1 Introduction

The business that considers society and ecology as an important stakeholder alongside their profit-making stakeholders are known as sustainable business (Jolink and Niesten 2015). Recently, the Business RoundtableFootnote 1 in the United States issued a statement, where chief executives of companies agreed, that for the sustainable development of a business, it needs to consider society and the environment, along with other stakeholders, in their corporate activities. In the recent consultation paper by the IFRS Foundation (September 2020), we discovered that business stakeholders are in urgent need of sustainable reporting that is consistent across countries and can be comparable in a simple manner. Such approach by business stakeholders indicates that companies are now focused on a multistakeholder approach for sustainable future of the business. But which business model sustainable entrepreneurs should follow to guarantee a sustainable business future is yet to be decided in the literature and practice. Studies on sustainable business are mainly focused on developed countries which highlight the importance of consideration of society in the business model by the profit-making business (Schaltegger 2002; Parrish 2010), but there is no concrete conclusion about the societal commitments required by business along with their profit objective, mainly in developing countries (Hiller 2013). In the last decade, we find the application of B Corps allow the business to combine environment and society as important stakeholders of the business (Hoffman et al. 2012). B Lab organization issue the B-Corps certificate as a third party and believe that their global movement will continuously generate good for all through the business activities. B Lab believes that sustainability is compatible with long-term prosperity. Because of the socio-economic objectives, we can find more than 3000 companies from 150 industries are now certified B Corps from 64 countries. As the B-Corps certification assess the societal impact of business along with shareholders profit on a continuous basis, thus, usually certified companies are considered as sustainable business by the stakeholders in the society. The process of the certification is expensive and the stakeholders expect higher contribution from these businesses on a regular basis. Thus, we observe inconclusive decision in the literature about the suitability of B Corps in developing market like India. Motivated by the above concerns, we are interested in conducting experiments to determine the feasibility of B Corps in the Indian context. In this paper, we propose a scoring tool that can be applied to the existing Business Responsibility Reporting (BRRFootnote 2) and will allow to map the Indian model with the internationally accepted B Impact Assessment (BIAFootnote 3), for a sustainable future of Indian business. The Committee on Business Responsibility Reporting (hereafter “Committee”) and its subcommittees conducted several meetings, from 2019 to February 2020, to make BRR clear, accurate, and complete and eventually proposed a revised and comprehensive format, known as the Business Responsibility and Sustainability Report (BRSR). The revised BRSR motivates us to examine if our proposed scoring scale can be applied to the new format to make it easily comparable across companies and sectors, as envisaged by the Committee (5th Governing Principle, Report of the Committee on Business Responsibility Reporting, The Ministry of Corporate Affairs (MCA), GOI, 2020). The proposed scoring can also be applied to the proposed BRSR.Footnote 4

By critically examining the existing literature, publicly available relevant documents and by better understanding the initiatives of the Indian government to adhere to the requirement of sustainability practices by business, we propose a scoring mechanism to support the initiative of the Sustainability Reporting Standards Board (SRSB). The proposed scoring mechanism will enhance the simplicity of assurance process of financial reporting, which will make the financial report comparable and compatible with the BIA. We introduce measurement scores for BRR, where we consider 109 items of the existing scale and after benchmarking with BIA, we identified 13 items and then aggregated to a maximum score of 200. The proposed B Corps will allow companies to follow the “Triple bottom lineFootnote 5” concept in business and will assist them to overcome the institutional complexity to consider a business model with profit and society motive together (Stubbs 2017) to generate sustainable value creating future. The B-Corps model will advance the literature discussing the importance of considering ecology and society with profit motive of business (Jolink and Niesten 2015) and will support the sustainability initiatives taken by the Indian government in line with the Global Reporting Initiative (GRI) and other leading world organizations (Haque and Ntim 2018).

