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In pursuit of B-Corp status

The finance function plays an integral role in achieving B Corp certification, a standard that helps businesses demonstrate commitment to an increasingly environmentally and socially conscious world

In a world teetering on the brink of ecological and social crises, it is no longer sufficient for businesses to merely wear the cloak of responsibility. True commitment shines not through well-scripted PR campaigns, but through tangible actions and certifications.

Enter the B Corp status – a badge of honour for corporations that dare to walk the talk. But who within these corporations is spearheading the movement towards this gold standard of ethical business? The answer might surprise you. It is not just the sustainability officers or the HR heads—it is the CFOs.

The climate crisis and widening social inequality pose urgent challenges to the environment, local communities, and the economy, says James Ghaffari, director of Growth & Product at B Lab UK. While many businesses operate for the sole purpose of “making a profit”, recent decades have shown that this model is not sustainable, he says. But the demand for businesses to adopt fair practices as “the rule, not the exception” has grown, from both consumers and employees, he adds.

A focus on ESG needs to be top of the agenda for any business that intends to stay competitive in this new socially and environmentally conscious market.

Despite many companies wanting to do better, they do not always know how. Fortunately, B Corp certification provides a set of standards that ensure “people and the planet are considered alongside profit” in all operations, says Ghaffari. While companies may be hesitant to forgo the ‘profit first’ model, there are benefits to putting ESG at the forefront.

Early research suggests that B Corps experience higher revenue growth, greater employee retention and more innovation. Speaking to The CFO, Ben & Jerry’s finance director Michael Graning said the ice cream giant found that integrating ESG practices has been integral to their value proposition and profitability.

The CFO’s role in ESG and B Corp certification

While every business function plays an important role in B Corp status, being able to “accurately track” ESG-related metrics, collect evidence and report performance with “robust data” is critical, says Adam Hatchard, finance director for Pip & Nut.

Finance are often best placed to analyse the business data needed for accreditation, through providing “financial, carbon reporting or wider data”, says Hatchard. The finance function can also balance the “profit” side, because while ESG is important, being able to “grow sustainably” is still essential for the future of any business.

It is imperative that businesses review their impact and set objectives to ensure they way they operate is fair and equitable, says Hatchard. ESG reporting and goals are not just about “populating numbers into a report” but giving a meaningful way to drive decision making that is sustainable.

When done right, this reporting allows businesses to “reflect on the way that they’re operating” to identify risks and opportunities that drive better practices.

B Corp certification and assessment covers five key areas: governance, workers, community, the environment, and customers. Businesses can use the tools provided to assess where they currently stand, what steps they need to take to become certified, and where they rank against others who have taken the assessment.

The financial implications of B Corp status

While there are no specific monetary incentives for B Corp certification, it impacts investment strategies as companies are more likely to partner with financial institutions that align with their values, says Ben and Jerry’s Graning. Being a B Corp is “self-serving in a good way”, as more value-based organisations join the movement, the more influence they will have, he says.

Investment decisions should always be balanced across “people, profit and planet”, says Hatchard, and ESG should be considered as equal with financial impact. Pip & Nut prioritises transparency in their supply chain, for example, sourcing almonds from a single origin where they “know the farmer by name” and can verify they uphold sustainable practices. A route many companies would not take if “financial gain was the only driving force”, Hatchard says.

Some perceive that ESG practices are expensive, but this is not necessarily true. For example, while bringing production to a local area might result in higher wages, it could greatly reduce transportation costs, emissions, or import/export taxes. There is a delicate balance when it comes to shifting towards ESG practices, which is why the finance function plays such an important role.

What many businesses do not realise is that ESG is a long game that can take years to fully pay off. Which, unfortunately, many results focused leaders may struggle to digest. CFOs who are able to communicate the long-term effects that B Corp certification will have on revenue and culture are crucial to this process.

As Hatchard explains, businesses must ensure they have the financial resources to support their “sustainability ambitions”. Businesses must be sensible about how they manage resources to ensure they do not short-change ESG initiatives due to poor planning. For example, Pip & Nut include a line in their budget that is dedicated to these projects, which represents a percentage of their turnover. Companies must understand that not all ESG policies are financially beneficial, says Hatchard.

How B Corp can improve operations for the better

Becoming B Corp can have a hugely positive impact on businesses, at both the operational and consumer level, which can contribute to market growth, increased revenue, and brand loyalty.

For example, by diversifying their supply chain and supporting smaller businesses, companies can gain access to better products at cheaper prices. Unfortunately, often poorer communities are saddled with western manufacturing waste, meaning being more mindful of upstream and downstream supply can significantly improve the lives of local people, with relatively little cost to the business.

Similarly, while diversifying the workforce may not seem like it would influence daily operations, Ben & Jerry’s says it makes their team “more dynamic” and better able to relate to their diverse customer base. The fact is, consumers want to see businesses making an effort to operate more ethically, and have started to reject those they deem too profit focused.

Ben & Jerry’s believes integrating the concerns of employees, partnered communities, and their environmental impact into operations has been “critical” to their success, says Graning. For instance, focusing on aspects that drive efficiencies, such as reducing greenhouse gases, has contributed to a reduction in their energy costs over time.

While B Corporation provides tools to track ESG targets, it is most effective when businesses embed targets into their overall goals, explains Hatchard. Pip & Nut like to define “specific metrics” for each ESG objective to ensure they can produce evidence and regularly report back to their board.

CFOs can maintain these goals by setting “headline KPIs”, running reports both internally and externally, as well as team incentive schemes. At Pip & Nut every team member has a sustainability target linked to their bonus target, as well as overall team objectives, which helps keep every level of the company accountable and engaged in their mission.

Maintaining and building on B Corp status

For CFOs to successfully manage B Corp status, they will need to expand their mindset outside of profit to encompass people and planet, says Hatchard. B Corp provides a “great framework” for businesses to identify opportunities for improvement and what investment needed to deliver that. ESG compliant is changing rapidly meaning CFOs need to keep themselves up-to-date.

To successfully manage the certification, CFOs should implement a funding approach that puts ESG at the centre of every decision, prioritises transparency, and compliance with legal and accounting requirements. Businesses shouldn’t “underestimate the time commitment”, says Hatchard, and must ensure they have a “cross-functional project team” and know how to manage expectations.

However, businesses that achieve certification make themselves more marketable to consumers, current and prospective employees, and value-aligned partners. While it is a “comprehensive and challenging process”, it is essential to the longevity of modern business, says Ghaffari.

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