Companies with clients in controversial industries
B Lab has developed a new framework to assess the negative impacts of certifying companies with clients in controversial industries, incorporating concepts from internationally recognised due diligence frameworks which closely considers the nature of the involvement of the certifying company with their client’s potentially harmful activities. This framework will be used to assess company cases from 18 November 2024 onwards, and incorporates elements from B Lab’s new standards, though may be subject to some changes.
The diagram below demonstrates at a high-level how the categorisation of the client industry, combined with the nature of the certifying companies involvement leads to different pathways for certification eligibility, based on additional requirements that the certifying company must meet to ensure transparency, and in some cases, remediation including reduction in revenues from harmful industries. All outcomes are subject to final review and approval by B Lab. Continue reading to learn about the industry categorisations and definitions of company involvement.
*Companies who submit their B Impact Assessment on or before 18 Feb 2025 will be eligible for certification and will be given one recertification cycle to reduce revenue from a client in an ineligible industry to <1% as long as they meet the same requirements as Pathway 2 during their current assessment. The exception to this is companies in the US and Canada where a moratorium is applied for involvement with the prison industry. Learn more here.
THE NATURE OF A COMPANY’S INVOLVEMENT
Taking guidance from the framework used by the UN's Guiding Principles on Business and Human Rights, B Lab is using the following levels to categorize the nature of a company’s involvement in a controversial or ineligible industry:
Here are some examples of how a company may be classified under this framework:
Associated:
Toilet paper company selling its products to a tobacco company;
Company installing access ramps in a fossil fuel facility;
Flower shop selling plants to the defense sector.
Linked:
Corporate wellness company hired to provide its services to employees of a pharmaceutical group;
Hiring agency helping a charity lottery to recruit new employees;
Bookkeeping services to a nuclear power plant.
Contributing:
Company sells/rents drilling equipment to fossil fuel companies;
Legal firm representing its mining clients in litigation cases related to their negative social or environmental impacts;
Marketing agency working with gambling clients.
These examples above are non-exaustive, and the classification is dependent on the interaction between the certifying company and their clients as the actual and potential impacts of these interactions may vary. For instance, a steel company providing metal beams for the construction of a new office of a Pharmaceutical company will be assessed differently from a company developing steel to be used by gun manufacturers.
INDUSTRY CLASSIFICATION IN MORE DETAIL
B Lab is also introducing a more severe category of ineligible industries which applies to companies who sell products or services to clients in industries acting against B Lab’s Theory of Change as will be defined by the Foundational Requirements (1.2) in the new standards.
Clients in controversial industries
Companies who sell products or services to clients in these industries could influence adverse impacts:
Charity Lotteries
Debt Collection agencies in emerging markets
Nuclear Power or Radioactive Materials
Mining
Pharmaceuticals
Recreational Marijuana
New controversial industries (former eligibility review industries) may be added to this list once new requirements for those are developed
Clients in ineligible industries
Companies who sell products or services to clients in industries acting against the B Lab Theory of Change:
Fossil fuel producers
Gambling
Pornography
Prisons and detention centers (including labor)
Tobacco (including all nicotine products)
Weapons and Defense
For further information on how we define each of the industries listed about, click here.
PATHWAYS TO CERTIFICATION FOR COMPANIES WITH CLIENTS IN CONTROVERSIAL OR INELIGIBLE INDUSTRIES
The pathways below demonstrate the requirements a company with clients in controversial or ineligible industries must meet in order to certify, based on the industry categorisation of the client, and the nature of the certifying company’s involvement.
PATHWAY 1: The company is eligible to proceed with B Corp certification, provided they disclose involvement on their public B Corp profile.
Applicable for
companies with clients in controversial industries who are linked to adverse impacts OR
companies with clients in controversial and ineligible industries who are associated with adverse impacts OR
companies with past clients in ineligible industries in the last 5 years but not serving them anymore
PATHWAY 2: Requiring companies to disclose involvement on their public B Corp profile AND set up a grievance/complaints mechanisms and have a whistleblower protection policy. For further detail on meeting this compliance criteria, click here.
Applicable for
companies with clients in ineligible industries that are linked to adverse impacts OR
companies with clients in controversial industries that are contributing to adverse impacts OR
companies with clients in ineligible industries that are contributing to adverse impacts with less than 1% of revenue from these industries
PATHWAY 3: Meet Pathway 2 requirements and meet 1% of revenue threshold from each client in ineligible industry OR meet 1% of revenue threshold before certification for companies starting B Corp certification journey after 18 February 2025*
Applicable for:
Companies with clients in ineligible industries that are contributing to adverse impacts with more than 1% of revenue from each industry
*Companies who submit their B Impact Assessment on or before 18 February 2025 will be eligible for certification as long as they meet the same requirements as Pathway 2 and will be given one recertification cycle to reduce their revenue from each client in an ineligible industry to <1%.
Companies contributing to “industries acting against the B Lab Theory of Change” as will be defined by the Foundational Requirements (1.2) in the new standards and generating more than 1% of annual revenue from a client in an ineligible industry are not eligible for B Corp Certification.
(Last updated Nov 2024)