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This analysis looks at the first company listed on the London Stock Exchange (LSE) to become certified as a B Corporation, and considers the impact this may have on publicly listed companies in the UK.
Kin and Carta plc has become the first company listed on the London Stock Exchange (LSE) to become certified as a B Corporation, after its investors voted overwhelmingly in favour of aligning the global digital transformation consultancy’s articles of association with the standards of the B Corporation regime during the company’s general meeting in September 2021.
What is a B corporation?
A B Corporation (or B Corp for short) is a concept established in the US during 2006 by the non-profit organisation B Lab, as an accreditation programme for ‘businesses that meet the highest standards of verified social and environmental performance, public transparency and legal accountability’. It has since spread beyond the US, with over 4,000 B Corps worldwide in 77 countries, including more than 500 in the UK.
A company wishing to receive accreditation as a B Corp is required to undergo a stringent assessment process undertaken by B Lab, with businesses requiring a combined B Impact Assessment (BIA) score of at least 80 out of 200 against five areas of impact—namely governance, community, workers, environment and customers. In addition, it is necessary that the company change its articles of association and/or constitutional documents to include specific wording confirming its commitment to having a material positive impact on society and the environment.
B Corp certification
B Corp certification is not simply a one-off affair, but requires maintenance. It is compulsory for the accredited company to update their assessment every three years, and provide additional information and documentation to verify their answers, as well as keep their combined BIA scores at no less than 80 out of 200. The BIA is also updated on a triennial basis, ensuring that both aspiring and existing B Corps are assessed against the ‘most-up-to-date standards and [able to] benchmark their performance over time’.
Kin and Carta spent the last three years reviewing its operations and business practices in order to bring itself in line with the five BIA areas of impact outlined above. In keeping with these areas of impact, the company’s impact report for 2021, which can be found here, sets out how it interacts positively not only with its employees, but also its customers and society at large. However, it is worth noting that B Corp accreditation did not require concerted efforts in all of the five areas of impact. Although Kin and Carta holds a respectable total BIA score 85.3 out of 200, by far the highest scoring individual area of impact is workers (32.2), with the others falling far behind (community (18.0), governance (17.1), environment (10.8) and customers (7.0)).
What does this mean for UK plcs?
The entry of a B Corp into the London Stock Exchange poses some questions as to how B Corp accreditation fits in with the complex framework of ESG and CSR reporting requirements for listed companies. Will listed companies (and their investors) value an assessment of their ESG credentials from an independent third party, such as the B Lab in addition to the various regulatory requirements?
For accounting periods beginning on or after 1 January 2021, the Financial Conduct Authority’s Listing Rules require that companies incorporated in the UK, as well as overseas commercial companies with a premium listing, state in their annual financial reports whether they have released disclosures consistent with the Taskforce on Climate-related Financial Disclosures (TCFD) recommendations. In addition, if they have not included these disclosures, it is necessary for companies to outline the reasons for why they have not done so.
The FCA has also published a consultation proposing to extend the requirement to report in line with TCFD recommendations to standard listed commercial companies. For more on this, see our LexisPSL News story: FCA consults on climate-related disclosure rules for listed companies and certain regulated firms. This coincides with the government’s consultation proposing mandatory TCFD-aligned disclosures for large in-scope public quoted companies, private companies and LLPs. In October 2021 the government confirmed that it would be proceeding with most of its proposals and also published a paper, Greening Finance: A Roadmap to Sustainable Investing, which sets out the government’s long-term ambition to green the financial system and align it with the UK’s net-zero commitment. For further details, see Practice Note: Sustainability Disclosure Requirements and UK Green Taxonomy—government’s 2021 roadmap to sustainable investing (a subscription to LexisPSL is required).
Kin and Carta becoming the first company listed on the London Stock Exchange with B Corp accreditation represents a significant regulatory milestone. Nevertheless, it is yet to be seen whether this is a one-off accreditation, or merely the tip of the iceberg, with other UK-listed corporates not far behind.
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