Ecovis in Australia

Becoming a B Corp: Should Your Business Make the Move?

07.12.2023

An emerging business model, B Corp – or Benefit Corporation – signifies a progressive approach to running a business: aiming to reconcile profit with a genuine commitment to environmental and community welfare.

B Corps undergo a certification process administered by B Lab, a non-profit organisation which evaluates businesses worldwide, to ensure compliance with B Corp standards. The assessment is rigorous and reviews business practices across five categories:

• Governance
• Workers
• Community
• Environment
• Customers

There are currently more than 7500 B Corps worldwide[1] , companies which have undergone a scrupulous validation procedure to qualify. So, what prompts a business owner to join the B Corp movement?

Aligning Business Practices with Business Values

For Brendan Torazzi, business owner of Australian wedding, event and accommodation venue Seacliff House, becoming a B Corp was a natural step, formalising his existing interest in solar, sustainability and supporting the local community.

“The B Corp ethos really resonated with us as a business”, explains Brendan. “Our mission is to create a beautiful and sustainable meeting place that enriches our local community and inspires our guests to connect, love, celebrate and create life long treasured memories. Our vision is a world filled with happy and healthy people living to their highest potential.”

For the Seacliff team, their passion for reducing the impact of climate change, and preserving the environment for generations to come, align with B Lab’s environmental guidelines. They believe in fostering a healthy and supportive workplace, supporting local businesses and suppliers, and promoting diversity and inclusivity within the community, all factors which are very much in line with B Lab’s official requirements for an ethical, socially-conscious and green business.

Required Standards for B Corps

Becoming a B Corp is a stringent and ongoing process and involves adhering to the following:

• Complete the B Impact Assessment: Companies must complete an assessment of approximately 180 questions, measuring impact on employees, community, governance and the environment. This tool can also be used to identify and track best practices, and to assist with continuous improvement.
• B Lab Certification: Companies must be formally certified, to advise that their business meets the requirements of a B Corp.
• Changing Business Structure: Companies must adopt a new legal framework, requiring them to consider the impact of their decisions on all stakeholders.
• Re-certification every three years: Companies must be re-certified every three years to keep their B Corp status.
• Transparency: Companies must publicly disclose impact data through the B Impact Assessment. This document serves as a public resource, offering a transparent view of the company’s impact and assisting with its accountability.

For Seacliff House, it has taken approximately six months to complete the B Impact Assessment and make any necessary adaptions to their business practices. They are currently in the queue to be audited, and once qualified, will join the 818 other businesses currently certified as B Corps in Australia[2].

Advantages of Becoming a B Corp

Becoming a B Corp can be beneficial for businesses dedicated to social and environmental responsibility.

Firstly, it can be a point of difference from competitors, signalling to customers that the business values more than just profit. Customers are increasingly supporting businesses whose values correspond with their own beliefs, and the B Corp certification is an identifiable marker of commitment to sustainable practices and social responsibility. In addition, having the certification demonstrates to customers and stakeholders that the business adheres to exacting standards of performance, transparency, and accountability.

One benefit Seacliff House has recognised is the opportunity to attract like-minded talent. In today’s workforce, a rising number of employees, particularly among younger demographics, are seeking out companies that champion social and environmental causes. “As a B Corp, Seacliff can boost its ability to attract and keep high-calibre talent, particularly individuals motivated by a commitment to purposeful work”, says Brendan.

Becoming a B Corp also means joining a global community of businesses that share common values. Within this network, businesses can exchange best practices as well as offer each other support.

“At Seacliff we are pleased to support other companies whose values align with our own”, explains Brendan. “For example, we donate our venue space for various meditation retreats. In doing this, we can have an impact on carbon neutrality, as well as supporting those businesses who are focused on health and wellbeing.”

Agents of Positive Change

Brendan stresses that becoming a certified B Corp can be time-consuming and involves commitment. “You need a champion in the business, someone who will advocate the idea and follow through with everything required”. For Seacliff that was Brendan, and he admitted it was, at times, challenging to navigate the process.

“I got help from a B Corp consultant”, he says. “That was invaluable. They answered questions, provided a roadmap and kept me accountable throughout.”

In becoming compliant, the Seacliff team also had to add in formal procedures and introduce new initiatives. “To meet certain standards we had to make some changes. For instance, we put in a program to support the health of our workers. This program provides employees with a monthly payment that can be used for any health or wellbeing-related purchase. Separately, becoming a B Corp has made us think in detail about how we do business, including how we treat customers, suppliers and employees. We’ve tightened up our processes and created detailed records – everything is documented. It has also provided us with a strong focus on continuous improvement.”

B Corps aim to show that businesses can play a positive role in addressing environmental and societal concerns. Striking a balance between financial success and fulfilling social and sustainability goals can be a challenge for any business, but for Brendan it is worth the effort. The Seacliff team’s dedication to sustainable practices are contributing to a more socially conscious and eco-friendly business landscape, and this is certainly something to be proud of.

“It has definitely been a learning curve”, says Brendan, “but also extremely rewarding”.

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References

1. https://www.bcorporation.net/en-us/find-a-b-corp/
2. https://www.bcorporation.net/en-us/find-a-b-corp/?refinement%5Bcountries%5D%5B0%5D=Australia

China cross-border data transfer: Navigating legal complexities

07.12.2023

Stricter regulations for cross-border data transfers, such as risk impact assessments, now apply in China. The Ecovis experts explain what companies that transfer data need to consider.

An example

Contemplating a new business idea, Mr. X from Heidelberg (Germany) explores the possibility of providing software support to Chinese companies through remote maintenance and repair services. While the geographical distance is no hurdle, a crucial aspect demands careful consideration: the handling of personal information.

