2022 Sparks Opportunity for AgTech Certified B Corps With Environmental, Social, and Corporate Governance (ESG) Goals

The 2019 Business Roundtable statement can be found here, and the Bloomberg Intelligence prediction can be found here.

AgTech and ESG

Agricultural technology (AgTech) companies present a relatively new but rapidly growing market opportunity for ESG-focused investors. Supply chain pressures and increasingly volatile climate events are highlighting the importance of maximizing crop yields and reducing agriculture's climate impact. Demonstrating the growing importance of these issues and the industry's ability to address them, a record $7.8 billion flowed from investors to AgTech companies in 2021. The increased emphasis on ESG among investors may lead AgTech companies to seek corporate forms that allow them to better align their corporate purpose with ESG goals.

In a previous Alert, we discussed how AgTech companies might benefit from prevailing ESG trends by incorporating as or converting into a Public Benefit Corporation (PBC). In this Alert, we explore another way AgTech companies can tap into the ESG trend: by becoming a Certified B Corporation (B Corp).

Certified B-Corporations

First created in 2006, the B Corp certification fits squarely within the ESG space. Similar to PBCs but not a statutory corporate form, B Corps balance profit, and purpose, all while meeting certain goals for social and environmental performance, public transparency, and legal accountability. To be certified as a B Corp, a company must complete the B Impact Assessment with B Lab, a non-profit organization, which produces a report that examines the company's impact on their workers, community, environment, and customers. The B Impact Assessment also examines a company's governance structure and accountability. The Assessment generates a score that is benchmarked against the average scores of other companies that have also taken the Assessment. To qualify for the certification, a company is required to meet or surpass a threshold score of 80 out of 200 points on its Assessment.

More than 3,700 companies worldwide have obtained Certified B Corp status, including well-known consumer brands like Danone North America, Ben & Jerry's, Patagonia, and The Body Shop. In its November 2021 IPO, sustainable shoemaker and B Corp Allbirds raised over $300 million to give the company a valuation of $4.1 billion. Lemonade, an online insurance B Corp, raised over $300 million in its July 2020 IPO, giving the company a valuation of $1.6 billion. The Special Purpose Acquisition Company (SPAC) Sustainable Development Acquisition I Corp., a PBC that held its IPO in February 2021, is in the process of obtaining its B Corp certification (for further information on SPACs in the AgTech industry, see our previous Alert). 

Opportunities for AgTech Companies

AgTech companies can benefit greatly from obtaining B Corp certification. Certification as a B Corp may help an AgTech company (A) build public trust through accountability and transparency; (B) attract and retain top industry talent that is seeking work at a mission-driven organization; and/or (C) leverage impact investment and strategic partnerships with like-minded businesses. With increasing pressure on global food supply chains, health issues and nutritional demands of a growing global population, and new regulations to address climate change and water stewardship, businesses that can achieve ESG goals while efficiently supplying large quantities of raw materials to multinational food and beverage companies stand to benefit tremendously. For example, as opposed to non-B Corps, B Corps can more easily comply with sustainability sourcing programs and supplier codes of conduct increasingly mandated by multinational food, beverage, and other companies that are key players in the value chain.  

Similarly, AgTech B Corps can be attractive funding and investment targets, particularly for ESG investors and companies seeking to meet their own ESG goals. According to AgFunder Network, corporations that offer opportunities for B Corps include the Coca-Cola Company, Anheuser-Busch, General Mills, the Kellogg Company, and Nestle, along with nineteen other companies that belong to the "One Planet Business for Biodiversity" (among them Google, Microsoft, and Walmart). AgTech companies that become certified B Corps can more easily benefit from partnerships like these with multinational food and beverage companies and from the increasing emphasis on ESG factors among investors than non-B Corps.

Impact

With increasing emphasis on achieving sustainability and promoting ESG, AgTech companies are naturally well-positioned to benefit from increased investment. Obtaining a B Corp Certification can turn an AgTech company into an even more attractive target for potential investors or business partners interested in bolstering their ESG credentials. If you are interested in learning more about obtaining a B Corp Certification, please contact Arent Fox's Agricultural Technology group.

Arent Fox's Agricultural Technology group will continue to monitor this issue. If you have any questions, please contact Karen Ellis Carr, Thomas S. Brennan, Megan E. Daily, Scott L. Gates, or the Arent Fox professional who usually handles your matters.