News > Well prepared for the certification process

Well prepared for the certification process

Beratung
Medien & Kommunikation

Are you about to submit your B Impact Assessment? Then congratulations!

You have completed the most difficult part and now the official certification process awaits you. At this point, many people are wondering how best to prepare for this. That’s what this article is all about and today we’ll be looking at the following points:

. Zertifizierungsprozess und Timeline
. Best Practices für die Dokumentation
. Dokumentation: was zählt als solche?

Certification process and timeline

Before we get into the best practices for documentation, let’s first take a look at the official, three-part certification process to understand what to expect and when. Once the assessment has been submitted, the first step is the evaluation phase, which looks at how the company is structured. This phase is not yet about checking the assessment questions, but about ensuring that the company is on the right track and is therefore using the right version of the B Impact Assessment for the company. The second step is the verification phase. This is where it finally gets down to business and the information in the assessment is verified through documentation. (Written) documentation includes everything that serves to support and substantiate the information. The assessment team members then receive a so-called “verification report” with a list of selected questions for which the documentation must be uploaded. If, after verification, the company falls below the 80-point mark as a minimum standard, it can then make improvements within three months in the third step in order to reach the minimum mark. Finally, certification takes place.

Best practices for documentation

Anyone working with the B Impact Assessment will sooner or later ask whether and to what extent the information provided in the assessment is verified. The answer is that during the certification process, a representative of the Standards Analyst Team will request and check the underlying documentation or evidence on the basis of a random sample. This means that not all answers are subjected to an in-depth review, which is why it is not necessary to upload all of them to the assessment in advance. The following tips are helpful in the context of preparation:

It is generally advisable to add a note to the information and answers in the respective question box in the comments column at the beginning of the assessment. This note can, for example, contain a specific reference to the source that contains evidence for the respective information. With 200 questions, it is easy to lose track and a personal note can be very helpful in the course of the process and, above all, save time when the evidence is requested, as this may also be important for the analyst.
Companies that have specified an Impact Business Model (IBM) can assume that these will be examined in detail in any case. You need to be careful here if you have specified more than three IBMs or receive more than 40 points for two or more IBMs. More than three IBMs and/or more than 40 points are generally not recognized. If this is the case in your assessment, you should check them again and prioritize them for you, e.g. according to the measured impact they generate.
It is also advisable to prepare your questions for the analysts in advance and, if necessary, to involve colleagues who can provide relevant background information and context.

Documentation: what counts as such?

Documentation is usually written evidence. This can be, for example, a manual or a guideline, a presentation or an e-mail. Here is an overview of the most common forms of evidence:

Descriptions on the website (e.g. the mission statement)
Certifications
Studies carried out or commissioned
Case studies
Product presentations
Annual reports
Sustainability reports
Manuals (e.g. occupational safety, employees)
Surveys (employees, customers)
Data from certified management systems
Contracts
Invoices
Reports from external audits

In addition, in some cases B Lab can provide a “documentation template” which you then have to fill in. Further documentation tips, especially for the Impact Business Models, can be found here.

News > The requirements for the articles of association of B Corporations from the perspective of legal expert Dr. Karl von Rumohr

The requirements for the articles of association of B Corporations from the perspective of legal expert Dr. Karl von Rumohr

Beratung

The following article is an edited partial transcript of an online webinar with Dr. Karl von Rumohr, lawyer and partner at Dechert LLP. Intermediate titles have been added to the transcript for readability.

