Impact Topic: Environmental Stewardship & Circularity

Taking action on a company’s environmental impact is not only about ethical leadership, it is the only viable route for society. B Lab’s Standards Management team shares why Environmental Stewardship & Circularity is a core topic of the draft standards.
By Brigitta Nemes, Senior Environmental and Governance Standards Manager
December 11, 2023

B Lab’s standards define the performance that a company needs to manage and continuously improve upon to achieve and maintain B Corp Certification. Since 2006, they have been developed to improve their impactfulness and clarity around what it means to be a leading business and to incorporate feedback shared along the way.

In order to achieve these goals, the draft standards have departed from the current framework where companies have flexibility in how to achieve a verified 80-point score, and instead meet specific requirements across the standards’ Impact Topics. While the components of the draft standards have been developed with the existing standards in mind, you can expect to see new topics, designed to optimize and improve our certification processes. After all, the B Corp community is on a journey of continuous improvement.

Today, the world faces several environmental crises, from climate change to water scarcity to biodiversity loss. There is an urgent call to action to shift away from incremental improvements and pursue meaningful action to stabilize biodiversity and facilitate the recovery of natural ecosystems. Companies can showcase their commitment to environmental stewardship by ensuring that their impact remains within the ecological limits of our planet. This starts with understanding the company’s actual and potential impacts within its operations and value chain, and taking action to address them: avoiding and minimizing waste; halting and reversing biodiversity loss; ensuring that water consumption does not exceed the proportionate allocations of available renewable supplies of the local watershed; and protecting animal welfare. It is important to note that Environmental Stewardship and Climate Action are deeply interconnected.

Brigitta Nemes articulates why this topic serves as an exemplar of how businesses, people, and the environment can thrive without the exploitation of natural ecosystems and marginalized communities.

What is the purpose of the topic, and why is it important?

We have reached a state where no one is surprised when we hear daily news of unprecedented storms, floods, droughts, wildfires, and so on. However, the climate crisis is just one of the symptoms of our ecosystems being imbalanced. The way our economy works has led to us crossing the safe zone for six of the nine planetary boundaries(1), which include, among others, land-system change, freshwater change, and biosphere integrity - vital for Earth’s stability. We know that one million species are on track to becoming extinct within decades. Yet, we keep introducing novel entities, like microplastics, pesticides, and nuclear waste into the environment. The time has come to shift our focus from seeing nature as a commodity to be exploited, to recognizing it as a vital component of our well-being and the health of the planetary systems that support us. Businesses and society are all embedded into — and dependent upon — healthy ecosystems.

In December 2022, the Kunming-Montreal Global Biodiversity Framework (which is as significant as the Paris Agreement is for global climate action) was signed by 196 countries with a commitment to halt and reverse nature loss by 2030 and to live in harmony with nature by 2050. This historic framework also calls for businesses to monitor, assess, and transparently disclose their impacts and dependencies(2) on biodiversity. This also stresses that today, understanding and taking action on a company’s environmental impact is not only about ethical leadership, it is the only viable route for society. That is why Environmental Stewardship & Circularity is also one of the core Impact Topics of the proposed new standards for B Corp Certification.

How has the idea of this topic in relation to the standards for B Corp Certification evolved over time, and what are the main driving factors behind this evolution?

In the past few years, nature has gained more attention in the business world. New regulations such as the Corporate Sustainability Reporting Directive in the European Union, and emerging voluntary initiatives including the Taskforce on Nature-related Financial Disclosures and the Science Based Targets Network, indicate that companies are increasingly expected to understand their overall impacts on nature and take action. Aligned with this, the proposed new standards for B Corp Certification require companies to conduct an assessment of their operations and value chain to identify their significant (material(3)) environmental impact areas. This is one of the foundational requirements within the Impact Topic, Environmental Stewardship & Circularity. Based on this assessment companies are expected to define a strategy to mitigate their actual and potential impacts. This is a change of direction from the current standards, where companies can voluntarily decide if and which environmental impact areas they work on, and a specific environmental impact assessment is not mandatory.

With growing awareness of the planetary boundaries, the question is often asked: When are a company’s actions enough? How can companies move from incremental improvements to significant action? While there is emerging guidance on how companies can define what their right level of contribution is (i.e. setting science-based targets for nature, Sustainable Development Performance Indicators), it is far from being common practice. Therefore, the new draft standards also aim to give more guidance on what level of action companies should target. For instance, it is expected that all companies commit to achieving 100% renewable electricity and zero waste to landfill. Larger companies are also asked to define a water stewardship strategy with the aim not to exceed their proportionate allocations of available renewable supplies of the local watershed. 

When addressing a company’s environmental impact, contributing to the circular economy(4) is also essential. It can help tackle many of the environmental challenges, like the climate crisis, biodiversity loss, and pollution. Nevertheless, there is growing scrutiny of companies' circular actions, raising awareness of potential greenwashing. The current B Corp Certification standards already list various beneficial circular practices. The proposed draft places greater emphasis on the hierarchy of these practices in terms of positive impact. This means that, for instance, companies are expected to work on increasing their use of renewable(5), reused(6), or recycled input materials over those that are virgin, or non-renewable. The elimination of single-use products and packaging is also a priority. It is also emphasized that circular principles cannot be applied in a vacuum, companies should consider how their different product and packaging choices help reduce the overall pressure on natural resources.

What challenges and obstacles do companies face when trying to adopt this topic?

