How to identify industry activities for the Foundation Requirements

Modified on Mon, 20 Oct at 11:24 AM

In FR1.2, what are examples of companies causing, contributing to, or linked to the ineligible industries?
If my company is causing, contributing to, or linked to the ineligible industries, then what is the outcome?
I’m unsure if my company is causing, contributing to, or linked to the ineligible industries. What should I do?
If a company has a client that is in multiple industries, then how should they determine whether their client is in an ineligible industry?
Are there any additional requirements for an industry not specified in the Foundation Requirements or Impact Topics?

In FR1.2, what are examples of companies causing, contributing to, or linked to the ineligible industries?

See below a list of terms and their definitions and examples of industries. If a company sells products or services to industries that undermine the B Lab Theory of Change, but the nature of the products or services is not described in causing, contributing to, or linked, then the outcome is no further action.

Terms	Definitions and examples	Questions to ask
Industries that undermine the B Lab Theory of Change.	The listed industries that have systemic negative social or environmental impacts such that individual companies cannot remediate these systemic impacts. The listed industries are: fossil fuel producers, gambling, pornography, prisons and detention centers (including prison or detention center labor), tobacco, and weapons.	For industry definitions, see FR1.2 Clarifying the Compliance Criteria.
Causing	Causing is when the company has a direct connection with the affected stakeholder. This could be: Manufacturing nicotine products Operating coal plants Selling weapons	Does the company manufacture, grow, wholesale, or retail the product or service?
Contributing	Contributing is when a third party sits between the company and the affected stakeholder, or the company is one of multiple companies with a direct connection to the affected stakeholder. This could be: Investment fund invests in a prison Marketing company creates advertisements for a gambling client Consulting company advises tobacco client on selling new products or expanding to new markets Manufacturing company sells drilling equipment to a fossil fuels client Construction company builds gas stations Engineering company advises weapons client on weapons design Company sells restraints, uniforms, or mattresses and linens to prisons	Does the company sell products or services that aim to increase profits (i.e. increase revenue or decrease costs) or improve public perceptions of the industry or client? Does the company sell products or services that are tailored for the industry or client and relate to the industry’s negative impact? This includes products or services tailored for the manufacturing, sale, or use of the industry’s product or service.
Linked	Linked is when the company is not causing or contributing to impacts on affected stakeholders, but they are linked through business relationships. This could be: Human resources company sells employee training software to a pornography client Accounting company prepares financial statements for a prison client	Does the company sell products or services that are tailored for the industry or client but don't relate to the industry's negative impact? Does the company sell products or services that are not available to the general public?

If my company is causing, contributing to, or linked to the ineligible industries, then what is the outcome?

Term	Scope (% of revenue)	Outcome
Causing	Less than 1%	No further action
Causing	Greater than 1%	Ineligible
Contributing	Less than 1%	No further action
Contributing	Greater than 1%	Ineligible
Linked	Less than 1%	No further action
Linked	Greater than 1%	Disclosure
Not causing or contributing or linked	N/A	No further action

I’m unsure if my company is causing, contributing to, or linked to the ineligible industries. What should I do?

During the Intake process in the B Impact platform, companies will answer questions to self-assess whether they are meeting FR1.2.

If a company is “linked” to an industry, then the company must publicly report this, including an explanation of the product or service the company provides to the industry. The public report will likely be on the company’s B Corp profile.

B Lab understands a company may be unsure whether they are “contributing” or “linked” to an industry. In this case, the company can consider the following questions:

Does a public report explaining why the company is linked (FR1.2.2, i.e. not contributing) to an industry represent complete and accurate information (as required by FR1.4)?
As needed, can the company defend this explanation to public stakeholders?

If the answers to both questions is yes, then the company is likely “linked” to the industry.

Please note that, unless a company is in the certification process, B Lab has limited resources to review individual company cases.

If a company has a client that is in multiple industries, then how should they determine whether their client is in an ineligible industry?

For clients in the fossil fuels industry, the definition aligns with SBTi: companies with any level (>0%) of direct involvement in exploration, extraction, mining and/or production of oil, natural gas, coal, or other fossil fuels.

For all other industries, the client is in the ineligible industry if > 5% of the client’s revenue is from an ineligible industry. For example, if a client generates 94% of revenue from hotels, and 6% from casinos, then the client is in the gambling industry, and FR1.2 applies to this client. If a client generates 96% of revenue from hotels, and 4% from casinos, then the client is not in the gambling industry, and FR1.2 does not apply to this client.

Are there any additional requirements for an industry not specified in the Foundation Requirements or Impact Topics?

If an industry is not specified in the Foundation Requirements or the Impact Topics, then there are no additional specific requirements for the industry. Nevertheless, all companies have to meet the Foundation Requirements and Impact Topics tailored for their context, including managing their industry’s material negative impacts through the relevant sub-requirements.