Executive Summary

The requirement for the articles of association (also known as the “legal requirement”) relates to the description of the object of the company in the articles of association
The purpose and effect of the amendment to the Articles of Association is the documentation and recognizability of the objectives in the market for external market participants
The amendment to the Articles of Association is accompanied by a framework for the management, which, if it violates the objectives, may violate obligations in the internal relationship, in particular in the internal relationship between the Management Board and Supervisory Board or management and shareholders
A breach of duty in the internal relationship can also affect the company and B Lab, which can withdraw the certification in case of doubt
Externally, however, there is no restriction on the legal capacity of the company or the managing directors to act

Introduction

The inclusion of specific sustainability goals in the regulation on the purpose of the company in the articles of association is one of the central requirements for the B Corp certification of companies. As part of the certification process, the companies include a specific wording in their articles of association that is the same for all B Corporations. The exact wording of the amendment to the articles of association for e.g. the GmbH or the AG can be viewed here. In this way, companies anchor “stakeholder-oriented management”, i.e. the balanced consideration of the interests of all relevant interest groups (“stakeholders”) in the company’s decision-making processes. At this point, the question is often asked as to what the amendment to the Articles of Association means in concrete terms and what implications it has for the companies to be certified. Dr. Karl von Rumohr answered the most important questions in a webinar.

Which part of the articles of association is affected and what legal consequences are associated with the inclusion of the wording for B Corporations?

One of the formulations specified by B Lab and equally applicable to all B Corporations concerns the description of the company’s purpose in the articles of association. The description of the object of the company in the articles of association has the following two regulatory purposes in particular: On the one hand, it makes it clear to the market in which areas the company is active, in particular by providing an insight into the commercial register. Secondly, the legal effect is to set a legal framework for the management within which it must operate. Actions by the management outside the limits of the company’s purpose generally constitute a breach of the managing director’s duties. In this respect, the description of the object of the company simultaneously offers a certain degree of protection for the shareholders with regard to the area within which the management is operationally active and against an excessive expansion of the management’s activities. It is also important for the purpose of recognizing the activity in the market externally that the corporate purpose is entered one-to-one in the commercial register. In order to understand the legal significance of the object of the company in the articles of association, it is helpful to distinguish between two pairs of terms. One pair of terms is “management authority” vs. “power of representation”. The other pair of terms relates to the “internal relationship” and the “external relationship”. The “management authority” describes the framework within which the management may carry out its activities for the company. The description of the object of the company in the articles of association can limit the management authority or set guidelines for the management. The “management authority” is particularly relevant for the “internal relationship” of the management to the company and the shareholders, while the “power of representation” also has a particular impact on the “external relationship” of the company to outside third parties, i.e. whether the management can effectively represent the company vis-à-vis third parties in a particular operational activity. If the management does not comply with this, it is in breach of its duties in the internal relationship, which may be punished by the shareholders. This is to be distinguished from the term “power of representation”, which describes the extent to which the management can legally bind the company through its activities (i.e. it can also effectively conclude contracts). This is to be separated from the term “management authority” in that a managing director can generally also effectively conclude contracts for the company beyond the description of the company’s purpose. The inclusion of the formulation of the sustainability goals in the corporate purpose, which is required for a B Corp certification, concerns the “management authority”, but does not restrict the “power of representation” of managing directors and board members in this respect.

What specific formulations of the company purpose are now required for certification?

This concerns two areas of the object of the company: on the one hand, the description of the “corporate purpose” and, on the other, the question of how this purpose is to be pursued. As a rule, every articles of association contain a description of the object of the company at the beginning. At this point, B Lab requires an addition which aims to ensure that“the business activities have a significant positive impact on the common good and the environment“. The second addition concerns the question of how specifically companies and their activities are to achieve this positive impact. In all business activities of the management of B Corporation,“the effects of the company’s respective actions on certain groups of people (the “stakeholders”) and the environment shallbe taken into account“. The stakeholders to be named here in the Articles of Association include the shareholders of B Corporation, its employees, its customers, the communities in which B Corporation is based and others. B Corporations are expected to include this in their corporate purpose so that the management always considers the impact of its actions on these interest groups in its business activities. These stakeholder groups all rank at the same level. In this regard, a further passage must be added to the purpose of the company, which states that it cannot be demanded that the interests of individual stakeholders be given priority over other stakeholders. This is the aim of B Corp: all stakeholders should be included and considered equally (and not just the shareholders of a company, for example).

What are the specific legal consequences of the amendment to the Articles of Association?

