The emergence of B Corps in Britain David Hunter 14 June 2016

A declaration of interest and some assumptions BWB is a B Corp – the first UK law firm to be so So, pre-disposed to B Corps, but also to other forms of social enterprise Assuming progress to a social economy is positive and involves: people and society should be the masters, not the servant of business and the economy a worthwhile business will look at its impact in the round and for the long term, not focus exclusively on short term profit this is a desirable goal across the global economy, not just as a niche practice

The Business Spectrum Standard Business Social Enterprise Charity Foundation Charity providing services Community Benefit Society Community Interest Company Co-operative “Social Business” Standard Business Mutual Social Enterprise Standard Business CF CPS CBS CIC Co-op Mutual “SB”

The social enterprise spectrum Social enterprises come in a variety of forms – and for good reason Asset locks are important Asset locks and other restrictions can limit their reach however “Social businesses” exist but struggle to carry assurance Is the B Corp an effective way to extend significantly the practice of social enterprise in the mainstream economy, without losing the qualities that make social enterprise distinctive and without allowing any business to claim it is a social enterprise?

Blurring the boundaries Used to be a binary choice between charity or for profit company Eroded by the advent of social enterprise and, in particular, the community interest company B Corp now blurring the distinction further between social enterprise and for profit business B Corp focus is on intent (how the business is run and for what purpose) rather than how much money is made and for whom

Protections Naturally, this raises concerns for those in the not for profit sector How can you ensure the Triple Bottom Line approach is meaningful? Three elements to B Corp status: The legal test The impact assessment The declaration of interdependence

The legal test Requires the adoption of a constitutional commitment to the Triple Bottom Line approach There are template objects clauses for use by limited companies and limited liability partnerships Closely mirrors the terminology of section 172 Companies Act 2006, which provides a statutory framework for directors’ duties generally The wording of the B Corp objects is more explicit about the balance between different stakeholder interests Whilst it may appear not a massive leap, the following are significant: - the act of voting to change the articles to make it explicit - the implications of that on board behaviour - the public commitment to this approach

The template objects clause (1) The purposes of the Company are to promote the success of the Company for the benefit of its members as a whole and, through its business and operations, to have a material positive impact on society and the environment, taken as a whole. (2) A Director shall have regard (amongst other matters) to: the likely consequences of any decision in the long term, the interests of the Company's employees, the need to foster the Company's business relationships with suppliers, customers and others, the impact of the Company's operations on the community and the environment, the desirability of the Company maintaining a reputation for high standards of business conduct, and the need to act fairly as between members of the Company, (together, the matters referred to above shall be defined for the purposes of this Article as the "Stakeholder Interests"). (3) For the purposes of a Director’s duty to act in the way he or she considers, in good faith, most likely to promote the success of the Company, a Director shall not be required to regard the benefit of any particular Stakeholder Interest or group of Stakeholder Interests as more important than any other. (4) Nothing in this Article express or implied, is intended to or shall create or grant any right or any cause of action to, by or for any person (other than the Company). (5) The Directors of the Company shall for each financial year of the Company prepare a strategic report as if sections 414A(1) and 414C of the Companies Act 2006 (as in force at the date of adoption of these Articles) applies to the Company whether or not they would be required to do so otherwise than by this Article.

The impact assessment The business is assessed against a set of standards which measure its overall impact on its stakeholders These are: governance workers communities environment and customers Need to score 80 out of possible 200 Test repeated every two years

The declaration of interdependence

B Corp – a certification, not a legal form Just as social enterprise is not a legal form, nor is B Corp CICs, community benefit societies, co-ops can all be B Corps too Charities and public bodies cannot Certification like Fair Trade, Forest Stewardship Council, LEED About customer confidence and independent assurance – and in respect of the whole business And different from benefit corporations (though similar)

B Corp status – what you get for your money Fourth element to B Corp status – fees Apply on a sliding scale B Lab (UK) identifies the following benefits:  Attracting investors Protecting the company mission Attract talent and build trust Trade with like-minded businesses Benchmark and improve performance Appeal to ethical consumers Build collective voice Lead a global movement Join a community of leaders

B Corp – how it feels Has given a collective name and shape to what many thought individually previously Surprisingly strong positive reaction across the firm (and personally) Impact assessment as learning oppportunity Great networking opportunities Great company to be in

So what difference will it make? Has Momentum Is of the Moment Built on Metrics Is interesting Money Mission driven Another welcome intervention towards the economy becoming a social economy

David Hunter d.hunter@bwbllp.com 020 7551 7684 Contact Details David Hunter d.hunter@bwbllp.com 020 7551 7684