Milton Friedman famously wrote in 1970 that, “there is only one social responsibility of business – to use its resources and engage in activities designed to increase its profits.” Today, there’s a long line of business leaders who would disagree, many of whom will brandish their B-Corp certificate – an award obligating them to stringent labour and environmental standards – as proof that people and the planet are, in fact, considered alongside profit.
But there’s a price tag on being good. The B-Corp process is an arduous and expensive one that can take several months and must be renewed every three years. Annual certification fees alone range from £1,000 to £50,000, depending on turnover. Not to mention, the internal time and resources required to align business operations with B Corp’s rigorous ESG standards.
As such, the finance function has a vital role to play in maintaining and growing a company’s B-Corp status, balancing the profitability of the business with the added layer of cost and complexity it takes to be more sustainable.
Be prepared to make costly changes
Embarking down the B-Corp route requires finance leaders to move away from a purely profit mindset, a pivot that may feel difficult at first for a traditionally revenue-orientated function. There are extensive costs associated with running a responsible business, from measuring and reducing carbon emissions to publishing impact reports and operating policies for a more fair and equitable environment.
Finance leaders must ensure they have the “appetite to make potentially costly changes over time” to support their environmental and social ambitions, says Mark Shields, finance director at Scottish beer brand Brewgooder, which has one of the highest B-Corp ratings in the world.
This, says Shields, means allocating resources and planning for the necessary changes well in advance, while embedding ESG practices into the company’s budget and long-term strategy. “From a financial perspective, we need to ensure that we resource and support the business in developing in other areas, such as through investment in making Brewgooder a great place to work, advising on governance topics, particularly with regards to corporate governance, and supporting decisions on improving our environmental footprint.”
Despite the hefty price tag, research suggests that having a B-Corp label pays off, increasing a company’s potential to attract more capital, talent and customers. But this takes time and patience. “No CFO should think of B Corp as a quick win,” says George Graham, CEO and co-founder of Wolf & Badger, a B-Corp fashion brand. “It is not cheap, and it is not easy. But if your business is genuinely committed to being a more responsible one, then it is a great framework to work with.”
While the immediate financial returns may not be apparent, for Wolf & Badger the long-term benefits outweigh any initial costs. By going through the rigorous B-Corp process, the brand’s leadership team was able to see areas where they could improve, gaining a better understanding of the risks and opportunities available to them. “It helps us to reflect externally the work that we do to help create a more ethical and sustainable future for fashion retail… ultimately it helps us build a better business,” Graham stresses.
While ESG practices are often considered expensive, they can also add value and drive growth. Shields says this has had a “substantial impact” on Brewgooder’s product decisions, leading to new collaborations in markets that they may not have considered if financial gain was the sole driving force behind investment decisions.
Consider the long-term implications
Andy Revell, finance director at B-Corp branding agency Household, says it’s important for finance leaders to “look at the big picture” when considering accreditation. While it does not offer a guaranteed or immediate boost to revenue or profitability, B-Corp status can drive value in the longer term through brand reputation, ability to attract top talent, increased employee engagement and retention, and competitive differentiation.
Finance leaders are responsible for future-proofing the business, protecting it from market tailwinds and positioning it for future growth. In this regard, the certificate offers an additional layer of security. As Revell notes: “More and more B-Corp companies only want to work with other B-Corp-accredited companies, which is a powerful snowball effect for good.”
CFOs must also consider the growing consumer and employee demand for corporate civic responsibility. Factoring such pressures into their long-term strategy could gain them a competitive edge or avoid backlash down the road. B Corp Here We Flo shared how certification helped them stand out from their competition, especially in the US. “In the US market, being the only condom brand with a B Corp certification has genuinely set us apart. It’s a clear message about our values and what we stand for,” co-founder Susan Allen explains. Similarly, Cooper Parry, the UK’s largest accountancy B Corp, said certification proved advantageous with investors, cementing its reputation as a purpose-driven firm. “Investors love the ‘slower, better, stronger’ businesses,” says its head of sustainability, Nicoleta Ciobanu.
Shields admits that, as an impact beer brand “this is more of our reason for doing what we are doing than a specific financial motivation.” But he says there’s “no doubt” that the certification has had a positive impact on its customer base. “Expectations of both consumers and employees – particularly generation Z – are getting higher and higher when it comes to choosing what brands to work for and consume,” he says. While “time-consuming and potentially expensive” the process of becoming and remaining certified “sends a clear message to consumers of a business’s commitment to these standards.”
How to manage and grow B-Corp status
The finance function has a “massive part” to play in maintaining and growing the company’s B-Corp status, says Richard Moore, finance director at B-Corp retailer Micro Scooters UK. “From helping with the application in the first place to ensuring improvements against our impact plan are logged, cost and shared with the rest of the company – we are involved in it all.”
