Alex Rhodes, Head of Mishcon Purpose
Mishcon de Reya
Welcome everybody, I am Alex Rhodes, I am Head of Mishcon Purpose. Thank you for joining this Mishcon Academy Digital Session. This is the first in a collection of conversations that we have called ‘Purpose Matters’ and today we are going to be looking at B Corp as a framework for better business. In April we launched a new sustainability business called Mishcon Purpose and it aims to help our clients accelerate, manage risks and seize the opportunities of bringing ESG or Environmental, Social and Governance considerations into their boardrooms and into the management of their businesses. We decided to do this because our clients were asking us for help and because we believe as a firm that these issues are fundamental to building resilience and success. In each conversation I will be bringing together specialist lawyers from across our firm with leaders in sustainability and responsible business and I am really excited in the first conversation to be joined by Nadim Meer, a Partner and Head of our Private Equity Group and Chris Turner who is the Executive Director of B Lab UK, the organisation supports the UK B Corp community and I’d like you maybe just to begin by telling us a bit about, you know, what is B Corp? Where does it add value?
Chris Turner
Executive Director, B Lab UK
Well I think the… really the kind of magic, when it comes to B Corp and the movement that we are building, is that it’s about business being a force for good and the way that we do that is by… at it’s most basic level it’s a certification that businesses get and they can use that to tell the world about their intent and their work to have a positive impact on the world and so sitting behind this certification is an assessment and every business, every B Corp, needs to reach a certain threshold – 80 points in that assessment – in order to then have their answers, their responses in the assessment verified. The second big bit of the certification is sort of globally we call it mission lock and it differs depending on what country you are in but it’s a way of embedding the purpose of the business within the governance and so the magic if you like of B Corp that makes it really special is those two things coming together.
Alex Rhodes, Head of Mishcon Purpose
Mishcon de Reya
Nadim, this is an interesting way of looking at a business, isn’t it? I mean you are, you Head our Private Equity Group but at the same time you forged our relationship several years ago with B Lab UK. How are these compatible?
Nadim Meer, Partner, Head of Private Equity
Mishcon de Reya
Recently there has been a change so whilst it has taken, you know, a fair few odd years or so, the financial world I think has now finally caught up with the fact that just relentlessly pursuing the bottom line as a way to build value is not sustainable. It’s not sustainable for the businesses nor indeed for the planet so I think there has been a recognition of that and for me. So the clearest sign of that, publicly, came last year in August when the Business Roundtable which is traditionally very conservative US lobby group, like two hundred of the biggest US companies and last year they issued a statement on the purpose of corporation and that was quite, you know, radical in terms of what they said because they stepped away from the guiding principle in running a business and corporate 3.54 which was shareholder primacy and that is something that has been religiously followed for many, many years so they said, you know, the purpose of a corporation is no longer to advance only the interest of the shareholders and they talked about they have to invest their employees, they have to protect the environment and they have to deal and fairly and ethically with their suppliers and they sort of recognised, they said ‘well each of our individual companies serves its own corporate purpose, we share a fundamental commitment to all of our stakeholders’ and they said ‘we commit to deliver value to all of them for the future success of our companies, our communities and our countries’, and coming back to their investors, they’ve also woken up to that which I think is part of the reason why the Business Roundtable bit and they’ve seen that looking beyond short-term value iteration is key to a sustainable business and it will lead to success and better overall returns over a longer period of time. It’s kind of really, really turned around and when it comes to investment, I think we are now at the situation where B Corp status could actually be a deal clincher to get investment on board.
Alex Rhodes, Head of Mishcon Purpose
Mishcon de Reya
Chris, I was going to ask you to tell us about a couple of the companies which have certified and why they did it.
Chris Turner
Executive Director, B Lab UK
A good example is the Body Shop which certified towards the end of last year. As we all probably know, it’s a, you know, it’s been a sort of… it was established if you like as a purpose driven business, Anita Roddick believed, I think it might even be a direct quite, “Business is a powerful force for good” but they went through a lot of changes in terms of ownership and then they were acquired by Natura which is a big Brazilian B Corp and so as a way of, if you like, kind of returning to their roots of purpose and figuring out exactly what that meant through all of the sort of the operations of the business, B Corp certification made perfect sense to them. And I suppose another nice example is, thinking about The Guardian, because everyone know that The Guardian is sort of a independent, you know, committed to independent reporting and journalism and has that kind of purpose embedded but actually they saw the value of becoming a B Corp in order to think about how they could reflect their values across everything else so, around the same time they announced some big environment commitments and for example, you know, becoming a B Corp allowed them to kind of use our B Corp framework so they think about how they would bring those environmental commitments to life.
