“To B or not to B”: is achieving B Corporation status valuable for organisations in 2019?

06 March 2019

Our research suggests 2019 will be a tough year.  With Brexit uncertainty and a slowdown in economic growth, consumers will be more cautious about their spend generally.  Conscientious consumption is also becoming more mainstream and continues to affect purchasing decisions.  With our predictions of declining retail volumes, retailers and consumer packaged goods (CPG) businesses alike will need to bring their A-game to gain market share.  Environmental, social and governance (ESG) credentials are also driving more investor decisions and employee choices.  So, is certifying as a B Corporation actually an opportunity to get ahead of your competitors?

B Corps are businesses that balance profit with purpose.  Likened to the Fair Trade stamp on coffee, a B Corp gives as much thought to their social and environmental impact as they do to their financial returns.  B Corp certification is provided by a not-for-profit organisation, B Lab.  Achieving accreditation means B Corp directors are then legally required to consider typical investor issues (e.g. cost vs ethically sourced supply chain) through a different lens, not solely with profit in mind.  There are currently 2,778 B Corps globally with household brands such as Patagonia and Ben & Jerry’s certified, along with Innocent Drinks and Propercorn amongst the 196 B Corps in the UK.

So, if you are considering taking the plunge, here are four observations to be aware of:

  1. It’s catching on: CPG businesses are adopting B Corp status at a greater rate than other industries. Given how easy it is for shoppers to vote with their feet it’s no wonder this industry is embracing B Corp status more rapidly than others.  Over 10% of all B Corps were in the Food and Beverage industry in 2017, greater than any other market segment*.  This suggests CPG companies are seeing greater value in becoming a B Corp than other segments.  Waitrose has embraced the movement, recently launching an online B Corp aisle where customers can shop for certified products in one place.
  2. It’s got investor appeal: Private Equity houses are now appointing ESG specialists. Limited Partners are significantly increasing the pressure on Private Equity (PE) general partners to demonstrate that their management company, as well as portfolio operations, are diverse, inclusive and accountable. Having a B Corp in a portfolio is a step in the right direction. There is also the highly active and growing impact investor community, solely focused on purpose led profit-making businesses.  More recently, traditional PE houses themselves have also certified as B Corps.
  3. It can drive growth: there is some evidence that being a B Corp can drive above average growth.  UK B Corps reported an average growth rate of 14 per cent*, 28 times higher than the national average of 0.5 per cent*. ESG is not just informing more consumer choices but employees too are now prioritising making a difference over traditional financial rewards.  If you want to attract and retain the best talent, mixing profit with purpose could provide a differentiator.
  4. But - it’s still early days.  Rigorous research on the impact of becoming a B Corp, especially in the context of valuation, does not yet exist.  There is still a mindset that a company can’t be ‘doing good’ whilst maximising growth or financial return.  Potential benefits such as enhancing brand appeal and reducing the due diligence required by a purchaser (due to the rigorous B Corp certification process) could provide comfort to cautious investors.  The empirical evidence won’t be there for some time.  But, as Unilever and Danone continue to acquire and own B Corps and whilst the ESG sentiment gains further traction in the market, it might not be needed to tilt the balance.

Whether you’re considering B Corporation status or not, it’s clear that more and more businesses, including your competitors, will take the B Corp leap across 2019.  So, the question remains for you, “To B or not to B?”

For more insights into the world of B Corps, including steps to take to become one, please go to our guide page or contact me directly to discuss further.

Isabella Fox

Isabella Fox | Manager in Corporate Finance M&A ICAEW Chartered Accountant PwC UK, London

Profile | Email | +44 (0)7753 463986

* Source: B Lab

B Lab’s research has shown that the average year on year growth rate of UK B Corps is 14 percent1, 28 times higher than the national economic growth of 0.5 percent (Office for National Statistics, 2018) - with leading UK B Corp FMCG brands, growing on average 21 per cent in 2017, compared to a national average of three per cent across their respective sectors.2

1 B Corps that have recertified have grown on average (median) 14 percent year-on-year since launch in 2015.

2 Average median year-on-year growth of leading UK FMCG B Corp community vs average median growth of their respective categories. The total UK B Corp FMCG makes up 11 percent of the total community.

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