A company must include all of its consolidated and controlled subsidiaries in the scope of B Corp Certification, but, in many cases, can exclude minority-owned subsidiaries, if they are not consolidated nor controlled.

Being included in the scope of certification means that the entity’s operations must be reflected in a B Impact Assessment if it has any (non-operational holding companies can be included in the scope but have no material impact on the B Impact Assessment). Entities in the scope must also meet the B Corp legal requirement, either by making the legal change themselves or by being covered by their parent entity.

If a subsidiary seeking certification shares the same name as its parent company, it will trigger a requirement for the parent company to certify within six years. Read more on the Affiliated Company Requirement.

Brands may not independently pursue certification if they are part of a broader business with multiple brands, or do not meet B Lab’s Complete and Distinct criteria. A company that has one or more subsidiary, brand, or division in the scope of certification whose name is different from the parent company and that wishes to independently use the B Corp IP, will need to go through a brand review conducted during the verification stage. For any differently named brand that falls under the umbrella of a B Corp, B Lab has an obligation to ensure that the verified B Impact Assessment score applies consistently across the brands and thus permits the company to use the B Corp IP for all brands in question. The brand review fee, paid during the review process, is based on the revenue of the certified parent company and covers the review of up to three differently-named brands.

Companies can certify and maintain certification independently of their corporate parent as long as they qualify as Complete and Distinct; that is, a business unit that is able to control its impact and meet the B Corp legal requirement. The list below outlines the five criteria a company must meet to be able to certify independently:

• Legal Accountability: Your business retains a separate legal entity that is a for-profit business, with the ability to meet the B Corp legal requirement. It’s a good idea to ensure that the existing or new legal entity is fulfilling the B Corp legal requirement as a sale occurs.
• Executive Accountability: Your business has a dedicated executive team or equivalent that is accountable for, and has decision making authority over, all business operations, reflected on the businesses profit & loss statement.
• Control Over Product Purchasing and Supply Chain Impact: The executives and managers residing over your company must exercise control over at least 90% of the product or service your business delivers. The company must have visibility into and the ability to improve the social, environmental, and financial performance of at least 80% of the company’s products’ supply chain.
• Complete and Distinct Reporting Accountability: Your business must have a separate profit & loss statement (P&L) that encompasses all operations of the business being certified. The P&L must include salaries of the executive team, often either captured under labor costs or as shared service costs. The P&L does not have to be publicly reported.
• Generation of Revenues From Competitive Market Activities or Sales: Eligible companies must generate a majority of revenues from trading activities (sales), compete in a competitive marketplace, and must not be a charity or public body. Furthermore, internal business entities or units such as sales and distribution entities or R&I entities would be ineligible for independent certification.

If a company does not meet all of the criteria outlined above, it cannot certify independently of its corporate parent or related affiliate entities. This means that the parent company should start its own B Corp Certification process and include the initial company as a subsidiary or brand.

If a certifying company meets the Complete and Distinct criteria but has the same name as its parent company, it is able to certify independently, but its certification will trigger a certification requirement for the parent company. In most cases, the parent company will have four years from the certification of its subsidiary to be making significant progress on its own B Corp Certification. Learn more about the affiliated company rule and contact B Lab if this applies to your company.

Certifying companies should include complete information about their parent company when providing company details on the B Impact Assessment, regardless of whether it is in or out of scope.

 If two or more entities do not have a subsidiary-parent company relationship but are owned by the same parent (corporate or individual), they can certify together if they have integrated operations and/or uniform branding. Common ownership by itself does not qualify two entities to certify together. Companies should include all entities that have common or integrated operations and uniform trading/branding with the main certifying entity in the scope of the certification.

The certification process for franchises depends on whether the corporate parent (the franchisor) is a B Corp or not, given that the ownership of an entity directly relates to its business decisions and therefore its eligibility to certify. Franchisors are eligible to certify if they directly own greater than 50% of store locations, or directly operate all of the store locations in their market (country). If the franchisor is a Certified B Corporation, any franchisee can pursue independent B Corp Certification. Franchisors will need to align with B Lab directly on B Corp IP use guidelines.

If a franchisor is not certified, independently owned franchisees can certify only if they are in a distinct market (country). Each franchise and each independently certifying entity will have to complete the legal requirement. The exception to this is if they are wholly-owned (at 99% or more) by a holding or parent company that completes the legal requirement on their behalf. If there are multiple franchisees in a distinct market, all franchisees in that market must achieve a reviewed score of 80 or above for the franchisees in the region to certify.

Companies operating in multiple locations should include all locations directly owned and operated by the main certifying entity, or one of its subsidiaries in the scope of their certification. Any locations/offices set up through a licensing agreement with a third party may be considered out of scope. This means that their employees/operations may not be reflected on the company’s B Impact Assessment and will not be able to claim B Corp designation. For example, a food chain that owns most of its restaurants but set up their university campus locations through licensing agreements can only certify their non-university locations. The same guidelines apply for franchises owned by the parent company vs. franchises owned by a third party.

Fund managers are eligible to pursue B Corp Certification, but not funds themselves. The certification is intended for corporate entities with decision-making power over their operations. Investment firms should include the general partner and all consolidated and controlled operational entities in the scope of certification. If a subsidiary is legally exempt from financial consolidation, it does not need to be included in the scope. Limited Partners (LPs) are always excluded from the scope as long as they are not the general partner. Even if included in the scope, non-operational and holding companies will not impact the assessment.

Any joint venture (JV) owned by a company seeking certification should be included in the data submitted to B Lab for the scoping process. Minority-owned JVs can be excluded from the scope of certification if the certifying company does not consolidate and control the JV. If a company controls a JV via a deciding vote in the Board of Directors or consolidates a significant portion of a JV’s revenues on its financial statements, it should include the JV in the scope of certification. If the JV trades under the same name as the parent company, it should be included in that parent company’s certification scope, even if it is a minority-owned JV.