Alex Rhodes, Head of Mishcon Purpose
Mishcon de Reya
So, Nadim, you know, we’re in the business of helping our clients, you know, with challenges that they are facing. One of the components Chris mentioned earlier was this idea of a legal lock, or a mission lock, maybe you could just tell us a little bit about what B Corp actually requires a business to do in terms of its constitution and whether you think it really matters and businesses really have to pay attention to it after they have done it.
Nadim Meer, Partner, Head of Private Equity
Mishcon de Reya
It does require a legal lock, in the UK how that manifests itself is that the company has to incorporate language into its articles of association so it becomes part of its constitution which, you know, for the corporate lawyers in this group will know that, you know, you need 75% majority to do that, it is a very serious debt and it’s a publicly recorded document that sets out what your obligations are. The difference I think it does make is that I was talking earlier about the idea of shareholder primacy and what the legal lock requires effectively an override of that so that the directors are duty bound to consider a broader set of stakeholders not just the shareholders. I mean the reality is the legal piece in itself it shouldn’t really be anything dramatic. If a company has decided to become a B Corp it’s because they’ve got that particular mindset and desire to behave in a particular way.
Alex Rhodes, Head of Mishcon Purpose
Mishcon de Reya
And Chris, can you just tell us a little bit about the B Corp Impact Assessment and the standard.
Chris Turner
Executive Director, B Lab UK
The actual assessment and the verification of a business’ assessment is done by an independent organisation called The Standards Trust. It’s objective, it’s independent and it’s verified. That’s so crucial to the kind of credibility of everything that we’re trying to do. The assessment itself is done, is delivered if you like, through an online platform and you work your way through five sections: governance; workers; environment; customers; and community and the average business will answer about two hundred questions but it will totally depend on the size of the business and the sector and the geography. It’s a really intelligent tool for kind of capturing all of the information, you know, in terms of a business and the various kind of ways in which that business can have an impact in order to do then assign a score and weight it accordingly depending on how many people work there and all sorts of things like that. We set the bar at 80 points which is high, which is difficult and intentionally so, you know, so that people who are looking at better ways of doing business know that the B Corp model is one to aspire to.
Alex Rhodes, Head of Mishcon Purpose
Mishcon de Reya
The third component part of this system is, it seems to me, the requirement to be audited. With the companies you have been working with, is this something that they are taking seriously? I mean, this goes to the heart of their reputation doesn’t it?
Nadim Meer, Partner, Head of Private Equity
Mishcon de Reya
It is definitely something that is taken seriously and I think that’s only going to increase. Most of the businesses that get certification naturally have a desire to continually improve their B impact score and anecdotally we’re speaking to impact investors who have a stated aim of trying to throughout the cycle of their investment into their portfolio companies, have made a commitment to improve the B impact score of each of their portfolio companies throughout their cycle. If you look at it from an F&A perspective as well, let’s say a target company happen to be a B Corp and it’s going through a period of due diligence by the buyer, if you are selling a business or if you are the other side and you are buying and it’s a B Corp and it’s got a glowing B impact assessment audit, that’s going to give comfort to the buyer and should actually make the whole sale process smoother.
Alex Rhodes, Head of Mishcon Purpose
Mishcon de Reya
And that point around the audit, moving on to the next point I wanted to raise which is how the B Lab process fits in with all of the other processes that are out there for responsible business. On the macro level, all of us will to a greater or lesser extent be familiar with the sustainable development goals. How does B Corp relate to those other standards and in particular the sustainable developed goals?
Nadim Meer, Partner, Head of Private Equity
Mishcon de Reya
Within the B impact assessment we recognise other kind of accreditations that are part of kind of, you know, the various sort of working groups and collaborations that are in place to try and sort of find, you know, the complementary aspects of those frameworks. When it comes to the SGGs, conceptually the way I look at the SGGs and the BIA kind of sitting alongside one another is if you like the SGGs obviously go beyond business, you know they look at 11.39 and they look beyond things that business alone can solve but what they do is they give us that 20/30 snapshot of what we want the world to look like and what I think the impact assessment does and what B Corps do in taking that assessment is if you like they have the road map, you know the kind of mapping out the journey to that destination.
Alex Rhodes, Head of Mishcon Purpose
Mishcon de Reya
And I think maybe to finish, as we look to how we come out of lockdown at the end of Covid, it seems to me that there’s… we’re not certain of emerging into some kind of utopia of purpose led business and so Chris, one short sentence. Are you positive that this is the way we’re going to go or is there concerns?
Chris Turner
Executive Director, B Lab UK
In my position it’s hard not to be when you see, you know, the businesses that we see coming to us just for the conversations, you know, just to understand, you know, appreciating this direction of travel, appreciating the need, appreciating the urgency and wanting to have the conversation “What does it mean for our business?”, you know, “Can you help?’. It would be hard for me not be optimistic.
Alex Rhodes, Head of Mishcon Purpose
Mishcon de Reya
Thank you everybody for joining us and we look forward to having you with us for our next session of Purpose Matters in a few weeks’ time. Thank you.
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