1.1 Theoretical Framework

Following the Companies House ISO14001 System issued in 2002 and after understanding that business will encounter financial risk if not following nonfinancial stakeholders in operation (OECD 2019), legal recognition of nonfinancial activity reporting by business has been in the agenda of the researchers and policy makers. However, in the academic literature we cannot find any support from theory explaining how the legal approval form the B Corps can enhance the companies’ adaptability to the triple bottom concept. Thus, in this paper, we develop a theoretical framework that will support the amendments to the BRR system. It is hard to explain complex entrepreneurship activities with one theoretical model, which is also explained by the researchers explaining complex business models (Haque and Jones 2020). Following this argument, in this paper we propose two most relevant theories that, together can explain better the need of the proposed scoring mechanism following the B-Corps model. First, we introduce the natural inventory model (NIM) (Gaia and Jones 2017). The theory is widely used in literature to explain that when businesses are not responsible toward the nonprofit stakeholder of the society, then they face questions from other stakeholders about the reliability of the product and services of the company. Such pressure and neglect from the stakeholders affect the long-term financial performance of the company, which reduces its corporate social responsibility (CSR) rating (Samkin et al. 2014). Certification of a B Corps of Indian companies will make them comparable with international companies, which will increase interest in social impact investing. The scoring of BRR, will allow the B Corps to assess if the companies are able to reach optimum natural inventory and the scoring mechanism will enhance BRR ease of use and thereby, assist the companies in self-evaluation, reducing the time required in B-Corps certification. However, the B-Corps certification will allow many companies from different countries to trade in the newly proposed Social Stock Exchange, which in turn will support the Indian economy to grow after taking care of the environment and the society. Thus, we expect that by applying NIM, the business can produce necessary information about the natural inventory to the B Corps. Second, we use the actor-network theory (ANT) as a supplement to NIM. According to ANT, there should not be any distinction between human and nonhuman elements while considering them in business activities (Barter and Bebbington 2013). The theory proposes to “clear the state of nature-culture dualism” (Ivakhiv 2002, p. 391) which will allow the business to mingle the nonfinancial aspects with their financial activities (Steen et al. 2006). By applying the ANT, business can understand how to link their activities with societal aspects (Lee and Hassard 1999; Lowe 2001), which will expedite the B-Corps certification in India. The theoretical framework also captures the relevant non human connections that are made continuously (Steen et al. 2006, p. 207), which allows business to adopt a new practice or a system (Whittle and Mueller 2008, 2010). In summary, we propose that by applying NIM and ANT together, the Indian business can understand better about how to consider nature in business and how to maintain natural inventory to maintain their financial activities to get certification from the innovative B Corps for a financially viable and sustainable future.

The findings of the study will contribute to the academic literature on CSR, B Corps, corporate governance, and sustainability reporting, especially in the context of developing countries, like India. The comprehensive theoretical model will provide a comprehensive sustainable framework for businesses and scholars to apply in future studies. In practice, the study will allow decision-makers to have a better understanding of the importance of B Corps.

The paper is organized as follows: in the following section, we discuss the evolution of B Corps around the world and the legal requirements in India for a sustainable business. In section 4, we outline the differences in practices followed by B Corps using B-Impact Assessment with the present mandatary regulatory framework of BRR in India. In the last two sections we discuss the current position of India regarding the B Corps and we propose how sustainability reporting framework of India can be modified to scale up following the international standardization model used by  the B Corps.

2 Evolution of B Corps

The transformation in the corporate landscape with companies changing from a traditional commercial entity striving to maximize profits to responsible business units with a concern for social causes gave way for B Labs, a nonprofit organization in the United States to institutionalize social and environmental certification of newly evolving business. Conventional profit-driven companies are taking extensive efforts to be identified as “green” and “good” business with social inclination. B Labs certify these for-profit companies involved in social and environmental cause as “certified B-Corps,” where “B” denotes companies working for the benefit of the society. The certificate endorses sustainable commitment of the business toward its stakeholders (Kim et al. 2016, Delmas and Grant 2014). It demonstrates that a company is following a fundamentally responsible governance philosophy than a traditional shareholder-centered approach. It is worth mentioning here that this is just a third-party certification for social enterprises and is voluntary in nature, without any legal implications. In order to have a far-reaching bearing of this philosophy, that is operating under the hybrid model including commercial interests along with social goals, it is imperative that countries should adopt this in their statutory framework (Hiller 2013). Only then will companies be obligated to pursue sustainable business practices with a concern for all stakeholders.

