How to meet FR1.2 on industries that undermine B Lab’s Theory of Change

Modified on Mon, 23 Feb at 4:20 PM

How do I know if my company is directly involved in an industry that undermines B Lab’s Theory of Change?
B Lab defines ineligible industries as those that sell products or services that act against the B Lab Theory of Change. The industries are listed below.
My company has clients in an ineligible industry. How do I know if my company meets FR1.2?
The Setup section will guide your company through the following questions and outcomes.
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?

How do I know if my company is directly involved in an industry that undermines B Lab’s Theory of Change?

B Lab defines ineligible industries as those that sell products or services that act against the B Lab Theory of Change. The industries are listed below.

Fossil fuel production
Gambling
Pornography
Prisons and detention centers (including prison or detention center labor)
Tobacco
Weapons

The Setup section will guide your company through the following questions and outcomes.

Question	Explanation	Outcome
In the last fiscal year, did any of the entities in scope generate 1% or more revenue from manufacturing, growing, wholesaling, or retailing any product or service from a listed industry?	For industry definitions, see FR1.2 Clarifying the Compliance Criteria. Calculate the 1% per listed industry.	If “yes,” then your company is ineligible for certification. Your company can re-apply after they reduce / exit their involvement in the listed industry. If “no,” then your company meets FR1.2.

My company has clients in an ineligible industry. How do I know if my company meets FR1.2?

The Setup section will guide your company through the following questions and outcomes.

Question

Explanation

Outcome

Consider the products or services your company sells to clients in the ineligible industries. In the last fiscal year, did your company generate 1% or more revenue from providing the following products or services?

Lobbying or public relations services
Marketing, advertising, or branding services
Physical products tailored for a client

Calculate the 1% per listed industry.
Physical products tailored for a client in a listed industry are products tailored for the manufacturing, sale, or use of the client’s product.

If “yes,” then your company is ineligible for certification. Your company can re-apply after they reduce / exit their involvement in the listed industry.

If “no,” then your company meets FR1.2.

My company has investments in an ineligible industry. How do I know if my company meets FR1.2?

The Setup section will guide your company through the following questions and outcomes.

Question

Explanation

Outcome

Consider your company’s investments in the ineligible industries. In the last fiscal year, did your company generate 1% or more revenue from investments through the following activities?

Direct equity investments
Private equity, venture capital, or growth capital, including debt financing

Calculate the 1% per listed industry.
The company’s applicable revenue is limited to the revenue generated from investments in which the company has discretionary control over investment decisions.
The company’s applicable revenue is limited to the revenue generated from direct exposure to the listed industry. For example, this excludes exchange-traded funds with exposure to multiple industries.

If “yes,” then your company is ineligible for certification. Your company can re-apply after they reduce / exit their involvement in the listed industry.

If “no,” then your company meets FR1.2.

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

A company may have a client in a listed industry that is also involved in a non-listed industry. If so, then for FR1.2, the company’s applicable revenue is limited to the revenue generated from serving the client’s involvement in the listed industry. For example, a fossil fuels client may also be involved in renewable energy. If so, then for FR1.2, a company’s applicable revenue is limited to the revenue generated from serving the client’s fossil fuels involvement (and not the client’s renewable energy involvement).

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.

For the following questions, please refer to the FAQs: Updates to B Lab Standards, Release of V2.1.

What is FR1.2, and how has it changed?
How did B Lab determine the list of ineligible industries?
What does B Lab define as an ‘ineligible industry’?
In FR1.2, is the 1% threshold per each ineligible industry, or a combined percentage?