Disclaimer, the views expressed in this post are my honestly held opinions. These points are current as of Feb 10/2024.

Sustainability: Something we all (should) feel strongly about, but these days people seem more concerned with doing what feels right instead of trying to do what is right. This is especially true with the confusion that’s stemmed from certain NGOs and brand marketing primarily designed to take advantage of this demand. Consumers are willing to spend more for products they perceive to be greener, but as that demand snowballs, it’s often left to the ignorant and greedy to fill this growing market segment. Knowing what best practices are for every leg of a supply chain is legitimately difficult. Big companies spend millions of dollars every year trying to work them out. So when the market demands something that seems impossible, what is a company to do?

If only there was some kind of International Standards Organization with a rigorous public review process that we could all look to. Something like ISO, has a nice ring to it. Let's gloss over whether that exists for a second and have a quick look at an alternative certification body willing to exchange their branding, clout and respected stickers. For a small fee.

Certifications are often touted as something consumers can trust. A way brands can back up the claims they’re making. But what if the certifications don’t hold up past that trust? What if, at the end of the day, they are riding a wave of good intention and clout built up over years of positive intent perpetuated by every brand who benefited from their cutting edge marketing? What if, when critically assessed, they seem to be doing more harm than good?

B Lab is a company I’ve seen gain a lot of traction over the last few years, with their certification B Corp cited as the “highest standard of social and environmental performance” (This is real messaging that goes as far as academia for social entrepreneurship). B Lab aims to fill the void at the far end of the spectrum. With laudable goals such as “be(ing) the change you want to see in the world” and “That all business ought to be conducted as if people and place mattered”. B Lab claims to be doing exactly what the masses feel needs to be done. But are they? Are they really the “highest standard of social and environmental performance”?

This article will attempt to answer that question. Let’s unpack.

One example of the messaging out there on B Corp, featured in Cosmetics Business earlier this year about the brand The Inkey List. Has the brand achieved “sustainable” beauty?

What is B Corp?

B Corp is a certification scheme by the company B Lab that intends to legitimize corporate social values. As mentioned in my intro, standing on laudable good intentions, the B stands for benefit. On the B Corp website, B lab claims that they are a “nonprofit network transforming the global economy to benefit all people, communities, and the planet.” What makes B Corp unique among certifications is that it goes so far as requiring changes to incorporation articles. With traditional corporations, they are beheld to their stakeholders, which generally means profit at all costs. For example, when a company is ready to be sold, regardless of the ethics of the buying company, they’d be expected to sell the company to the highest bidder. With a B Corp, if the purchaser doesn’t fit with company morals, they may choose to sell to a lower bid. This is something that I appreciate with this certification scheme. For the longest time, given what’s out there, including from universities who often encourage social entrepreneurs to have their companies B Corp certified (speaking from first hand experience), I didn’t question that this was a sound business decision.

B corp is endorsed by academics, politicians and business leaders alike. According to Rose Marcarlo, CEO at Patagonia, “The B Corp movement is one of the most important of our lifetime, built on the simple fact that business impacts and serves more than just shareholders.” In 2020, B Lab even partnered with the UN Global Compact to purportedly help steer companies in progressing sustainable development goals.

In a presentation to Ryerson University (2019), B Lab’s stated that, in Canada, B Corps are 6x more likely to offset all of their emissions, 2x more likely to incentivize public transportation or carpooling- with employees 45% more likely to be highly satisfied with their work. According to B Lab, their road to “shared & durable prosperity” involves “1) building a community of thousands of credible leaders who are certified B corps, 2) create tools to make it easy for millions of other businesses to follow, and 3) inspire billions of consumers, workers and investors to support businesses who are a force for good.” This is all really compelling stuff. With the information provided by B Lab and its peers, I can totally see why they’ve garnered their reputation.

Wait, what do they mean by most? Have they just cherry picked the best results? Or is this representative of the majority of B Corps?

How do companies become B Corp certified?