One challenge that companies may face today is that when evaluating their impacts on nature and defining their actions to address those, there is no one-size-fits-all method. For instance, compared to climate action, where company targets are predefined (based on science), and there are fewer metrics, the assessment of other nature-related impacts is location-specific, with context-specific responses/targets. For instance, taking action on water consumption will look different in a water-stressed region than in a region with abundant water. Also, metrics (and the related targets) may have a broad spectrum, from minimizing pollution of soil or water to ecosystem conversion or degradation to the prevention of invasive or alien (non-native) species.

Therefore, the assessment and understanding of a company’s full nature impact and addressing those may be more complex. Nevertheless, more tools and resources are expected to become available in the future.

If you were to convey ‘just one thing’ about why this topic is important for the standards for B Corp Certification, what would it be? 

Nature, society, and the economy are all interdependent. Operating in an ecologically safe space is one of the two critical aspects of ensuring that humanity can thrive in the future.

The second consultation will run from 16 January 2024 to 26 March 2024. (1) Planetary boundaries: are scientific benchmarks or boundaries that define the safe operating space for human activities within the Earth's ecological systems. These thresholds are intended to guide decision-making and ensure that human actions do not exceed the capacity of the planet to sustainably support life. Sustainability thresholds encompass a range of environmental, social, and economic factors that are crucial for maintaining the balance and resilience of the Earth's ecosystems. They are based on scientific research and aim to identify critical limits beyond which certain processes or activities may lead to irreversible damage or negative impacts on the environment or society. (Stockholm Resilience Centre)

(2) Dependencies: are aspects of nature’s contributions to people that a person or organization relies on to function, including water flow and quality regulation; regulation of hazards like fires and floods; pollination; and carbon sequestration. (Science-based targets for nature - Initial Guidance for Business, Science Based Targets Network, 2020)

(3) Material (topics): represent the organization’s most significant impacts on the economy, environment, and people, including impacts on their human rights. (GRI-Material topics)

(4) Circular economy: is centered around reducing the pressure on natural resources to a level that respects the ecological thresholds and does not compromise the well-being of other stakeholders who rely on those natural resources. It involves industrial processes and economic activities that are restorative or regenerative by design, enable resources used in such processes and activities to maintain their highest value for as long as possible, and aim for the elimination of waste through the superior design of materials, products, and systems. (adapted from EPA, Ellen MacArthur Foundation with modifications for the B Corp certification)

(5) Renewable material: is continually replenished at a rate equal to or greater than the rate of depletion. Renewable materials include, for example, cotton, hemp, maize, wood, wool, leather, agricultural by-products, nitrogen, carbon dioxide, and sea salt. (Circulytics - Definitions List - Ellen MacArthur Foundation)

(6) Reused: The repeated use of a product or component for its original intended purpose without significant modification, but potentially involving cleaning or small adjustments so it is ready for the next use. (Circulytics - Definitions List - Ellen MacArthur Foundation)

What is the overarching expectation of B Corps for this Impact Topic?

B Corps demonstrate environmental stewardship and contribute to the circular economy in their operations and value chain, minimizing any negative impact and pursuing positive impact.

What are the most significant differences between the current standards and the latest draft of the standards in relation to Environmental Stewardship & Circularity?

Conducting an assessment to identify actual and potential environmental impacts in the company’s operations and value chain will not be optional anymore, but expected (except for small companies and companies in the service sector with minor footprint(7)).

The proposed standards also have increased expectations around having an environmental strategy to address a company’s negative environmental impacts. This includes a stronger emphasis on the hierarchy of actions such as circularity and biodiversity.

In addition, the proposed draft standards introduce a new requirement for those in the service sector with a minor footprint. These companies would need to assess the potential negative environmental impacts of working with prospective clients and projects and take necessary mitigation actions.

(7)Service sector with a minor footprint: A company that earns revenue through the provision of non-physical services. A company that does not sell a physical product or does not own/operate a retail, wholesale, or manufacturing facility. (e.g. law firms, marketing/communications agencies, software companies). This sector is one of the sector categories in the B Corp Certification. 

How will the standards related to Environmental Stewardship & Circularity be responsive to the different contexts of companies?

Small companies may focus their actions on mitigation without having to develop a dedicated environmental strategy, which may be too resource-intensive and not necessary for small companies to take meaningful action.

There are more expectations towards larger companies. For instance, they are required to have a dedicated water stewardship strategy and a dedicated biodiversity transition plan.

The supply chain-related requirements are also increasing in rigor; smaller companies are required to demonstrate how their procurement practices consider environmental aspects, while larger companies are asked to have a traceability roadmap for their high-risk raw materials (including the commodities covered by the deforestation regulation in the European Union and also beyond).

The environmental actions for the service sector with a minor footprint focus on where their most significant impact may be: the clients and projects they take on. 

What kinds of impacts does the topic hope to address?

The Environmental Stewardship & Circularity aims to minimize companies’ negative environmental impacts and support their contributions to safe and just planetary boundaries and to protect animal welfare.

If I’m a current B Corp, or seeking to become one, where should I focus my impact efforts for this core topic of Environmental Stewardship & Circularity?

Start by understanding what the company’s most significant environmental impacts are in its operations and value chain, including potential negative impacts on animal welfare.

The smallest companies may utilize the joint guide by B Lab and Fairtrade International: People and planet in business - A simple guide to how small and micro companies can start or strengthen their due diligence.

Medium and large companies can leverage various resources, among others:

Understanding the most significant environmental impact areas will help prioritize action to ensure the company focuses on the areas where it matters most.

Want to learn more about the other Impact Topics in the draft standards?

🪧 Purpose & Stakeholder Governance

🪧 Human Rights

🪧 Climate Action

🪧 Fair Wages

🪧 Environmental Stewardship & Circularity

🪧 Workplace Culture

🪧 Government Affairs & Collective Action

🪧 Justice, Equity, Diversity & Inclusion

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