The shift towards ESG practices is a delicate dance; it can cause considerable upheaval if not managed effectively. Finance leaders play a critical role in communicating the impact of these changes on revenue and culture. For Moore, this includes “updates on initiatives, where we are versus where we said we would be, new ideas, and where we are falling behind – all shared monthly via a newsletter, weekly in individual team meetings and quarterly at all company catch-ups.”
Finance leaders are not only responsible for communicating their organisation’s ESG performance to its employees and stakeholders, but for accurately measuring and reporting these efforts. Keeping on top of ever-evolving ESG compliance, understanding the opportunities for improvement and knowing what investment is needed to deliver that, requires continuous assessment by finance chiefs. As Shields points out: “The expectations from the business increase as it grows so we are very aware of the need to ensure we remain aligned with B-Corp requirements over time.”
CFOs must also ensure that the ESG mission and intended impact is protected over time, regardless of any financial curveballs down the line. Brewgooder makes a contribution to an independently governed non-profit for every beer it sells. This means every drink purchased is guaranteed to have an impact somewhere, regardless of other financial decisions the business takes or their bottom line. “Naturally this adds cost,” Shields says, “but it is at the core of why our brand exists.”
A growing number of B-Corp CFOs are using ESG-linked incentive plans to keep the workforce accountable and engaged on the company’s wider mission. B-Corp startup Pip & Nut have a sustainability target linked to their staff’s bonus targets and ethical advertising agency Good-Loop is partly employee-owned. They are not alone: just under 10% of all B-Corp businesses in the UK are now employee-owned. Such tactics can improve the recruitment and retention of committed staff; employees that have some skin in the game are more invested, they have a voice and are therefore more committed to the triple bottom line – people, planet and profit.
However, the finance function has a much bigger role to play in managing B-Corp status than in the ‘yes/no – it costs this much’ department. “There is enormous scope for us to be and do more than spreadsheet wrangling,” says Moore. In Micro Scooter’s case the finance team has been working with Carbon Neutral Britain to ensure the company’s emissions are calculated accurately. They’ve also been assessing sustainable packaging improvements, spending more time on “actually being a part of a critical lever of positive impact.”
Becoming B-Corp opens opportunities for every part of the business to participate actively in change, and Moore argues that finance leaders should encourage their teams to be a part of these conversations from the very beginning. “Get your team to approach B Corp from an entirely non-financial point of view – you may be surprised at the results. Great ideas can come from the most unexpected places, and finance teams have so much to offer companies that are becoming or who have become B-Corp certified.”
Why B-Corp status is not for everyone
At the end of the day, finance leaders must decide whether going the full B-Corp route makes sense depending on their corporation’s goals, resources, and business model.
The time and money involved in maintaining B-Corp status has played a major role in some businesses choosing to drop their certification. Milkcrate, an app that helps keep streets clean, decided that the “cost and time it took to gain the points required” for B-Corp status became “too much” for a small business, according to founder Morgan Berman. The business dropped the certification in 2021. Glitter is another of Berman’s ventures that is currently navigating “B-Corp algebra” but the cost versus benefit is “still a bit of a mismatch,” she explains. “It’s a burdensome process and one that we might not succeed in.”
Criticisms levelled against the B-Corp movement in recent years, alongside growing concerns of greenwashing, have led some business leaders to question if the expensive certificate is worth what it once was. Especially, when there are alternatives to the B-Corp certification that avoid recurring fees, such as becoming a public benefit corporation.
For companies where environmental or social impact is core to the mission and brand positioning, it can be a valuable investment despite the costs. For others, it may not add up – at least not yet. Either way, the finance function is essential in that decision.
Considering becoming a B Corp? Do this first
- A good first step is filling out the impact assessment on the B Lab website - it is both free and relatively straightforward, and it will give you a good baseline of where you are currently and a framework with which to think about further business improvements you may want to make before looking to certify as a B-Corp.
- Make sure that your team, board and shareholders are really on board with you running a more sustainable business, and if they’re not your first job is to convince them of the benefits all round.
- One of the strengths of the B Corp approach is the breadth of its coverage so it’s critical to have the right team, with the appropriate expertise, as well as sufficient decision-making authority, in order to be successful and to grow in this area.
Milton Friedman famously wrote in 1970 that, “there is only one social responsibility of business – to use its resources and engage in activities designed to increase its profits.” Today, there’s a long line of business leaders who would disagree, many of whom will brandish their B-Corp certificate – an award obligating them to stringent labour and environmental standards – as proof that people and the planet are, in fact, considered alongside profit.
But there's a price tag on being good. The B-Corp process is an arduous and expensive one that can take several months and must be renewed every three years. Annual certification fees alone range from £1,000 to £50,000, depending on turnover. Not to mention, the internal time and resources required to align business operations with B Corp’s rigorous ESG standards.
As such, the finance function has a vital role to play in maintaining and growing a company’s B-Corp status, balancing the profitability of the business with the added layer of cost and complexity it takes to be more sustainable.
