certification has served as a magnet for the kind of people he'd prefer to work with anyway.

Inside a Cotopaxi factory in the Philippines. Photo: Cotopaxi

Inside a Cotopaxi factory in the Philippines. Photo: Cotopaxi

"I think the biggest benefit is that we've been able to attract and retain exceptional talent because of it," Smith says on the phone. "We'll have between 300 and 500 job applicants for every opening. I've never seen that in a previous company. People are constantly saying, 'I just wanna work for you.'"

One of the benefits that might be less obvious to the average consumer, but that Coupounas thinks is deeply important, is the way that being a B Corp can help founders embed their mission into a company so that it lasts even if ownership changes hands. After B Lab's founders exited And1, they were disappointed to see so many of the values they'd prized stripped from company culture. They've tried to help other founders avoid the same fate through the creation of B Corp, which is hard to earn as a certification but also hard to negate — it takes a two-thirds shareholder vote to convert out of B Corp status once it's been attained.

What kinds of brands is it best for?

In theory, B Corp certification is for any brand that cares about doing good — and being able to prove it. The B Corp community includes everything from sole proprietorships to multibillion-dollar companies, but Coupounas says that the largest demographic has been the kinds of small- to mid-sized companies that are agile enough to make the changes that certification requires.

"Even though they're small, these kinds of companies are very mighty from a standpoint of being recognized as how businesses should be run, and they have pushed sustainable business practices really far down the pathway," Coupounas says. 

That's not to say that every mission-driven business of that size will treat B Corp certification as a priority. Sseko Designs, a fashion-based social enterprise started in Uganda, is an example of a brand that fits the demographic but has so far chosen not to pursue B Corp certification, in part because its founders Ben and Liz Forkin Bohannon feel that customers already understand the degree to which the business is mission-centric, even without certification.

But where a smaller company like Sseko may have an easier time connecting with customers and communicating their company mission directly to them, behemoth multinationals like Unilever, the owner of Dove and Dermalogica that looked into B Corp certification in 2015, find it harder. They also find it harder to get certified. Coupounas recognizes the difficulty for companies that have a host of subsidiaries, but she explains that B Lab is working on developing a way to make it more attainable for large companies to get certified that doesn't compromise B Corp's rigorous standards.

"If you think of the impact [that size of company] can have from the standpoint of how many people they actually touch, it's enormous," she says. "You can't really change capitalism or create the future of shared and durable prosperity that we're seeking without them."

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