FAQs: B Lab’s approach to managing risk and understanding negative company impacts

Modified on Wed, 08 May 2024 at 09:46 AM

Last updated: 8 May 2024


CONTENTS


How is B Lab’s approach to understanding a company’s risk and negative impacts changing?

1. Can you share any further information on the work that B Lab is undertaking and how this might impact the risk process?

2. Why is there no longer a Risk Topic in the latest draft of the standards? How will the new standards take into account a company’s negative impacts?


My certification status is paused awaiting upcoming risk changes. What is the current status of these changes?

3. My certification status has been paused because of a risk-related issue. Why is this?

4. Update on the Russia Moratorium

5. Update on the Franchisor Moratorium

6. Update on Clients in Controversial Issues

7. Update on the development of risk standards for new industries

8. Update on new Location Based / Platform Economy standards

9. Update on new Financial Service standards

10. What should I do if my company's certification status is paused due to a risk-related issue?




How is B Lab’s approach to understanding a company’s risk and negative impacts changing?


  1. Can you share any further information on the work that B Lab is undertaking and how this might impact the risk process?


As B Lab works to evolve the standards more broadly, we are using this moment to optimize and improve our risk processes. The most significant redesign in our processes will allow us to evaluate preliminary risk factors and negative impacts at the outset of a company's certification journey, ensuring a more seamless experience and allowing companies to better understand their eligibility for B Corp Certification at the start of the process.


We are also implementing a new 'due diligence' approach (the actions taken to both identify and remediate actual and potential human rights and environmental risks) that aligns to industry best practices and internationally recognized frameworks, for example the UN's Guiding Principles on Business and Human Rights and OECD MNE Guidelines, while improving efficiency in our processes and maintaining the rigor required for B Corp Certification. 


  1. Why is there no longer a Risk Topic in the latest draft of the standards? How will the new standards take into account a company’s negative impacts?


B Lab’s risk standards are currently under review. In the latest version of the proposed draft standards, there is no longer a standalone Risk Impact Topic because:

  • We are evaluating how best to incorporate the risk standards into the new standards - whether they be fully embedded into the Impact Topics, or a separate list of industries and/or practices ineligible for B Corp Certification under Foundation Requirement 1.2.  (For example, the sub-requirements related to prohibiting harmful lobbying and practicing responsible tax management have been integrated under the Government Affairs and Collective Action topic, and the sub-requirements on responsible marketing and communication practices and having a grievance procedure have been added to the Purpose and Stakeholder Governance topic.) 

  • Secondly, we are using this moment of standards evolution to optimize and improve our certification processes and, as mentioned above, are working to incorporate upfront evaluation and eligibility to understand negative company impact from the outset, making it clear to companies early on in the process, under the Foundation Requirements, if they are eligible to pursue B Corp Certification.


Once completed, the relevant B Corp Certification requirements will be updated, shared, and consulted as appropriate, with stakeholders.


My certification status is paused awaiting upcoming risk changes. What is the current status of these changes?


  1. My certification status has been paused because of a risk-related issue. Why is this?

  1. As part of B Lab’s work to holistically evolve our standards, we are reevaluating our approach to understanding risk (how we understand a company’s negative impacts). This includes updating our standards for specific countries of operation and industries (including controversial industries and controversial clients). 


    Due to the interdependent nature of this work and efforts to align our risk approach with internationally recognised practices, we are unable to share a comprehensive update at this time (previously slated for March 2024), but we are committed to sharing regular status updates in this Knowledge Base article. If your company's certification status is currently "paused", it will remain so while we work through these complex process updates. We appreciate your understanding and patience; B Corps, and those who aspire to join the community, are critical to realizing our vision of an inclusive, equitable, and regenerative economy and it’s vital that you are on this journey with us. 

    1. My certification status is paused as I await updates on the Russia Moratorium. What is the delay and when will I know more?


    B Lab initiated a moratorium in March 2022 following Russia's invasion of Ukraine. The moratorium was designed to pause new certifications for companies in Russia and Belarus while B Lab navigated political and operational complexities. We are in ongoing discussions with governing bodies to review the moratorium and its requirements, while also considering the situation more comprehensively to address similar situations in future. We acknowledge that we are delayed in sharing an update on the moratorium, and commit to sharing updated information here as soon as possible.

    1. My certification status is paused as I await updates on the Franchisor moratorium. What is the delay and when will I know more?


    In 2023, B Lab Global established a partial moratorium on the certification of Franchisor / Licensor businesses, in response to identified risk and potential brand confusion when a Franchisor is certified without its Franchisees and vice versa. This tension is best illustrated in cases where companies franchise or license their intellectual property and related support services, but do not operate store / franchise locations in their markets. Accordingly, B Lab applies a certification moratorium to Franchisors / Licensors who operate less than 50% of their branded locations globally.


    The current moratorium on franchisors/franchisees (further information in Chapter 5 here) remains in effect until further notice.

    1. My certification status is paused as I await updates on B Lab's approach to certification for companies with clients in controversial industries. What is the delay and when will I know more?


