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Historically, businesses in America were given a charter for a specific public purpose that allowed them to operate and expired upon the completion of the chartered project. Profits were allowed, but they were legitimized by the mission within the business charter. In modern-day America, businesses are held legally accountable to maximize profits for shareholders, frequently at the exclusion of all else. However, some entrepreneurs and businesses don't want this to define the character of what their company is all about. They want to ensure that the mission of their company stays intact over time and factors like environmental stewardship, community involvement, and employee well-being are legally recognized in the DNA of their founding documents. A structure has emerged to serve this purpose, called the Benefit Corporation.
This past October, California joined New Jersey, Virginia, Hawaii, Vermont, and Maryland in passing legislation to create this new type of legally recognized company. A Benefit Corporation, or B Corp, is a business entity that creates a public benefit and meets tests of transparency and accountability. Currently, there are more than 450 certified Benefit Corporations in 60 different industries nationwide, with a quarter of those residing in the San Francisco Bay area.
The organization behind the B Corp brand is a non-profit called B Labs. Their vision is to harness the potential of business with a mission, stewardship, and accountability. B Labs is working to create a new model for business: "When you support a B Corporation, you’re supporting a better way to do business. Governments and nonprofits are necessary but insufficient to solve today’s most pressing problems. Business is the most powerful force on the planet and can be a positive instrument for change. Our vision is simple yet ambitious: to create a new sector of the economy which uses the power of business to solve social and environmental problems. This sector will be comprised of a new type of corporation - the B Corporation - that meets rigorous and independent standards of social and environmental performance, accountability, and transparency."
Companies have come under scrutiny for greenwashing and cause marketing that espouse civic engagement and environmental commitment but are not verified by an independent third party. B Labs seeks to address this problem by weeding out the good companies from the companies with good marketing. They make their full Impact Assessment available for free as a resource for companies interested in learning about areas in which they could green their operations and what steps they could take to improve their corporate citizenship, even if they are not ready to become a B Labs-certified Benefit Corporation.
The California version of Benefit Corporations was somewhat confusing, with two bills, one for Benefit Corporations and one for Flexible Purpose Corporations, working their way through the legislature. Both of these new structures allow for companies to operate with a purpose beyond the bottom line. Some of the features for the respective bills include:
Benefit Corporations must:
Further breakdown of the specifics on both bills is at Innov8Social. Both bills have now been signed into law by Governor Jerry Brown.
Surprisingly, during the efforts to get the two bills approved in California, the primary opponent of Benefit Corporations was the California Association of Nonprofits. Addressing why this might be, Ben Rose writes in Defining Social Good: Nonprofits Worry About Calif. Bill on Philanthropy.com, "The fear is that some wealthy Americans would take money they would otherwise have given to charity and invest it in for-profit corporations pursuing social goals." However, he adds, "Advocates for the new corporate structures argue that charitable donations might in fact rise, since companies that explicitly pursue social or environmental goals also tend to be generous with their corporate philanthropy."
Doing good in the most effective manner while ensuring long-term adherence to a mission is a complex challenge. Priya Haji, founder of World of Good (an importer and reseller of handcrafted products from cooperatives) made her purpose-driven project into a company in order to scale, but split off a connected non-profit (World of Good Foundation) in order to preserve the mission aspect of her project. (This occurred before the existence of Benefit Corporations but is an interesting case study of the challenges and merits inherent in both companies and nonprofits.) Some great examples of B Corps that are putting people and planet alongside profits include Method, Seventh Generation, and Numi Tea.
The social and environmental challenges of the future will affect all the structures within our society, whether corporate, governmental, or nonprofit. The hope for this new type of corporation is to trigger a wave of culture shift and priority shift in corporations as a whole, to change the winning strategy to one that is accountable, ethical, and fair.
Salem Kimble is the manager of social
media development at TechSoup's donor partner, BetterWorld Telecom.
This work is published under a Creative Commons Attribution-NonCommercial-NoDerivs 4.0 International License.
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