B Corp – is it the right choice for your business?
@ the IERP® Global Conference, August 2023
Session chairman Tan Ee Beng of B Market Builder SEA was joined on the stage by Benjamin Chua, founder and CEO of Speco, and Song Ee Rong, General Counsel, of Bintang Capital Partners. Instead of giving a definition of what B Corp was, Tan invited Chua and Song to share their experiences with B Corp. Neither Chua or Song admitted to having had an easy time with B Corp, which is essentially a certification for businesses that measures a company’s entire social and environmental impact. At its core, having a B Corp certification signals to an organisation’s stakeholders its seriousness about ESG practices.
Recounting his initial experience with B Corp, Chua said that Speco, a smart hygiene company, having expanded its presence to seven countries, was now doing R&D in sustainability. As a company dealing primarily with cleaning, disinfecting and sanitising services, it had invested significant funds in R&D for durable coatings and self-cleaning technology. Speco applied for B Corp certification because it saw the push by technology towards sustainability. The company had already removed harmful chemicals from its products, and perceived the B Corp certification to be a desirable one to have, in view of its orientation towards sustainability and environmental awareness.
The process of certIfication took nine months; the first round alone had 300 questions. All answers had to be substantiated. “We claimed that our products were biodegradable and safe for the waters of Singapore,” Chua said. “B Corp asked for proof. We brought in consultants to prove how safe our products were – but we had to fight for every point. B Corp is essentially the highest form of accreditation for companies relating to sustainability. Do it if you want the gold standard.” It was a slightly different for Bintang Capital, Song said, of the private equity fund manager’s certification journey. Bintang Capital currently manages about US$100 million in assets, regionally across ASEAN.
“We were thinking about how to provide capital in a way to be used for good,” Song explained. “Alongside profits, our focus has always been the planet and people. We were thinking about which certification would best reflect our strategy, and what we stood for. And we found that B Corp worked best for us because we had a vision of investing in a better world.” Being a signatory to the UN’s Principles for Responsible Investment, and a signatory of the Corporate Principles for Impact Management, Bintang Capital believes that not only do investors have a fiduciary duty, they also have the ability to apply it responsibly, he said.
“We do require our portfolio companies to comply with B Corp’s standards,” he said. “They must also apply for B Corp’s certification within a certain timeframe once we have made our investment.” Bintang Capital practises what it preaches; it has applied for the certification itself, and Song readily admits it was a rigorous but necessary undertaking as the company had to push the concept, up its standards, and demonstrate that attaining the certification was not a greenwashing exercise. The certification was eventually obtained, signifying to portfolio companies the exercise was attainable. “With the right strategy, approach and experience, we can assist them,” he added.
To a query on why companies should choose the B Corp certification when there arewere many frameworks available, Chua pointed out that an increasing number of high-profile companies like Ben & Jerry’s and Body Shop are getting B Corp-certified. “There is so much greenwashing going on right now but B Corp makes it difficult to greenwash because of its robustness, vigorous assessment and audit process,” he said. “It is difficult for companies to hide anything. Also, sustainability benchmarking is necessary if suppliers want to be onboarded with big clients or MNCs. They want you to be aligned. Having a B Corp certification puts you on the fast track, and gives you a jump on the competition.”
It also helps B Corp-certified local or regional companies to identify who they should be doing business with, in other regions. For a venture capital company like Bintang Capital, B Corp’s B Impact Assessment is a good measurement tool. “One of our challenges is tracking our portfolio companies’ use of our capital,” Song explained. “The Impact Assessment has a set of questions you must answer, and the impact score is transparent across five impact areas…you are strategically reviewing and identifying areas for improvement. The B Impact Assessment applies across all companies, is sector agnostic and can be customised.”
Additionally, it promotes employee empowerment and improves supply chain management. Where it requires a review of the organisation’s environmental impact management system, it can also result in reduced emissions,; transparency and accountability, and better stakeholder governance are incorporated. Song said that although there were sometimes concerns that ESG issues were being prioritised over fiduciary dutiesy, ESG and financial sustainability do not need to compromise each other. The sustainability that is carried out under the five focus areas of the B Corp certification aligns with the prioritiesy for ESG issues that many institutions require of their investors.
Citing studies carried out by the UN on this, he said, “That’s why we require our portfolio companies to go for it.” Chua agreed, remarking that if a company is B Corp-certified, it will automatically score highly in ESG ratings. “ESG is three of the five pillars you are scored on,” Chua added. Noting that ESG ratings may be good at evaluating risks, Song said that B Corp combines profit impact and profit creation, even taking into consideration the possibility of greenwashing by including a mechanism to address this – a necessary measure as “The impact of decertification is quite severe for the brand’s reputation,” he said.
Both speakers stressed the necessity of showing more than policies. All claims made must be verified and demonstrated. The need to recertify every three years is a measure of the transparency which underscores B Corp’s rigorous impact assessment. But it is becoming the choice of many companies precisely because of this rigorousness. “B Corp is for organisations that want to be certified to high standards of social and environmental practices, and with the proper commitment in terms of their vision and mission, in line with legal requirements,” Chua said, adding that it was for organisations wanting to manage ESG risks well, and measure ESG performance holistically, in parallel with profits.