On the one hand, the amendment to the articles of association results in a commitment to the sustainability goals of B Corporations that is clearly visible to the market (e.g. via the commercial register). The market can then differentiate whether a company is oriented towards these goals or not. On the other hand, this has consequences for the company or the Management Board and management, who are given an additional framework for their management authority through the addition to the corporate purpose: the interest groups mentioned must be taken into account and the objectives must be pursued. If the management violates this in individual measures, the shareholders can draw possible consequences. If necessary, certification may be withdrawn. The inclusion of sustainability efforts in the articles of association in particular gives them more than a programmatic character and makes them legally binding requirements for the management. More on the topic of amending the articles of association or “legal requirement” here.

News > Interview with Business Sustainability Analyst Nicola Tröge on the topic of recertification

Interview with Business Sustainability Analyst Nicola Tröge on the topic of recertification

Beratung
Partnerschaften zur Erreichung der Ziele
Corporate governance & transparency
Ökologische Nachhaltigkeit

All certified B Corps are due for recertification in three years at the latest. For many B Corps, this raises the question “How do we best approach the topic, how do we prepare ourselves”? We were therefore very pleased to be able to conduct an interview with Nicola Tröge, a Business Sustainability Analyst at B Lab Europe who supports companies in the recertification process. In this interview, she provides valuable insights into her work and tips on what B Corps can do to prepare themselves in the best possible way.

Nicola, thank you for taking the time to answer our questions! You are a Business Sustainability Analyst in the Review Team at B Lab Europe. Can you briefly describe what that means exactly and what you are responsible for?

As business sustainability analysts, we guide companies through the so-called verification phase. In this verification phase, the response options selected during the assessment are verified. During this process, for example, evidence is requested to confirm the selected response options. As business sustainability analysts, we are therefore in close contact with companies to determine how positive impact is created. We help companies to reflect this positive impact correctly in the assessment and the resulting final score at the end of the verification phase determines whether a company becomes or remains part of the B Corp community (in the case of recertification).

Key point “recertification”. All certified B Corporations must undergo recertification every three years at the latest. What do you pay particular attention to in the process?

By and large, recertification is similar to the original certification. An assessment is again completed by the company and the evaluation and verification phases are also completed. In these phases, information is again requested regarding, for example, the company structure and the product and service offering of B Corp. With regard to recertification, particular attention is paid to changes within B Corp.

Has the company’s mission changed? Are new products or new services being offered? Have the existing products or services possibly changed? Among other things, these are important aspects that can influence the positive impact of the company. The recertification can be seen as a new ‘stocktaking’. A lot can change in companies over a three-year period and we want to reflect these changes in the assessment. This can, for example, lead to a new impact business model being applied. An example of this would be a food manufacturer that has introduced additional Fairtrade-certified ingredients within the three years. The positive impact achieved by this implementation is reflected by an additional impact business model in the assessment. Many companies also use this three-year window to improve their own company impact. The assessment tool also offers direct assistance here. For example, companies can create a personal ‘Improvement Report’ in the B Impact Assessment. In this way, many companies improve their positive impact and consequently their score compared to the initial certification.

Do you have the impression that some companies find recertification more difficult than initial certification, and if so, why?

It is difficult to give a general answer to this question. However, there are several aspects that can influence whether companies find recertification more difficult than initial certification. Many companies find it an advantage that they are already familiar with the way the assessment works. For example, existing B Corps already have an understanding of the impact areas, the structure of the questions and the verification process. This can help to make it much easier for B Corps to go through the recertification process. Through the initial certification, companies also know what type of documentation is required. This makes it easier to prepare for recertification. For example, the supporting documents can be better prepared over the course of the three years with a view to recertification. During the initial certification (and each subsequent recertification), companies can also identify opportunities to improve their impact. Over the years, many companies actively use the B Impact Assessment as a tool to integrate certain aspects into their business practices. Another important point is that within three years, not only will corporate practice within B Corp most likely change, but B Lab’s standards will also evolve. Especially with regard to recertifications, it is important to understand that so-called ‘version changes’ occur every three years or so. As a result of such changes, B Corps may, for example, have to answer new questions during recertification that were not asked during the initial certification. The existing standards are changed to ensure that the way in which ‘positive impact’ is defined and evaluated is constantly improved. The level of the standards therefore increases steadily over the years. Recertification can therefore be a challenge for companies whose score was close to the 80-point minimum limit at the time of initial certification. For such companies in particular, it can be interesting to use the assessment as a tool to identify areas where there is potential for improvement. With regard to the upcoming recertification, certain practices can then be integrated to prepare companies for the rising level of standards.

