What to know about scoping your company for certification

Modified on Mon, 11 Aug at 11:36 AM

This article contains the rules and requirements for defining a company’s scope for B Corp Certification on B Lab’s new standards. The scope determines if a company with a complex structure, including multiple legal entities, facilities and operations, can be certified under a single certification and single assessment. The certification scope must be identified for each company when they apply for certification. The following guidelines ensure consistent application of the certification requirements across such companies.

It should be noted that the scoping rules outlined here are not a huge departure from the scoping rules applied to previous versions of the standards, but efforts have been made, in consultation with a number of B Corps, to simplify the rules and ensure they reflect the realities of how companies are managed.

The scoping rules are as follows:

1. The B Corp Certification scope must include all the following that are owned/controlled* by the applicant company, and which the company seeks to apply the B Corp Certification claim:

Legal entities
Facilities
Business activities and operations

*Definition: Control means having authority over an entity’s leadership or being directly involved in its daily operations and decision-making, including the ability to direct or manage its business activities. This could show up as financial control (e.g. financial consolidation) or managerial control (e.g. executive team makes decisions over that business).

If a legal entity is included in the scope of certification, it is required that all facilities/ employees/ revenue/ business operations that exist under that legal entity are considered within scope of the assessment and certification.

Control can be exercised in several ways. If a legal entity meets either of the control criteria listed below, it must be included in the scope:

1.a Subsidiaries that are financially consolidated and/or controlled

The applicant company must include all subsidiaries within its certification scope if:

The subsidiary is financially consolidated in the applicant’s accounts; or
The applicant company exercises control over the subsidiary’s operations, whether or not it is financially consolidated. Control means having authority over an entity’s leadership or being directly involved in its daily operations and decision-making, including the ability to direct or manage its business activities.

Rationale: Financial consolidation reflects the ability to govern the financial and operating activities of the subsidiary, which inherently implies control. Therefore, inclusion in the Certification Scope is mandatory for any entity that is financially consolidated. Additionally operational control means the applicant company has authority over strategic or operational decision-making. If either financial consolidation or operational control applies, the subsidiary must be included in the certification scope1.

1.b Affiliated entities that are controlled through executive management of the entity

Affiliated entities are legal entities linked through common ownership, branding, joint ventures, or shared operations. If the applicant company exercises control over such entities, they must be included in the Certification Scope.

Rationale: If the applicant company’s executive team is responsible for the affiliated entities operations and makes key decisions that affect its business activities, this constitutes control for the purposes of certification and those affiliated entities must be included in scope. Examples of affiliated entities could be companies having common shareholdings owned by individual(s), or joint ventures. Some considerations would be:

if there is a contractual or operational agreement - for example if the affiliated entity operates exclusively as a manufacturer for the applicant company
if there are shared day-to-day business activities
if there is a shared executive team
if the applicant company exercises a majority of control over the entity, for example in the case of a joint venture

To summarise, all entities under the control of the applicant company (as defined above) must be included in the Certification Scope.

2. If the applicant company has more than one entity or site, they must:

operate under a unified single Sustainability Management System*
have executive accountability, distinct reporting, distinct branding, and legal accountability (requirements for each are outlined below).

*Definition: Sustainability Management System means a framework of policies, processes, and practices integrated into an organisation’s operations to manage their environmental, social, and governance (ESG) responsibilities effectively. It enables continuous improvement by systematically identifying sustainability impacts, setting objectives, implementing actions, monitoring performance, and engaging stakeholders—all aligned with the organisation’s strategic goals and in compliance with legal and voluntary standards.

An effective Sustainability management system shall contain:

Governance: Clearly defined roles, responsibilities, and decision-making authority over sustainability policies, procedures, goals, objectives, and budgets.
Objectives and Action Plan: Clearly defined sustainability goals supported by a structured action plan outlining steps, timelines, and key performance indicators (KPIs).
Policies and Procedures: Documented sustainability-related policies and operational procedures applicable across relevant areas.

An applicant company must meet the following criteria to be applicable for B Corp Certification:

2.a Sustainability Management System

An applicant company must have a single Sustainability Management System covering all the controlled entities and/or sites within scope, and have authority to develop and implement the associated policies, practices and procedures required by B Lab’s Standards.
In the case of corporate groups this means the company applying for certification has authority to develop and implement policies and practices in its operations separate from its ultimate parent or has the ability to change its parents policies and practices to comply with B Lab’s standards where these are shared.
For companies within a corporate group that lack clear authority, additional due diligence is required to determine their decision-making power and ability to address non-compliance. If necessary, the applicant may be asked to sign a Commitment Letter

2.b Executive Accountability

The applicant company must have an independent executive team, including a chief executive or equivalent, who has the authority to develop and implement policies, processes, and procedures to meet the B Lab standards. This means the applicant company’s executive team has authority over their sustainability management system.
The independent executive team is accountable for all of the operations reflected on the profit and loss statement (P&L) and whose salaries are reported in, or cross-charged, to said P&L.
Where there is a shared executive team across multiple affiliated entities, the applicant company must track the time spent working across both businesses, and this must be cross charged to the applicant’s P&L

Definition: Authority means the ability to establish, approve, and enforce company-wide policies and procedures, as well as ownership and oversight of the centralised management system through which these are implemented. Authority may be exercised through formal structures such as executive leadership, corporate governance frameworks, or parent company control, and is evidenced by decision-making power over operational standards, strategic priorities, and sustainability practices across one or more entities.

2.c Legal Accountability

The applicant company must be a distinct legal entity operating as a private-sector business. The entity must have a separate legal structure that can adopt B Lab’s legal requirement, where the company operates in a jurisdiction where there is an available legal pathway, that includes managerial accountability over the operations in scope of certification.

2.d Distinct Reporting

The applicant company must be able to provide comprehensive reporting on all aspects of its operations, including both financial and impact performance.
Financial reporting: The applicant company must be able to produce a separate P&L that matches the operations of the organisation being certified. If part of a corporate group, the applicant company must, at minimum, be able to produce a shadow P&L that encompasses all the operations included in scope. Any shared resources - such as employees or executive team members - must have their time appropriately tracked and allocated, with costs cross-charged to the relevant P&L.
Impact reporting: The applicant company must be able to measure and report on the social and environmental performance of all in-scope operations, and be able to provide evidence in the B Corp assessment. Where data is shared with out-of-scope entities, the applicant company must be able to identify data metrics specific to the operations within the certification scope.

2.e Distinct Branding

To ensure the B Corp IP and certification claim is only used by the applicant company and its entities within the certification scope, the applicant company must have its own distinct public name or brand from any affiliated out-of-scope entities.
This means the applicant company must have their own independent website aligned with B Lab’s brand requirements or a distinct company name that has a distinct qualifier, such as a geographic, industry or other name qualifier.