Many fashion brands and stores have been subject to considerable scrutiny and criticism over their use of unethical practices and questionable supply chains. These incidents can be very damaging to customers’ perception of the brand and the products they manufacture and sell, particularly in an industry where marketing and reputation are among the key drivers of success.
It is no surprise therefore that many brands in the industry are looking to “clean up” their reputation. For example, this month Ermenegildo Zegna announced that it was linking executive pay to climate targets, as part of its new environmental strategy. Meanwhile Kontoor Brands appointed a new global head of ESG.
But some brands are going further and becoming B Corporations. In October 2021, Chloé announced it had achieved certification as a B Corporation. Prada too, has also expressed interest in obtaining B Corporation certification.
What is a B Corporation?
A B Corporation is a business that meets the criteria set by B Lab, an international organisation that sets standards and policies for businesses. In order to become certified as a B Corporation, a company must meet B Lab’s standards of “social and environmental performance, public transparency and legal accountability”. The certification process by B Lab is rigorous and continuing and as such, a company should follow through on their commitment to improving their social and environmental performance and be prepared to restructure how their business is run.
As such, becoming certified as a B Corporation may allow a fashion brand to stand out in a saturated market place as a company that is truly conscious of their environmental and social impact or on the other side, to demonstrate that they are atoning for past unethical practices by overhauling their entire structure.
Are you B’ing real?
Inevitably, the recent trend of becoming certified as a B Corporation has been met with cynicism and criticism. The fashion industry is heavily geared towards marketing and presentation and competition is intense.
Indeed, many have criticised the recent trend of becoming certified as a B Corporation as a method of ‘greenwashing’ see here.
Whilst greenwashing may be a bold accusation to level at a fashion brand seeking B Corporation certification (due to the rigorous certification process), there are some criticisms generally of B Corporation status that do not help to address this.
While B Lab requires transparency from the B Corporation, they are not as transparent as they may make out. One example of this is that B Lab’s corporate governance board sets the standards that companies are assessed against but they do not show all of the results and performance of each company against these standards.
There is also no requirement to file an annual report detailing a company’s performance, except for those that are publicly listed.
The grass is greener
Despite this criticism, there is definitely a benefit to be had for a fashion brand to become certified as a B Corporation as it provides them with tangible evidence to market their products as environmentally friendly.
The B Corporation status can be used across all marketing materials and can allow a brand to distance themselves from the controversies that plague the fashion industry.
Patagonia for example, became certified as a B Corporation as they aimed to reduce their carbon footprint and change the way businesses operated in the fashion industry.
How do I become a B Corporation?
To become certified as a B Corporation, you must fulfil the criteria set out by B Lab, who carry out an assessment (called a B Impact Assessment) of the business’ impact on its workers, customers, community, and the environment.
Businesses must score a minimum of 80 points (out of 200) to become certified. B Lab will first meet with the business to review the completed assessment and responses provided. Publicly listed companies are treated differently to private companies in relation to their B impact assessments, with the assessments of public companies being made available online.
However, you will also need to demonstrate a legal commitment to becoming a B Corporation. Certain language surrounding the commitment to having a material positive impact on society and the environment must be inserted into the articles of association of a UK company. Directors of the company are also required to prepare an annual impact report amongst other things.
To B or not to B?
Deciding on whether to become certified as a B Corporation is a big step to take due to the scrutiny that a company is placed under by B Lab.
The criteria to become a B Corporation are very rigorous and companies that voluntarily undertake this process do not do so lightly as they must allow access to a B Lab’s analyst to undertake a review of the entire day to day operations.
As such, a company would need to restructure to remove any unethical or questionable environmental practices to even be considered for B Corporation certification. It is therefore a step that anyone attempting to greenwash would be unlikely to take, particularly if there are environmental or ethical issues within their supply chains.
Should a company decide that, after becoming certified, it no longer wishes to remain a B Corporation, the certification can be surrendered, as Etsy did in 2017.
At the time, Etsy reported that to maintain its certification, it would be required to change its corporate structure, which it would not do “because converting is a complicated, and untested process for existing public companies.” However this announcement came the same day the New York Times ran an in-depth piece about the transformation Etsy has been undergoing to a more profit-driven company under its new CEO.
Nevertheless, as the world continues to combat climate change and consumers become more conscious of the environmental impact of corporations, the B Corporation may continue to be a popular method of proving to consumers that fashion brands are moving towards more sustainable practices and environmentally products.
Take home points
To summarise, the key advantages of becoming certified as a B Corporation are:
you can take the first step to becoming more socially and environmentally conscious about the impact of your business
your company is able to market a social and environmentally friendly image with real substance to support its claim
B Corporations can still remain profitable and in fact are some of the most profitable companies in their respective markets
it may help to rehabilitate any prior unethical practices by demonstrating real steps that the company is taking.
the process to becoming certified is robust and can be time consuming and require significant resources
the entire structure of the company will require an overhaul which will require significant time and cost
there is no guarantee that the company, even restructured, will pass the B Impact Assessment to achieve certification
some may be concerned that becoming a B Corporation can deter the focus of a company from profitability.
We have advised companies on becoming B Corporations, if you are interested in exploring certification as a B Corporation, please get in touch with Paul Taylor or Steve Sidkin.
Need more information about the above people and legal expertise? Talk to one of our lawyers: +44 (0)20 7628 2000
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