Enhanced regulations for cross-border data transfer

Companies engaging in cross-border data transfer now face enhanced regulations in China. In addition to the mandatory standard contract (18 pages long), employers must submit an impact evaluation and gain approval from the provincial government bureau of the Cyberspace Administration of China (CAC) every time data crosses borders. The implementation of the Personal Information Protection Law (PIPL) in 2021 provides an extra challenge, mandating notification, individual approval, and adherence to CAC stipulations.

Deadlines and requirements

For Chinese companies, compliance involves adopting the standard contract for personal data transfers, effective from 1 June 2023. For ongoing transfers before this date, companies must submit the standard contract, transfer impact assessment, and related documents for approval by 30 November 2023.

Together with our Chinese partners, we can implement the new data transfer requirements for you.

Richard Hoffmann, Lawyer, ECOVIS Rechtsanwaltskanzlei Richard Hoffmann, Heidelberg, Germany

What companies should do now

Navigating the CAC submission process requires precision. Each Chinese subsidiary of a company must file a contract with its local regulatory authority, taking into account unique filing guidelines in certain provinces such as Beijing and Shanghai. While local CACs are expected to align with national guidelines, differences in filing logistics may exist. Document reviews, especially for transfer impact assessments (TIAs), may vary locally.

The submission process takes approximately 15 working days, during which approval or rejection is determined. Importantly, anonymous inquiries about the application process are prohibited; inquirers must disclose the identity of the person handling personal information when contacting the CAC via phone or email.

For employers with Chinese subsidiaries, the next steps involve collecting data for the standard contract and transfer impact assessment, preparing TIAs for data recipients, and submitting these documents to the relevant local CACs. Navigating these legal intricacies demands meticulous preparation to ensure compliance with China’s evolving data transfer regulations.

For further information please contact:

Richard Hoffmann, Lawyer, ECOVIS Rechtsanwaltskanzlei Richard Hoffmann, Heidelberg, Germany
Email: richard.hoffmann@ecovis.com

Real Estate Peru: Preoperative expenses and income tax

07.12.2023

In cases where a company has carried out a specific real estate project and then chooses to continue with its economic purpose and carry out new projects, the question arises as to whether the expenses related to the latter can qualify as preoperative expenses under income tax law. The Ecovis experts explain the details.

According to article 57 of the Peruvian Income Tax Law, a taxpayer’s expenses are charged in the exercise of their accrual, which generally occurs when substantial events take place for their generation.

However, under article 37 (subsection g) of the same law and article 21 (subsection d) of its Regulation, special treatment is given to so-called pre-operative expenses – including those for expanding activities – “And to the accrued interests during the pre-operative period, which may be deducted in the first year of exploitation or operation or proportionally amortised within a maximum period of 10 years.”

It should be noted that the tax legislation does not define “activity expansion expenses”. It is therefore necessary to consider the judgements and criteria issued by the national financial administration SUNAT (Superintendencia Nacional de Administración Tributaria) and the Tax Court.

What the tax authorities have determined

In Report No. 173-2016 SUNAT the financial administration defined this concept as “The disbursements needed to open a new facility or to start an operation or the launch of new products, processes or projects related to the activity carried out by a company”.

On the other hand, although the Tax Court would initially have taken the same view as SUNAT, it took a different position with Resolution No. 5917-3-2019. Here, in the case of a taxpayer whose business is construction, the court specified that expenses for expanding activities are expenses of ongoing companies “(…) aimed at the planning, implementation, development, and/or execution of new economic activities and/or ventures, of a different nature and characteristics or incurred for the exploitation of a new production unit different from those already existing, in order to achieve a new line of business, product or service (…).”

It is important to add that even though the precedents at this level do not qualify as mandatory observance, they do represent the current interpretative line of the Tax Court (especially since the disputes involve two different chambers). According to Article 154 of the Tax Code, binding jurisprudence is given through a resolution of the Tax Court “that expressly interprets and with a general character the meaning of tax norms, as well as those issued under Article 102”.

The above definition means that when the business or income generating activity is carried out by a real estate company (i.e., an entity dedicated to the sale of real estate units), it is logical to conclude that there is only one preoperative phase, as companies whose economic activity is based in this sector only have a single economic purpose from which their income originates from the beginning of their operating phase. In the case at hand, this could have occurred in previous years, when the first real estate project was developed.

We support you in correctly assessing the tax side of your real estate project.

Gary Salazar Paz, Partner Public Accountant and Lawyer, ECOVIS PERÚ, Lima City, Peru

In strict accordance with the provisions of the Tax Court, the various real estate projects carried out by a real estate company whose production phase has already begun should not be confused with a new activity, since the execution of these projects is an intrinsic part of the actions carried out by the taxpayer in the scope of their business.

Following this reasoning, even if projects of new characteristics and dimensions could be differentiated, they still fall under the realisation of the same industrial or commercial activity for the achievement of the taxpayer’s corporate purpose.

Consequently, it must be assumed that once the real estate business has commenced operations in accordance with the Income Tax Law (and is thus in the production phase), administrative and sales expenses must be deducted in the exercise of their accrual, even if they are related to projects that have not yet been constructed or exploited.

It is important to note that based on previous experience of audits and claims, SUNAT has sometimes accepted that new real estate projects by the same taxpayer could qualify as a separate preoperative phase and therefore that the expenses associated with each project could be deferred until the start of its exploitation.

For further information please contact:

Gary Salazar Paz, Partner Public Accountant and Lawyer, ECOVIS PERÚ, Lima City, Peru
Email: gary.salazar@ecovis.com.pe