A mounting number of jurisdictions attempt to meet this demand by allowing new hybrid organizational forms in their countries (Reiser 2011). For example, in the United Kingdom (UK), there are community interest companies (CIC), which are for-profit companies set up for the benefit of the community, as defined by the Companies (Audit, Investigations and Community Enterprise) Act 2004 (community companies, UK). On the other hand, in the United States, Vermont was the first state to initiate L3C companies (low limited liability companies), which bridge the gap between nonprofit and for-profit businesses and facilitate investments in socially beneficial for-profit companies. Further, in 2010, benefit corporations were introduced in the United States as for-profit business entities that, while having profit as their legally defined goal, have a positive impact on society, workers, the community, and the environment (Alpern 2015Footnote 6). Benefit corporations expand the principles of CSR by focusing on society and environment along with maximizing profits for shareholders with legal protections to management (André 2012). Beginning with Maryland in 2010, today there are nearly 36 US states where provisions on benefit corporations are legally enforceable (Reiser 2011).

B-Corp certified companies have now made a global presence in more than 64 countries, with around 3000 companies under its umbrella. Many other countries responded to this changing dynamics and formulated laws to enforce norms on the lines of benefit corporations. For example, in Italy, societa benefit corporations were introduced in 2016 to pursue economic activities with the aim of distributing profits and doing common benefit work by operating in a responsible, sustainable, and transparent manner (Societa benefit, 2016). Such benefit corporations are evaluated on the basis of transparency in corporate governance; relationship with workers, suppliers, and the community; and environmental conservation. However, in Switzerland, there have been two unsuccessful attempts to move toward creating a new legal form for benefit corporations or, at least, encouraging this movement (https://bcorporation.eu/about-b-lab/country-partner/switzerland). The evidence discussed here is mostly related to developed countries. But there is a lack of study about the suitability of application of B-Corps in emerging markets as a sustainable business model.Footnote 7 Thus, we conduct an exploratory study on Indian B Corps. Our objective is to identify suitable amendments to the existing B-Corp model for Indian companies. In the following section, we discuss the existing legal requirements related to sustainable business in India and proposed the amendments required in the existing BRR model that can enhance the comparability of sustainable activities of Indian companies with their international peers.

3 Legal Framework for the Sustainable Business Model in India

From the above discussion, we find that, B-Corps model can generate profit for the business and can also positively impact the society and environment, which allows the business to positively address the needs of the non-profit stakeholders. In this case-study related to India, we first highlight on the existing policy that aims for a sustainable business model and then identify how the proposed B-Corps can assist businesses to be comparable with other sustainable businesses across the countries. Though, benefit corporations do not have a separate identifiable legal existence in India, yet under Companies Act, 2013, a social enterprise can be set up as any of the five formalized incorporation structures like as a sole proprietorship, limited liability partnership, partnership, private limited, or public limited company. Formalizing the existence of the enterprise is quite necessary for any kind of fund-raising activity and market credibility of a business. At the same time, social enterprises may also face a dilemma when it comes to balancing their financial and social goals. Another option under the Act is to set up under section 8 as not for profit or nonprofit institution or as a charitable public trust or a charitable society. Such organization get respect and legitimacy as an entity dedicated to a noble and selfless social service but lack financial support and talent. This further accentuates the need for a hybrid organization aligned with the concept of benefit corporations that provide separate legal identity to for-profit making social enterprises. The government responded to this emergent need by setting up a high-level committee for corporate social responsibility under the Ministry of Company Affairs (MCA). In August 2019, the recommendation of the committee entails creating social impact companies, having hybrid features of social welfare and profit making.

There are other legal provisions that focus on ensuring that responsible business is conducted by companies in India. The new Company’s Act of 2013 proposes section 135, a landmark provision for mandatory corporate social responsibility (CSR) spending to nudge businesses to be more responsible and mindful toward the stakeholders. Essentially, every listed company having a net worth of rupees 500 crores or more, or turnover of rupees 1000 crores or more or a net profit of rupees 5 crores or more during any financial year shall need to spend 2% of the net profits on CSR activities and constitute a CSR Committee for monitoring CSR policy and spending. The section initially mandated companies to “comply or explain,” wherein directors are required to submit the reasons for not spending for nonprofit activities. In a recent amendment in 2019, companies need to additionally deposit the unspent amount in a separate account, which if unused by the company in the next three years, will be transferred to the regulatory fund created under the Act. Further, section 166 of the Act states that directors have the fiduciary duty to work for the benefit of the company and promote the interest of their employees, the community, and the environment.