Companies fill out a B Impact Assessment Questionnaire based on best practices laid out by B lab, the company behind the certification.
If they meet the threshold score, B lab does a “3rd party audit”.
If all goes well, B Lab issues certification. With recertification every 3 years.

Hang on a sec. Within the B Impact Assessment, all the information provided by B corps is self-reported? Surely there is a rigorous review process involving site visits, maybe even public review? Well, with the exception of the 10% of the B corps that have a random site review yearly by B Lab. What exactly do they mean by “3rd party audit”? As far as I can tell, this involves just reading the questionnaire and interviewing the brand.

There is a clear beneficial relationship between B Corps and B lab, who performs the third-party auditing. There is a significant business opportunity in being perceived as socially or environmentally superior. B Corps enjoy a marketing advantage which opens up more funding opportunities (i.e. the huge growth in impact investment), and consumers are willing to pay more for products they perceive to be socially/environmentally superior. There’s also the fact that B Corps pay B Lab a certification fee, which is between $500-$50,000 annually depending on the firm size. This kind of mutually beneficial relationship would never be allowed in government because clearly the officials “auditing” the company may be compromised if they benefit directly from that company's success.

Yes, B Lab is a nonprofit, which limits the profit potential for the company itself. But what’s missed is the social credibility this affords an organization.

Who are these evaluators at B Lab looking at the questionnaires? What are their values? This is currently not sufficiently specified. Third party evaluators are beheld only to their customers and public opinion. The process itself that these evaluators use to hold companies accountable is proprietary (Andre, 2012). This is in stark contrast to ISO standards (e.g. ISO 9001 and 14001) which are audited by external international groups on a regular basis.

What does this mean? Well we’re just going to have to trust that B Lab is doing the right thing, that their standards make sense, and that B Corps are telling the truth. These accountability practices overwhelmingly serve private interests. With the financial relationship between B Corps and B Lab, certified B corps are able to exert a level of control in how their sustainability efforts are measured. The result - companies are accountable to each other rather than to society, thereby controlling the process of accountability.

Is B Corp the highest standard for environmental performance?

No. That title would probably go to ISO (International Organization for Standardization) 9001 and 14001, which are globally regarded as the leading quality in environmental standards (Fonseca et al., 2021). ISO 14001, based on 9001 with changes to focus on environment management; the standard helps give companies the tools to think about environmental management systems (EMS) via internationally accepted and audited resources. Unlike B Corp, ISO standards are not proprietary. Companies can get a certification with ISO 14001, which involves a gap analysis, the implementation of the EMS as per the standard, internal audits and management reviews. The certification is accredited, which means that there’s been independent confirmation via a competent accreditation body, and the accreditation is subject to global supervision.

And then there’s the B Impact Assessment. To become B Corp certified, companies have to score 80 points out of 200. Here, there are 5 pillars that are assessed: governance, workers, community, and customers, with a certain number of points allotted to each pillar. Currently, there is no minimum score required for any of the 5 pillars, they only have to get 80+ points total (Liute & De Giacoma, 2022; Milne & Gray, 2013). This means that companies can pick and choose which pillars to focus on. B Corp certification also doesn’t consider industry specific issues, allowing companies to choose the easiest issues to address, rather than the most relevant issues to them and their industry. Disclaimer, B Lab is currently in the process of modifying this - these changes should be in place by 2025. What will that look like and how will it compare to ISO standards? Hard to say at this point.

Companies can choose to ignore certain impact areas altogether, such as the environment (Liute & De Giacoma, 2022; Villela et al., 2021). When you make it so easy for companies to essentially game the system, they will. Not every company, obviously - there are many B Corp certified companies doing really impressive work with their sustainability management. B Corp really hit the jackpot with Patagonia. But there are also companies doing very little in the way of meaningful corporate sustainability action who get certified and enjoy the benefits of being associated with companies who are actually making a difference.