    B Lab is pursuing a shift in our approach to align with 'due diligence' concepts, helping companies identify and assess adverse impacts of their business operations and products in line with industry best practices and internationally recognised frameworks, for example the UN's Guiding Principles on Business and Human Rights and OECD MNE Guidelines.


    Using due diligence concepts will have a material impact on the approach previously known as 'clients in controversial industries'. For now, B Lab Global has temporarily suspended the risk review process which means pausing certification for companies with clients in the following controversial industries: Pornography, Tobacco, Recreational Marijuana, Gambling, Defense (public and private sectors), Offensive Firearms and Weapons, Prison, Nuclear Power/Hazardous Materials, and/or Fossil Fuels (coal, oil sands) industries. We expect to provide guidance on what due diligence companies need to conduct in order to proceed with verification and kindly ask for your patience.

    1. My certification status is paused as I await new industry risk standards to be developed. What is the delay and when will I know more?


    As B Lab works to evolve the standards more broadly, this is an opportunity to reconsider our approach to understanding and managing the negative impacts, or risk, of companies from new industries joining the B Corp Community. In the past, we have sought to develop new risk standards whenever a company applies for B Corp Certification from an industry where we have not previously certified, but that could pose unknown risk or potential negative impacts. The need for new industry standards may also be required as new potential risks come to light - we recognise that some companies in a newly paused industry have already been certified. B Lab will continue to allow such companies to remain in the community. 


    While B Lab’s standards encompass a broad range of sustainability matters, the standardized B Impact Assessment cannot capture all material impacts of every company/entity. This sometimes results in delays in certification as B Lab staff must educate themselves on new industries/topics, develop new standards, and evaluate this against other risk priorities or industries that are in the pipeline. This can take 9-12 months per industry and, until now, 16 different industries have been in this queue awaiting new standards to be developed. This puts increased pressure on B Lab's internal teams, as well as causing unsatisfactory delays for companies. 


    Going forward, we anticipate the minimum requirements set in the new standards will mitigate much of this company risk and eliminate the need for industry specific standards. In addition, we are looking to implement a new approach to assess a company's adverse impacts inline with due diligence best practices such as the UN Guiding Principles on Human Rights


    While we await the finalization of the new standards for B Corp Certification, we encourage companies in the following industries to apply as there may be a path forward for certification, if they meet specific requirements. A review conducted by the Risk Team will determine if the company can proceed with certification at this time or if they will need to wait for the new standards to be rolled out.


    Industry

    Minimum Requirements in order to be evaluated by the Risk Team

    Automotive and Machinery Industry

    Must have a target submitted and validated by the Science Based Targets initiative (SBTi)

    Fishing, Fisheries and Aquaculture

    Must not have any material concerns in the public sphere AND either:

    • 90% of portfolio is certified by credible third-party organizations OR

    • they are < US$5M in revenue

    Jewelry Industry

    < US$10M in revenue

    Healthcare Providers

    Must not be majority owned by Private Equity 


    We appreciate your patience while this work is in development. Please check back here for regular status updates. 

    1. My company operates in the Location Based / Platform Economy. There was a consultation on new standards for this industry but my certification status remains paused. What is the delay and when will I know more?


    Over the course of 2023, B Lab undertook a public consultation on developing risk standards for companies operating in the Platform Economy. Upon conclusion of this consultation, the recommendation from the Standards Advisory Council, one of B Lab's governing bodies, was not to produce specific risk standards for the platform economy, but instead ensure the new standards for B Corp Certification cover companies in this industry. 


    Accordingly, no further actions will be taken with respect to Platform Economy risk standards at this time. The timeline to evolve and implement B Lab's new standards remains in development but we anticipate that a first cohort of companies will begin engaging with the new standards after 1 Jan 2026.

    1. My company operates in the Financial Services industry and my certification status is currently paused. What is the delay and when will I know more?


    In 2022, B Lab announced that an addendum for financial services companies would be developed to complement the current version (V6) of the B Impact Assessment. This addendum was intended to provide clarity around the application of standards for companies operating in financial services.


    Following internal reprioritization in 2023, and looking at our roadmap to evolve the standards for B Corp Certification in 2024 and 2025, B Lab has taken the decision not to proceed with development of a separate financial services addendum for the current standard (V6). There is recognition that a new standard is needed for the financial services industry and this will likely be inline with the timeline to evolve and implement B Lab's new standards. This timeline remains in development but we anticipate that a first cohort of companies will begin engaging with the new standards after 1 Jan 2026.


    The existing moratorium for new B Corp Certifications for financial services companies with greater than US$1B in revenues will remain in place. 

    1. What should I do if my company's certification status is paused due to a risk-related issue?


    We understand that a pause in certification status can be frustrating for your company. We encourage you to return to these FAQs regularly for any status updates, and your Global / Country partner representative or Key Account Manager will be in touch to share any changes or engagement opportunities. Some companies may be invited to participate in pilot testing of our new approach to risk. 


    We continue to encourage all advocates of the movement to engage with our standards - you can familiarize yourselves with the latest draft standards content in our microsite and continue to measure and improve your performance on the current B Impact Assessment (BIA) which contains the current version (V6) of the standards. No efforts to improve company impact and work towards becoming a better business are a waste!


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