Determining the right track. A guide.

There are many different versions of the B Impact Assessment (BIA), which are essentially determined by three factors:

• Size of the company – determined by the number of employees on a full-time equivalent basis
• Sector/industry in which the company operates
• Market – determined by the location of the company where most employees are based

These factors are queried at the very beginning, when registering for the BIA, and lead to the selection of the so-called “track” for the company. This in turn determines the selection of questions that a company answers as part of the BIA. It is therefore important to classify this correctly from the outset in order to avoid potential subsequent changes to the track, which usually lead to changes in the questionnaire and additional work. Choosing the right sector is particularly important here. Before we start, let’s first set the context.

Classification in the right sector is so important because it determines the selection and weighting of the questions. This reflects the interests of the various stakeholder groups, which differ depending on the sector and industry. For example, a small consulting company with an office will have fewer questions to answer about the supply chain or its environmental impact than a large manufacturing company, for which it is more important to know the details of the supply chain or to examine aspects of occupational safety. As a general rule, the more complex the sector in which the company operates, the more questions are asked in the BIA and the lower the weighting of the questions (inevitably).

The first fundamental question is: “How does the company generate its revenue, through the sale of a service or a physical product?” If the answer is “Both”, then the decisive factor is whether more than 10% is generated from the sale of a physical product. If yes, then the answer is “physical product”. This distinction helps with subsequent classification. Example: A hairdresser (service) also sells hair care products in the store, which account for 20% of turnover. In this case, the selection “Physical product” is correct. On the other hand, if a service company has income from the sale of physical products, but these do not exceed 10% of turnover, then the selection “Service” remains.

Let’s stay with the case of the service. Here, the next question is “Does the company need a physical space or specific equipment to provide the service?” If the answer is “Yes”, then the correct sector is “Services with significant environmental impact”. If the answer is “No”, then the correct sector is “Services with minor environmental impact” Attention! Offices are excluded from the consideration. Example: If a hairdresser needs a salon to provide his services, this is in the sector “Services with a significant environmental impact”. A consultancy or marketing company, on the other hand, which does not need any physical space apart from its office, is in the “Services with minor environmental impact” sector.

Back to the “physical product”: So, if 10% or more of a company’s revenue comes from the sale of physical products, the question then becomes, “Does the company have responsibility for the products or production (in whole or in part) at any given time?” In other words, does the company produce products in its own facilities with the help of salaried employees? If “Yes”, decision tree 1 follows; if “No”, decision tree 2.

Examples: For a store that buys goods in order to resell them, the answer is “yes” (-> decision tree 1). For an online platform that sells the products via a dropshipping mechanism (where the company does not buy the products it sells itself, such as Ebay or Etsy) and therefore does not own the products at any time, the answer is “No” (-> decision tree 2).

If a company manufactures less than 10% of the products it sells itself, the answer is “No” and the correct sector is “Wholesale/Retail”. If, on the other hand, a company manufactures more than 10% of the products it sells itself, the answer is “Yes” and another trigger question follows: “Do parts of the processed materials come from plant-based agriculture?” If the answer is “No”, the correct sector is “Manufacturing”. If the answer to this question is “Yes”, the next trigger question is “Does more than 10% of the processed material come from the company’s own plantations or fields?”. If the answer is “Yes”, the correct sector is “Agriculture/Growers”. Attention! If this is not the case, but the company pays for more than 50% of the expenses for suppliers/producers from agriculture, then the correct sector for the company is still “Agriculture/Growers”. If the expenditure for suppliers/producers from agriculture is less than 50%, the correct track is “Manufacturing”.

Attention! The 50% limit does not include expenses for marketing, salaries and rent for office space.

We remember that for online platforms (e.g.) that do not buy the products sold themselves at any time (such as Ebay or Etsy), decision tree 2 should be applied. Here, the central trigger question is: “Does the company have a physical space (e.g. a store or warehouse) or physical equipment (e.g. machines)?”. If the answer is “Yes”, then the correct sector is “Services with significant environmental impact”. If the answer is “No”, the correct sector is “Services with minor environmental impact”. If all trigger questions are answered correctly, you are on the right track! If you want to look at the illustrations again, click here for the presentation.

This is not a problem. You have the option of changing the track yourself. To do this, go to the BIA dashboard, where you will find the “Track Details”. Simply click on “Update Track” and you can make the necessary adjustments. This also applies to companies that are being recertified and whose business model or size may have changed. We hope this article has helped you to determine the right sector for you. You are now on the right track and can get started with the B Impact Assessment.