The growing demand for B Corp certification and the tracked evidence on increased revenue growth of the European B Corps indicate that stakeholder governance is a win-win for our planet, for society and for sustainable growth.

By Filip Smrekar Apih and Katie Hill

There is a perception that stakeholder governance – businesses that are run with a duty of care and consideration for the interests and impact of all those who are affected by its operations –  is not economically sustainable for a company. Two key reasons regularly given are firstly, that different stakeholder interests won’t coincide and therefore business will slow down, and secondly, that capital will be hard to secure, because it will likely perform less well financially, resulting in weak job creation and preservation.

But are these reasons really true? Could considering the interest of all stakeholders be better for the company’s financial health and other key business metrics? 

In the B Corp Movement, we’ve seen examples that providing equal employment opportunities can both help give people from marginalised communities financial independence, while also increasing productivity and employee retention. Putting living wages at the heart of a company’s business model supports human rights while also increasing the quality of the production. In some cases, switching to renewable energy sources can provide savings for companies, while circular systems can find innovative ways to generate profits from waste. 

For a long time, the prevailing assumption in business is that social and environmental considerations will stifle revenue growth and shareholders need to be traded off against other stakeholders. 

We aim to bust this myth. With the growth of the B Corp community over the past years, B Lab Europe now has a sufficiently large cohort of companies that have recertified at least once. So for the first time, we were able to analyse the data on revenue and growth in the European community during these intervening certification periods, using our data as a proof of concept that companies that operate in the interest of all stakeholders in fact also seem to reap financial benefits.

We analysed the European B Corp data to shed light on these points.

Spoiler alert: using European B Corp data, we show that companies are not just more environmentally and socially impactful, as their B Corp status shows, but they are growing sustainably and creating employment faster than our general level of economic output. 

A quick recap on B Corps: these are companies that meet high standards of social and environmental performance, and which have voluntarily embedded in the companies’ governing articles a commitment to run the company with consideration of the interests of all stakeholders. The certification process, run by B Lab, assesses a company’s practices across a range of stakeholder perspectives – workers, environment, communities, suppliers – and also assesses how these companies are governed.  Each company that is B Corp certified has to score at least 80 points in the B Impact Assessment. Every 3 years the company must complete a new assessment verified by B Lab in order to maintain its B Corp certification¹. This provides us with an opportunity to examine the overall progress of these companies over time. By looking at 228 out of 1190 certified companies that have completed at least two certifications (around 19% of the community²), we can show that these companies are not just more environmentally and socially sustainable but also economically resilient.

Below, we present the extent to which B Corp certification correlates with the growth of that company.  We assess growth through two lenses – firstly, through the change in revenue figures, and secondly through changes in the number of employees. We aggregate these findings to give average growth rates across these two parameters. 

Our analysis of the recertification data for these European B Corps revealed the following:

• 22% average annual revenue growth between certification periods³ AND

• 8% average annual growth in the number of full and part-time employees ⁴ 

whilst also improving their impact:

• 40% of businesses added a new Impact Business Model⁵ on recertification
• 6% average increase in impact scores by European B Corps on recertification

As we are not able to find comparable average revenue growth for EU companies over this period to show the scale of this outperformance by B Corps,  it is worth noting that European GDP at no point rose above 2.8% between 2013 and 2022 (excluding a recovery growth after the big dip from COVID⁶). Similarly, increases in the employment rate  across the EU showed average annual growth rates of between 1% – 2%⁷. We think it is fair to conclude that these are enviable figures of sustainable growth and therefore raise many questions to the assumptions that a duty of care for stakeholders could not sit alongside sustainable growth. 

Supporting evidence

Existing external studies, using various datasets from different B Corp communities across the globe, also show trends in a correlation between companies’ growth and their B Corp certification.  One study reveals that companies experience revenue growth in the first year after certifying⁸, but the effect even increases over the years following the certification⁹. Other studies confirmed that the growth is also observed in sales¹⁰, and found that the growth of B Corps is significantly higher than comparable publicly listed and small private companies¹¹. However, there is also a study which did not find any short-term financial growth, especially in smaller companies¹². A study showed that companies that score high points on the workers’ section of the B Impact Assessment experience higher growth and productivity¹³. Beyond growth, a further recent study showed that when a company takes on finance, the impact did not cause B Corps to exhibit the negative impact on sales, or the higher costs of employment that “standard” companies demonstrate.¹⁴ 

As the community grows, we have increasing data to analyse. Differences in findings are most likely explained by data sets used, that are drawn from different geographical B Corp communities  and reflect data from different time periods.