Okay so Inkey List met the minimum score to be B Corp, but in the environmental rating, they scored 17.3/56… so they’ve achieved “sustainable beauty”?

I think it’s interesting that B Corp is most popular in the USA and Canada, which as of 2021, was home to half of B Corps globally. This is particularly true for smaller companies, whereas ISO 14001 is more broadly used no matter the size of the company (Fonseca et al., 2021). In contrast to the few thousand certified B Corps, more than 1 million companies have adopted ISO 9001 and 14001 certification. So both B Corps and B Lab are making the claim that B Corp is the “highest environmental standard”... according to who? Seems like they just decided this was a fact and went with it because the message was convenient. I’m also unsure if this is something B Lab themselves state; but the message is rampant from people who benefit from this narrative. From the certified companies to consultants who help brands get certified.

Why is B Corp so popular with small companies? My pessimistic POV? I think companies want to pursue sustainability, but when they’re resource strapped, it’s tough to know how to approach that effectively. And with all the compelling messaging from B lab out there, including from a lot of business advisors who are consulting these companies, B Corp can really seem like the productive route to go. Developing a robust corporate sustainability management program is time and resource intensive. It requires a lot of specific expertise that most small players aren’t going to have out of the gate. B Corp certification can be expensive and can take a bit of time. But it’s a drop in the bucket compared to the alternative.

Is B Corp the highest standard for Social Performance?

No. But I think before I get into why I think that, it’s important to examine what corporate sustainability management should look like.

What should corporate sustainability management look like?

Disclaimer, we’re going to go on a bit of a tangent. Bear with me. There’s actually a fair bit of research on this topic to set out good practices on how companies can be held accountable via environmental accounting and corporate sustainability management. Below is a graphic I made, based on a corporate sustainability management textbook by Schaltegger et al. in 2017. Having a management plan is probably step 1 for companies thinking about making sustainability improvements (part of why ISO 14001 is so good here - it helps companies create the requisite systems). It requires an assessment of current practices and input from stakeholders to come up with sustainability targets, with the use of specific key performance indicators (KPI) to track progress. What really sets this standard apart from B corp is that the targets should be based on what’s most material to a given company and its industry. In other words, what’s the biggest environmental impact associated with a given product? Its waste stream? Is it sourcing? Production Emissions? The things that are relevant to that company and industry should inform the targets and KPIs. Disclaimer, again, it looks like B Lab is working on addressing this gap in their certification for 2025 - again, hard to say what that will look like at this point. From there, the companies will report regularly, via the use of a commonly used reporting framework and external auditing. This bit is important so the market can compare companies apples to apples rather than apples to oranges. When everyone is using different reporting frameworks, especially ones that give room for deception (like with B Corp certification), it makes it virtually impossible to see which companies are doing better or worse on the sustainability front.

A key factor for success in corporate sustainability management is to view sustainability as a journey rather than an end point. Sustainability is such a nebulous concept. Things change year over year, resources continue to be depleted, and there are so many facets to consider. Given that consumerism is the most impactful thing we do societally, the overwhelming evidence shows that overconsumption has canceled out any gains made via green innovation (Wiedmann et al., 2020). In the time we as a society started to think about sustainability, the only thing that’s really happened is that emissions, global warming and biodiversity disruption - is getting worse. Are we really sustainable? Can any consumer facing business achieve sustainability”? Sustainability entails that we’re going to be able to keep on as we are into the future indefinitely. In reality, that’s probably not realistic at this point in sectors where they have items to sell. Companies can certainly be improving their sustainability efforts, they can be trying to do better. This is why the journey concept is so important.

It should be noted that most regulatory bodies consider generalized claims like “sustainable” as deceptive. What exactly does the brand mean? Because sustainability is so complex, it’s not a substantiatable claim - and it’s a legal requirement for claims to be truthful, which requires evidence. The general message from most regulatory bodies: if companies want to make a “green” claim, they should be specific and they should back that claim up with proof. And so Inkey claiming they’ve achieved sustainable beauty? That’s deceptive.