In 2009, the MCA issued “Voluntary Guidelines on Corporate Social Responsibility,” which in 2011 were revised and became National Voluntary Guidelines (NVG) on Social, Environmental and Economic Responsibilities of Business. Also in 2011, the United Nations issued Guiding Principles (UNGP) on Business and Human Rights to make business more sustainable and make companies more responsible to society and the environment. India responded to the changing international standards in 2012 when the Securities and Exchange Board of India (SEBI) introduced BRR disclosures, which are based on UNGP principles and sustainable development goals (SDGs). The primary focus of BRR is to make business more responsible toward stakeholders beyond regulatory financial compliance. It addresses environmental, social, and governance perspectives based on NVG principles. More importantly, BRR is also aligned with nonfinancial reporting performance as per the GRI, SEBI circular dated 6 February 2017, and Integrated Reporting (IR). Initially, BRR reporting was compulsory for top 100 listed companies, but the requirement was extended to cover the top 500 companies in 2015 and further to the top 1000 companies in 2019. As decided before, the Committee collected evidence from the companies using BRR and extensively consulted with stakeholders to propose a new format known as BRSR.

Even after these excellent initiatives taken by the Indian government, current business models need to be comparable to facilitate the assurance of the annual reports of the companies and to allow the country to reach the UN sustainable goals. Indian national development agenda is well aligned with the UN sustainable development goalsFootnote 8 and we expect, the proposed BRSR will allow India to be a leader in the sustainable goal achievement race. However, to expedite the process of attaining sustainable goals, it is important to minimize the differences between BIA (which is a legitimate requirement), the BRR (which is mandatory for only top 1000 companies). This will allow businesses to generate a greater impact on society and the environment through their activities. It is always better to have a comprehensive theoretical model to explain the need for a sustainable model of business. As explained before, the ANT and NIM together, will provide a comprehensive framework about the importance of B-Corps for the Indian business to follow.

4 Comparability of the Indian BRR with the B Impact Assessment (BIA)

The “CSR movement” led to the the birth of many rating agencies focusing on assurance, certification, developing socially responsible principles for the corporate etc. (Scalet and Kelly 2010). The primary purpose of these rating agencies was to measure the environmental and social impact of companys’ CSR activities, which are widely used by stakeholders of the business in assessing the sustainable nature of the company. In the previous decade, BIA gained extensive popularity as a reliable sustainable rating scale for certified B Corps in different countries across the world. The scale measures the impact of performance of companies for environment, communities, customers, suppliers, employees and shareholders.

In this study, we compare BIA, a globally acceptable scoring scale of sustainable performance with BRR, a reporting structure of business responsibility used by Indian companies. BRR enlists the parameters of sustainable reporting, while BIA includes the scoring framework along with the reporting. Scoring of the BRR can improve the comparability of the sustainability nature of Indian business with the BIA rating system to derive advantages of B Corps for Indian companies. In Table 1, we compare BIA and BRR based on their applicability, enforcing organization, nature, scope of assessment, and purpose. From the comparison below, we can observe that BRR possesses a more detailed scope of assessment compared to BIA. As BIA is calculated as a score, it can be applied by any business. But BRR is not a scoring system, and so we find that the assurance mechanism is quite complicated. Also, BRR is mandatory for only the top 1000 listed companies, which, therefore, limits the applicability of the system. Removal of restrictions of participation by private and non-profit organization can also add large scale applicability of the BRR in India.

Table 1 Comparing BIA and BRR
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Further, keeping BIA as the reference instrument, the impact areas are listed and corresponding principles of BRR are mapped. It is important to mention here that more than 80% of the items under BIA are already covered by BRR. However, this relative assessment highlights certain key items which are unaddressed in BRR. Based on the comparison presented in Table 2, we conclude that there are areas of improvement in the existing BRR that can enhance the participation of more companies in environmental and social activities in India.