In your opinion, what are the key requirements for companies to get through the process without any major hurdles?

I would like to discuss four aspects that promote a smooth verification process.

Before the verification phase begins, companies are asked to document the corporate structure. This is an important step, as the company structure and related brands can influence the assessment. If this aspect is documented correctly at the beginning, subsequent changes can be avoided, which would mean additional work. It is important to remember that companies are being certified and not brands as such.
Another aspect that should ideally be completed before recertification is the amendment of the company statutes. Incorporating the additional paragraphs into the company statutes usually takes time and it is therefore advisable to complete this adaptation in advance. An important tip in this regard; if the company structure contains several companies, it is advisable to contact our community managers to determine which company should complete the adaptation.
As already mentioned, it is very important that all selected response options can be backed up with documentation. The selection of response options should be based on existing written documentation so that it can be made clear which aspects are integrated into company practice.
Another aspect that helps to ensure that recertification can be completed without major hurdles is the discussion of potential improvements as part of the assessment. As already discussed, the B Impact Assessment can be used as a tool to improve the positive impact that the company creates. This prepares organizations for the rising level of standards and contributes to a successful recertification process.

The B Corp movement is also known as the “Movement of Improvement”: how important are impact improvements for recertification?

As a Movement of Improvement, we see ourselves as a movement that is continuously learning and improving. The existing standards and processes are changed to ensure that the way in which ‘positive impact’ is defined and evaluated is constantly improved. The level of standards therefore increases steadily over the years. While the minimum threshold of 80 points exists as such, the B Corp movement is about improving the positive impact in terms of social and environmental aspects over time. After the initial certification has been completed and a company has become part of the B Corp community, we encourage companies to integrate the “Movement of Improvement” mindset into their organization. As mentioned, the B Impact Assessment can be used to identify areas for improvement. For example, if a company did not implement an environmental management system during the initial certification, this could be an aspect that can be introduced within the three years in preparation for recertification.

What tips would you give companies that are now preparing for recertification? How much lead time should they allow?

It is helpful to prepare for recertification in advance, as this promotes a successful verification process. The amount of preparation time can vary depending on the size and complexity of the company. Therefore, I share a few general tips below: Firstly, I recommend that after the initial certification, when companies have just engaged intensively with the assessment, they should already be looking strategically at recertification. This allows companies to make efficient use of the three-year period until recertification is due in order to prepare for recertification. For example, it can be helpful to use the “Improvement Report” in the B Impact Assessment as a tool to integrate certain aspects into company practice until recertification. It is important that the selected response options can be documented in the assessment. One tip in this regard is to have documentation ready for the selected response options. This could, for example, already be compiled when the assessment is completed so that the majority of the evidence is already available to the companies during the verification phase. Another tip is to involve internal company experts for the various impact areas right at the start of the recertification process. The B Impact Assessment covers different areas of the company and there is rarely just one person who is familiar with all aspects. It is therefore advisable to work in a team of experts. This promotes, for example, the selection of the right answer options right at the start of recertification. If evidence is then requested during the verification phase, it can most likely be provided because the answer option was selected by experts from the relevant area.

Dear Nicola, a big THANK YOU to you for your time and valuable tips!

Dear B Corps, we hope that we have been able to give you some helpful and valuable insights along the way. If you have any further questions, please get in touch with the B Lab Germany team: germany@bcorporation.eu