Do development contractors need B Corp certification?

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LONDON — As the conversation around business increasingly shifts from profit to purpose, is it time for development contractors to catch up?

Amid mounting calls for a new “responsible capitalism,” a growing number of firms have sought to prove their ethical credentials by becoming certified as B Corporations.

The scheme, which started in the United States in 2006 as the business sector’s answer to Fair Trade certification, has more than 3,000 members in over 70 countries. It is run by non-profit B Lab and requires companies to pass an online assessment of around 200 questions to prove they meet a tough set of standards set by an independent expert group. Certification costs between $500 to $50,000 annually, depending on the size of the company, and the fees go toward supporting B Lab’s operations.

The assessment looks at a company’s day-to-day operations as well as its business model and aims to identify whether it has a positive impact on its employees, community, customers, and the environment. B Corporations have to change their articles of association, or company constitution, to reflect this commitment, making them “legally required to consider the impact of their decisions on all their stakeholders,” according to the website. B Lab staff carry out various checks to verify the information and companies have to get recertified every three years.

While well-established in the U.S. — with big-name members including Innocent Drinks, which is owned by Coca-Cola, and Unilever’s Ben & Jerry's ice-cream brand — the movement only landed in the United Kingdom four years ago. To date, B Lab UK has certified 237 members, mostly from the retail sector, including Divine Chocolate, TOMS shoes, The Body Shop, and The Guardian newspaper.

The U.K. Department for International Development is also known to be supportive of the movement, having funded B Lab to expand into Africa.

In both the U.K. and beyond, however, very few development contractors have yet signed up — but this could be starting to change.

Earlier this year, Adam Smith International — which was at the center of controversy over contractor ethics and profits in 2016 — became the first British development B Corp.

Chris Turner, executive director of B Lab UK, said that a number of other U.K. development contractors have expressed interest in, or are already in the process of, becoming certified.

For ASI, which turned over £85 million ($110 million) last year, the process took 2.5 years and involved passing what CEO Jonathan Pell described as the “rigorous” B Impact Assessment process. Certification costs ASI £20,000 a year and is part of the company’s broader reform effort, initiated after accusations of misconduct.

“We decided to fundamentally change the DNA of the organisation and set out in a new direction, as a B Corp,” Pell wrote in a blog.

Speaking to Devex, Pell said he is proud of that fact that ASI’s global network, which includes subsidiary businesses and branch offices around the world, have all been certified — not just its U.K. headquarters — and that the company achieved the second-highest score for a B Corp ever awarded in the U.K.

Changes have included introducing carbon offsetting for senior staff travel, which Pell hopes to extend across the company’s entire transport footprint. The company has also invested in better video and teleconferencing equipment so that staff can be connected virtually and thus travel less — its most recent AGM was held entirely online.

Becoming a B Corp has been good for staff morale, which had been left bruised by the 2016 misconduct claims, Pell said. But the CEO also thinks it will be good for ASI’s business and the development sector as a whole.

“We are thinking about how do we use this to really drive forward further improvements in our business, the development sector, and the private sector more generally in the context of this period of change in the role of business in society,” he said.

Despite some companies’ concerns that becoming a B Corp will reduce commercial sustainability, B Lab’s research suggests that becoming certified can actually boost financial performance, thanks in part to the positive effects the certification has on brand reputation and its appeal to investors and employees.

While B Lab is not the only ethical certification out there, supporters say it is the most comprehensive since it looks across the entire business. Other assessments, such as those run by the International Organization for Standardization, tend to focus on specific technical issues.

Turner believes that development organizations are a natural fit for the certification. “These are businesses committed to achieving positive impact through their work, and B Corp certification presents the opportunity to embed these principles throughout the business itself,” he explained.

However, not everyone is convinced the sector needs it.

John Morgan, a veteran DFID contractor who runs Montenero, a consultancy that works with small and micro development firms in the U.K., is worried that it adds another layer of compliance on top of DFID’s already burdensome reporting requirements, and could possibly create duplication and confusion.

“It’s not clear that B Corp is the right route for the industry as a whole. It risks blurring the lines with existing DFID [and U.K. government] compliance requirements,” he said, adding that small and micro companies have less capacity to manage such certifications.

Some also said that while it is good to see advisory firms like ASI making improvements, the real impact on development will come if larger firms who do implementation work in low-income countries sign-on.

“For a company that’s making something or providing a service in a market to poor people in low-income countries [B Corp certification] could be quite useful. It’s one kind of standard or benchmark which companies can and should be assessed against,” explained Stephen Gelb, private sector development lead at the Overseas Development Institute.