After comparing BIA and BRR, we conducted a mapping exercise on the two to enhance our understanding of the limitation of the existing BRR system. As discussed previously, BIA is widely used by companies globally, which allows them to apply for B-Corp certification. The differences in BRR and BIA make it difficult for domestic and foreign companies to report on their sustainability activities to wider stakeholders and it is problematic for the Indian companies to be compared with global companies on sustainability parameters. In Table 2, we present the mapping of BIA impact with BRR principles. After mapping the impact areas (governance, worker, community, environment, and customers) with the BBR principles we find that inclusion of certain items can enhance the depth and breadth of the existing BRR system. In the following section, we address the gaps in the existing BRR and propose a revised BRR scale that will influence the logic of any business in India and can allow them to converge to the internationally comparable B-Corps certification.

Table 2 Mapping BIA impact areas with BRR principles
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After completion of mapping between BIA and BRR, we studied the proposed BRSR to examine if the revised format is comparable with the BIA, which can ease the application of B Corps. We find that the BRSR is highly comprehensive and is well aligned with the SDGs. Our research supports the findings of the IICA, which mentioned that companies are comfortable with the SEBI-BRR disclosures, but BRSR will provide comprehensive information from the companies. The minor modification of principle-wise performance of BRR is reflected in BRSR. Thus, the additional questions in proposed BRSR will allow the stakeholders to assess the responsibility of the business, however, we believe that the introduction of scoring scale in the BRSR will allow business to provide measurable evidence of their sustainable activities which will attract investors’ interest towards the company and will also generate higher confidence among customers and other stakeholders. Adding the B-Corps scoring tool in the proposed sustainability reporting standards (BRSR) will expand the opportunities of international collaboration for Indian business and will result in a higher cooperation and coordination with international sustainability reporting bodies, other governments, regulators and various stakeholders. Consistency with international B-Corps scoring will increase interconnectedness between financial reporting and sustainability reporting of Indian business.

5 How the Scoring Tool Could Enhance the Comparability of BRR and BRSR with BIA

As stated earlier, there are five impact assessment areas in BIA which are mapped with the corresponding principles in BRR. After careful consideration of the BIA and BRR, we identify the following points of differences and discuss them for each impact area. For governance: BIA has wider coverage including assessment of social and environmental performance, and stakeholders’ feedback for the same. For workers: it is mapped with principle three (employees) of BRR. Though most of the parameters are covered, yet “facilities provided and programs offered’” can be added to make it more inclusive. For community: it maps well with principle four (stakeholders), principle seven (community) and principle eight (inclusive growth) of BRR. In fact, BRR also covers human rights under principle five, which is partly addressed in BIA. For environment: though most of the parameters of BIA are covered under principle two (sustainability) and principle six (environment) of BRR, yet there is a gap in reporting carbon intensity and emissions which needs to be handled. For consumers: this is completely mapped with principle nine (consumers). To sum up, in order to align BRR with standardized international scale BIA, the gaps identified are proposed to be included in the revised BRR framework. Annexure 1 documents the complete BRR score with part 1 providing the scale of the existing framework and part 2 of the proposed parameters. The summative score of the nine principles of BRR totals up to a maximum possible score of 200, including 163 scores for the existing parameters and 37 scores for the proposed parameters. In the next step, we compare our proposed BRR with MCA’s proposed BRSR. From this comparison, it was found that the main objective of the proposed BRSR is to align the company’s sustainable business model with the SDGs. Less focus is placed on the comparison with the BIA. Though some of the concerns raised in our analysis are addressed in the BRSR but our objective to make the Indian model highly comparable with the international model is still important to discuss. We recommend that the proposed scoring mechanism converts qualitative information to measurable and machine-readable quantitative data. After completing the scoring for BRR, we apply the same mechanism to score the first two sections of BRSR. The total score of sections A and B of the proposed BRSR is 48. We report the example of the part scoring of BRSR in Annexure 2.

Based on Annexure 1, we conclude that the scoring of these nine revised principles will allow Indian companies of various sizes to apply for B-Corp certification. The proposed scoring of BRSR will allow rating agencies to compare the sustainable nature of Indian companies with international companies. Overall, we expect that the higher applicability of B Corps in India will make the companies more socially responsible, which will also allow them to generate financial benefits from their sustainable activities in the long run and contribute to the development of the economy.