It’s important to recognise that whilst B Corps individually are the exemplars of a shift towards an economy in which businesses serve people and planet, alongside securing the necessary financial sustainability, their full transformational power extends beyond the individual company  B Corps  increasingly act collectively to change unsustainable practices, for example,  in their own sector, or supply chain or in their locality¹⁵. The best measurement of this impact may not immediately show up in any one company’s performance but will be evidenced over time as practices and policies change as a result of their efforts.  

Conclusion: Business and purpose are not mutually exclusive

We do not claim that B Corp certification causes a higher growth rate in sales or increased employee levels. However, the existence of correlation indicates a very important message: that companies can “walk and chew gum” simultaneously; and that is critical for our economic system.  Critically, B Corporations voluntarily commit in their company articles to consider the impact of their activities on all their stakeholders. Without this legal commitment, there is no guarantee of continuing on this path with a change of ownership or investor.  Businesses across the planet need to protect livelihoods through impact-led, robust business models supported by aligned investment and mandatory director oversight.  

We offer this data to highlight the misconceptions that exist and that hold back progress in encouraging companies to consider both their financial and their social and environmental impact simultaneously. Not only is it possible, but the findings suggest it is beneficial. So we encourage all companies – regardless of whether or not they are interested in pursuing certification – to explore how to measure and manage impact to benefit all stakeholders, including shareholders. 

Interested in being part of the transformation of business to serve people  and the planet?  Then join 200,000 other users of the free to use, confidential B  Impact Assessment to be part of the urgent change we seek.

______________

¹ On average, the gap between certifications was 3.34 years
² We excluded from our survey companies that did not complete at least two certifications, we were left with 228 out of 1190 certified companies representing around 19% of the community. The results of the recertification data are to some extent biased because they do not include companies that decided to leave the community. With this in mind, reasons to leave were observed, and for 27 out of 156 companies that left, the reason was that these companies were out of business. That represents 17.3% of the companies that left or 7% of all companies that needed to recertify.

³ SD = 0.3844, t(224) = 8.866, p <.001; p value was calculate as a difference from 0.00%

⁴ SD = 0.1853, t(109) = 4.554, p <.001;  p value was calculate as a difference from 0.00%

⁵ Impact Business Models (IBMs) in the B lab Assessment are the ways that a business is designed to create a specific positive benefit/outcome for one of its stakeholders. They may be based on their product, a particular process or activity, or the structure of the business.

⁶ See  https://www.statista.com/statistics/1070317/eu-gdp-growth-rate/ ) anomaly from COVID and recovery percentage growth

⁷ Employment annual statistics from Eurostat

⁸ Paelman, Van Cauwenberge & Vander Bauwhede, 2020

⁹ Paelman, Van Cauwenberge & Vander Bauwhede, 2021

¹⁰ Romi & Cook, 2018

¹¹ Chen & Kelly (2015)

¹² Simon C Parker et al. (2019)

¹³ Romi & Cook, 2018

¹⁴ The Consequences of Financial Leverage: Certified B Corporations’ Advantages Compared to Common Commercial Firms  Ine Paeleman, Nadja Guenster,  Tom Vanacker & Ana Cristina O. Siqueira  Journal of Business Ethics (2023)

¹⁵ See B Corp Beauty Coalition, B Corps Climate Collective and others

______________

Methodology

For this purpose we looked into data of all companies certified in Europe. The data was collected for years between 2013 and 2022 with the B Impact Assessment (BIA), a tool developed by B Lab to measure companies’ sustainability performance. 

After we excluded from our survey companies that did not complete at least two certifications, we were left with 228 out of 1190 certified companies representing around 19% of the community.

Sample details

For calculating the revenue growth: Not all companies always certify in time, which creates different gaps between the assessments. With this in mind, the compound annual growth rate of their revenues between the last two verified assessments was calculated. 

The sample was then cleaned of outliers, which were 4 companies, the results of which were more than 3 standard deviations from the mean. That left us with 224 observations.

For calculating the worker growth: Each assessment includes different questions measuring the number of full-time, part-time, and temporary employees. The same approach, as with revenue, was also applied with these questions to calculate the annual compound growth of the number of workers (full and part-time). The sample was made of all certified companies, observing the difference between their last two assessments. All companies with less than 10 workers in the first certifications were also excluded to achieve more representable results. 

After the annual compound growth was calculated, the sample was again cleared of outliers (results that are more than 3 standard deviations from the mean). This meant that the sample changed from 111 to 110 companies.