I’m going to stop myself from going on a giant tangent about what sustainability means, especially in the context of business, and leave a 20 minute presentation I gave on this topic if you want to learn more. The intention behind this presentation was to give entrepreneurs a 101 about things they needed to think about to start to wrap their heads around the topic.

So, Is B Corp the highest standard for Social Performance?

This claim is clearly more subjective than something like environmental sustainability. And I want to say up front that I am not an expert in the social aspect of sustainability. We all have a lot to learn from each other and I am still very much learning as I go. But like with the progress B corps are claiming on the environmental side, the social benefit side seems just as disconnected with reality.

I am only going to use one example here and I could be missing the mark... But how does the “highest standard for social performance” certify a pyramid scheme? BeautyCounter is a large multi level marketing scheme based in America that employs around 70 000 “brand advocates”. BeautyCounter operates as a “direct to consumer” model where employing the customer is the primary financial incentive for its members. These schemes hide behind “products” or trinkets as I like to call them to skirt the negative public opinion surrounding pyramid schemes. “Brand advocates” sell these trinkets to their “customers”, generally friends and family while also attempting to grow their “reach of influence”. The only “brand advocates” making real money are those able to convince enough of their “customers” (friends and family) to join them in becoming “brand advocates” for the company. The new recruit becomes a new node in the pyramid and the recruiter sees a financial benefit from the new hire as well as any sales or recruitments perpetuated by this new node.

How these schemes remain legal is completely beyond my comprehension. It seems like something obvious we should have legislated against globally a long time ago. What’s even more perplexing is companies like this will often self report their income disclosure statements in an attempt to appear transparent and forthright to prospective new hires. But these statements are just an amazing look at the obfuscation a company like this is happy to engage in. Here’s a look at a small sample of this statement

Clearly with this layout they are targeting a certain demographic. Those who are bad at math. I’m sure there are people out there who would look at this and think yeah dang, I could use an extra $1878 a year. But in no way is that what this data tells us. First off, the statement reads

Making it seem like this chart includes all the “deadbeats” who just signed up but had no “drive” to make sales - however the astute among us may have noticed these numbers do not add up. Literally. If you add up all the people in the bullet points above you get 46 871 which curiously is not a number posted anywhere on the site (it’s almost like they just made it up) and certainly a far cry from 73 479, which was how many BeautyCounter claims were analyzed for this statement. Further adding to the confusion, if you add up the percentages on this chart you may notice another oddity. We have what we assume are the bottom 83% represented in the first 4 bullets then we skip straight to the top 1%. I am no math whizz but I was under the impression that percentages always added up to 100.

BeautyCounter could be employing the worst statisticians on the planet, but It’s important to note that this type of obvious manipulation on income disclosure statements is common across all of these schemes. So, to bring us back to B Lab, we have an industry that thinks numbers are just some fun tool to express one's opinions with. Or more nefariously, thinks they can manipulate the most vulnerable among us with the promise of “financial freedom” with some perceived transparency, while actually performing a litmus test on its prospective employees to see if they are able to perform basic math. No matter the intention behind these figures, how does a model so clearly rooted in the financial exploitation of its workforce stack up when assessed by “the highest standard for Social Performance?”

Pretty well as it turns out.

Wow! You might say, 97.7, that's really impressive! Oh and look at that improvement! They must be really making a difference. But 97.7 out of what? What does 18.3 on Governance really mean? They have a nice description but how does one turn an evaluation of a company's overall mission, ethics, and “transpancancy” into an 18.3? Ok so it’s proprietary, whatever we can live with that. Surely a company employing a literal army of first world slaves scores poorly for their workers, right?

This is a company that employs a salesforce of almost 100 000 people and just 530 of them are making more than 30k per year. Paying less than .8 percent of your salesforce a wage while promising the remaining 99.2 % they just need to put more effort in should not equate to a good score for the benefit of those workers.