It is agreed in the academic literature that because of the various criteria used by rating agencies and the lack of uniformity in CSR standards, it is impossible to determine poor- and good- performing companies (Chatterji and Levine 2006). But to benefit the stakeholders in better understanding the environment and social impact of the business activities, the International Organization for Standardization (ISO) implemented several changes over decades (for example, ISO 26000). From the above initiatives it is evident that even though there is no one standard that can allow any stakeholder of business to compare companies based on their social responsibility, but rating mechanism is widely used across countries. Thus, we propose that in India we should aim to introduce a mandatory CSR rating, which can be applied by all companies and every business can be compared with international companies on sustainable parameters. Such a detailed and comprehensive rating tool, like BIA, can encourage the B-Corp certification of private and nonprofit organizations in India. Higher applicability of the proposed BRR or revised BRSR will allow companies to generate a greater impact on the environment and society, which in turn will assist India in achieving the SDGs faster.

In addition, we find that the proposed model in this paper is well supported by the theoretical framework, which is comprised of NIM and ANT. If the companies can treat financial and nonfinancial aspects of their business with the same importance in detail (applying ANT), then the company will generate trust among people in the society about their products. If stakeholders discover that their products are not only allowing the business to generate profit but that they are also good for society and the environment, there will be more demand for such products. Higher demand for company products will allow the business to grow and they can generate higher profit by reducing the cost of debt etc. which will allow the business to continuously improve its sustainability score. Though, companies with B Corps are in limelight, but if they keep improving their score by investing in activities beneficial for society, then the business will experience less negative pressure from the stakeholders (by using NIM) and there will be more comparability with international companies. These theories together can explain the motivation for logical change in the business model to the stakeholders and by adopting B Corps, companies will generate profit through a sustainable model for the future.

6 Conclusion

In this paper, we compare the existing BRR and proposed BRSR in India with BIA and propose certain modifications to the existing BRR system. The motivation of the study is to address one major concern, which is the sustainability attitude of the companies. Even after several legal and voluntary changes, India is still lagging behind other countries when it comes to B-Corp certification. We argue that lack of comparability of the company reporting, and nonexistence of rigorous rating can be one major reasons of less B Corps. With support from existing literature, we argue that more B Corps can generate higher confidence about the business activities among the stakeholders, which in turn will enhance the financial position of the company. In summary, higher socially responsible business will create impact on environment and society along with contributing to the economic development by strengthening the financial future of the business.

The detail discussion of the BRR, proposed BRR scale and BRSR in this study, will enrich the academic literature on CSR in developing countries, sustainability, corporate finance, corporate governance, and other related fields. The proposed model will give a clear guideline to the regulators and policymakers about the limitation of the existing BRR for each of the principles and they can modify the proposed BRSR format to make Indian companies highly comparable with foreign companies. The findings of this study can be applied to other countries with a similar setup. During the coronavirus crisis, almost all companies around the world are affected at various levels. The policy makers around the world are asking for higher contribution by the business for the environment and society. The urgency of sustainable business practices by companies was already in place before the coronavirus crisis. For example, in 2019, the Global Assessment of the Intergovernmental Platform on Biodiversity and Ecosystem Services (IPBES), mentioned the danger of loss in biodiversity and thus the UN Convention on Biological Diversity (CBD) actively advise business to start practicing sustainable biodiversity in business model. Europe declared the goal of a “Climate neutral Europe 2050.” Some experts say that the unsustainable activity by business is one of the reasons for the Covid-19 (Moore 2020). In summary, the proposed model with scoring of impact areas will allow Indian companies to assist the country to achieve the SDGs and the same model can be applied by other countries for the benefit of the society. The comprehensive theoretical model will be beneficial for researchers in identifying the gaps in the existing sustainable reporting models in their country.

Like any other study, this study suffers from certain limitations. A more detailed comparison of the existing systems in other countries can enhance the applicability of the proposed model. Separate consideration of sensitive industry can be interesting aspect to check. In future, we plan to expand the study by conducting detail model for each industry. In addition, to make the scoring system feasible, we will map the proposed BRSR with BIA in detail to introduce a traffic light system.