Global Retail   //   January 3, 2024

Why 2023 saw a boom in B Corp certifications

At first glance, companies like the soda alternatives start-up Olipop and luxury French skincare company L’Occitane might not seem to have much in common. Neither does the direct-to-consumer tights brand Sheertex with the canned Bloody Mary mixer Longbottom. But 2023 saw those companies and nearly 1,800 others join the list of Certified B Corps, part of a growing trend as businesses seek to level up their environmental, social and governance commitments. 

B Corp certification was once a niche way for a company to measure its ESG impacts. Some might associate the label with all-natural products or fair trade brands. But recent years have seen interest balloon as companies look to shore up their ESG bonafides. The influx has been so great that B Lab, the operation that runs the certification process, had to hire on help to address long wait times and paused acceptance from about six dozen countries, including many located in the Middle East.

Despite the growing pains, the number of certified B Corps operating globally has more than doubled in three years, going from 3,735 in 2020 to nearly 8,000 at the end of 2023. This calendar year alone saw at least 1,800 new additions, likely the most additions seen in B Lab’s 17-year history. 

The increase can be traced back to rising scrutiny of how companies treat people and the planet. Investors are increasingly examining ESG impact for companies in their portfolios; asset management firm Capital Group found last year that around 89% of investors consider ESG in investment decisions. Potential new regulations from the Securities and Exchange Commission around ESG responsibilities could require public companies to examine the same kind of data need to pull off the B Corp application, potentially luring some companies to get ahead of the curve.

And there’s also external pressure from customers. They’re becoming quick to point out greenwashing, with Deloitte finding that a third of customers say they have more trust in brands that are certified as ethical or sustainable by a third party. And while affordability is a challenge for many customers, paying more for better production habits is on the rise; the National Retail Federation said that anywhere from half to two-thirds of shoppers would pay more for sustainable products.

As such, more companies are getting B Corp certified.

Joachim Krapels, head of insights for B Lab, told Modern Retail that some companies are “Born B” and aim to get certified from inception. But some recent entrants are more established companies on an “improvement journey” as they take a bigger interest in addressing topics like climate change or wage inequalities.

“They may have had very different starting points.” Krapels said. “But there is an awareness of where the world is heading and awareness of the crisis we are facing, and a sense that, ‘Hey, our, our company might actually be able to make a positive contribution.’”

Rising interest

B Lab launched its certification process in 2006 as a framework for businesses that wanted to shift from profit maximization to “stakeholder governance,” or considering the interests and impact of the people and environments affected by its operations. Becoming a B Corp requires companies to achieve a score of 80 or above on the B Impact Assessment, and shift their legal status to one of stakeholder governance. The company can rack up points based on its performance across five areas — workers, customers, community, environment and governance — though a revision of the standards is underway for next year. 

Following the assessment, company has to pass what’s called a “risk review,” which involve answering questions about their processes and operations. The company must also agree to have their data made publicly available. Once certified, the company has to undergo a recertification process every three years. 

Annie Agle, the senior director of sustainability and impact for apparel brand Cotopaxi, which became a B Corp about nine years ago and has been following the work of B Lab since its inception, said that one of the biggest strengths of the certification is how it signals that a company has invested resources into thinking about its impact.

“The B Corp is both a great defensive and offensive certification to have,” she said. “There’s a credibility that comes with that, I think, that makes a really big difference.”

As more people try to seek out companies that undertake better practices, the third-party certification of a B Corp as a way to back up a brand’s claims about it being sustainable, Agle said. This can work against any claims of greenwashing, as brands routinely make claims about sustainability, reusability or circularity without necessarily explaining why or what they mean. On the offensive side, brands like Cotopaxi are able to more easily link up with like-minded B Corps to help make broader changes that affect many brands, like approaching suppliers about using renewable energy, Agle said.

Krapels said the biggest question B Lab faces is whether companies that become a B Corp are still able to exist as healthy for-profit communities. A first-of-its kind internal study published this year compared the resilience of B Corps to traditional companies, during the pandemic. The team found that 95.6% of B Corps were still active as of September 2023, compared to 87.8% of ordinary businesses. Krapel credits this to how a B Corp has added incentive to keep operating in the long-term.

“They’re planning how can we serve that mission over the longer term rather than just by the next quarter,” he said. “It’s a continuous contribution that the company is trying to make. And so that kind of gets wired into the thinking strategically.”

A rigorous process

But achieving those benefits doesn’t come easy. And Krapels said the certification process may not be a fit for all companies. The process requires a deep dive into a company’s data, policies and supply chain. It can take anywhere from a few months to several years. To respond to that challenge, B Lab offers its Impact Assessment for free to companies who want to grade themselves, with about 250,000 uses to date.

“We know that B Corp Certification can be a lengthy process, because it requires quite a bit to become certified,” Krapels said. “And so it’s worthwhile to think about that timing, because it can be a relatively large investment for small and younger companies.”

Longbottom, a UK-based beverage startup that makes a canned Bloody Mary mix, became certified in the summer of 2023. Marketed as a natural and fresh product, the brand’s chief finance and people officer Daniel Misra-Jones said getting the certification is part of the brand’s mission to “do good” while still making a profit. They also wanted to be able to put the stamp on their brand as a way to signal that to customers and suppliers.

“The business decisions you make, they are going to have a positive impact or a negative impact, but you want to do the best you can,” he said. “[B Corp] is something to become fully embedded in the whole business and that’s really key for me.”

It took four people on the staff just under a year to go through the process, Misra-Jones said. He and another team member had gone through the certification process at prior roles, and he said that familiarity with the process helped speed it up — but there were still multiple rounds of questions and answers to fulfill, and about 70 to 80 documents supplementing their application.

“It’s a huge amount of work, which is why I love it as a certification. They put you through your paces, to do what you say,” he said.

Going through the process helped Longbottom make some changes to its operations, Misra-Jones said. That included a revised mental health policy, as well as raise the pay of an intern to 15% above the living wage standards, which in turn helped raise their score.

Yet the rigor may be worth it in the end to help ensure the company is “going to do more than try to sell and try to be profitable.” It also can help from a recruitment standpoint, whether that is with suppliers, brand partners or new employees. In the case of Skandinavisk, a lifestyle candle line founded by Shaun Russell, the company previously told Modern Retail that having a B Corp certification helped draw other companies who are interested in having a “lighter footprint,” and young talent with “different priorities” than capitalism.

In Longbottom’s case, the certification helps attract those want to do business with a company that is about more than just making profits. It signal boosted its certification on LinkedIn and Instagram, telling followers it’s “proud to be part of a growing movement of businesses that are using their power to make a positive impact.”

“There’s a world around this which is rapidly growing, and people are engaging in all of this,” he said. “It really is a valuable professional tool.”

Reel Paper, which makes paper products out of bamboo, became B Corp last summer. David VanHimbergen, the company’s CEO, said that part of the motivation was to help the brand stand out from competitors in a crowded shelf.

“The B Corp certification helps to filter that down and say, ‘Here’s a company and a brand that cares more about just profit but how to improve the world,'” VanHimbergen said.

But getting that stamp of approval was “certainly a challenge, and it takes awhile.” Even though Reel hired a consultant to help it put its application together, VanHimbergen said it still took about 10 months for start to finish. He said there were sometimes delays in the time it took to hear back because of the volume of companies B Lab was certifying.

Still, he credits the process with helping ensure the B Corp label still stands for something. 

“It’s good that it’s a challenging and lengthy process,” VanHimbergen said. “That weeds out companies that are trying to get through and haven’t made the effort to think about how they can have the most impact.”