So how does BeautyCounter end up with a 26.6 and not a 0? Clearly that shouldn't be possible using any logic or reason. So how much of a benefit is B Lab’s proprietary assessment process really? Who are the primary beneficiaries? It’s pretty clear from this example it’s not always clear how these scores are calculated.

Are B Corps more likely to make improvements over time?

This was a claim we saw from B Lab earlier on in their Ryerson University presentation, giving 3 examples from companies arguably doing a very good job in how they’re approaching sustainability. Is this representative of most B Corps as B Lab claims? Based on the information I’ve been able to gather, no, B corps, on average, do not make meaningful sustainability improvement over time. Growing research shows that B corps are more motivated by improving reputation rather than addressing corporate social responsibility. In a 2021 study on USA-based B Corps, companies were not driving to improve corporate social responsibility practices after being certified (Villela et al., 2021). While companies who use ISO standards have been shown to be motivated to improve environmental performance and legislative compliance (Paleman et al., 2021), B Corps have been shown to focus more on improving their reputation (Vilela et al., 2021). The score for the average B Corp may rise over time, but if that score is completely uncoupled from reality, is there really a benefit? Again, there is money to be made, and power to be had, when you’re perceived as socially or environmentally superior. So how can you improve your image to convince the market that you’re really a bastion of morality and social responsibility without getting bogged down by the reality of your situation? B Corp may be the best route to get there.

Take Home

I do not want the picture I’m painting to be one of malice from B lab or from all the companies that are seeking B corp certification. To be honest, my initial reaction after being exposed to the marketing from B lab was to become B Corp certified myself. I am sure the intentions that lead to the clout B lab has accumulated were good ones. However, good intentions can only take you so far. And when that intention far outpaces the reality of a situation, the only option to remain relevant in a space where feeling trumps fact seems to be to fake it until you hopefully make it.

While B Corp certification can help companies get nudged in the right direction, IMO, it is also very commonly used as a tactic to mislead. The pursuit of sustainable development in the business sector is important and requires the use of evidence, common reporting frameworks, and accountability. Based on everything I’ve learned about B Corp, I believe it is doing more harm than good. I am extremely bothered by the reporting I’ve seen in industry about what B Corp means. Again, there are a lot of really well intentioned companies who have opted to become B Corp certified who do excellent work. But does the certification actually ensure social or environmental improvement? The simple answer is no. Is B Corp the highest standard of social and environmental performance? The simple answer is no.

References

André, R. (2012). Assessing the accountability of the benefit corporation: Will this new gray sector organization enhance corporate social responsibility?. Journal of business ethics, 110(1), 133-150.

B Lab. (2019). B Corps in Canada. A presentation to Ryereson University for the study of Corporate Social Responsibility on B Corps and Benefit Corporation Law.

Fonseca, L., Silva, V., Sá, J. C., Lima, V., Santos, G., & Silva, R. (2021). B Corp versus ISO 9001 and 14001 certifications: Aligned, or alternative paths, towards sustainable development?. Corporate Social Responsibility and Environmental Management.

Liute, A., & De Giacomo, M. R. (2022). The environmental performance of UK‐based B Corp companies: An analysis based on the triple bottom line approach. Business Strategy and the Environment, 31(3), 810-827.

Milne, M., & Gray, R. (2013). W(h)ither ecology? The triple bottom line, the global reporting initiative, and corporate sustainability reporting. Journal of Business Ethics, 118(1), 13–29.

Paelman, V., Van Cauwenberge, P., & Vander Bauwhede, H. (2021). The impact of B corp certification on growth. Sustainability, 13(13), 7191.

Schaltegger, S., Burritt, R., & Petersen, H. (2017). An introduction to corporate environmental management: Striving for sustainability. Routledge.

Wiedmann, T., Lenzen, M., Keyßer, L. T., & Steinberger, J. K. (2020). Scientists’ warning on affluence. Nature communications, 11(1), 3107.

Is B Corp Actually a Benefit?