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The Benefit Corporation: Changing the Fabric of Society

A deeper look at benefit corporations and the market for transparency they hope to create

Submitted by: Francesca Rheannon

Posted: Feb 22, 2012 – 09:30 AM EST

Tags: b lab, benefit corporation, b-corporation, csr, corporate governance

 
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By Francesca Rheannon

Part One of this series introduced a new corporate form, the benefit corporation, which could revolutionize the fundamental rules of business. Now in Part Two, we examine the benefit corporation in more depth.

Singlebrook Technologies: A Newly Minted Benefit Corporation

Elisa Miller-Out is on a mission. As co-CEO of information technology company Singlebrook Technology, Inc. headquartered in Ithaca NY, she wants to make the “benefit corporation” the future of business in America.

For Miller-Out, becoming a benefit corporation isn’t just good for the bottom line, adding real value to a company’s brand. It’s also good for the other value she holds dear – making the world a better place.

A benefit corporation must be dedicated to creating a material positive impact on society and the environment.

Singlebrook Technology designs digital products, such as web and mobile apps, but it sees its purpose as much greater: “to use technology in innovative ways to make a positive social and environmental impact in the world,” Miller-Out told CSRwire.

One way is through its T4C (“Technology For Change) Campaign, which works with social ventures to expand their reach.

Singlebrook supported legislation in New York – just passed February 10, 2012 – that makes this new corporate structure available to companies operating in that state.  “This shows it’s possible to run a business with a true triple bottom line,” Miller-Out said.

As soon as the legislation passed, Singlebrook Technologies became a benefit corporation. It had already had been a certified B-corporation for the past three years -- and becoming a benefit corporation seemed like the logical next step.

Given the similarity between the two monikers, let’s take a moment to compare them.

The B-Corporation & the Benefit Corporation

Time for changeBoth forms are brainchilds of B-Lab, a nonprofit that is “dedicated to using the power of business to address the world’s most pressing challenges." 

B-Lab created the B-Corp affiliation to denote a company that certifies businesses according to a set of social and environmentally responsible standards. It also devised the benefit corporation form and is campaigning for its adoption in U.S. states.

B-corporations are in all 50 U.S. states and around the world, while the benefit corporation is currently available in just seven U.S. states (with more in the pipeline.)

Both B-corporations and benefit corporations hold certain values in common:

  • Accountability: Both forms have to take into account the effect of their decisions on stakeholders (workers, the community and the environment) as well as shareholders.
  • Transparency: Both have to report their social and environmental performance to the public, using third party standards.

What’s different is that B-corporations must submit to a B-Impact Assessment by B-Corps in order to gain their certification, while benefit corporations do not have to be certified -- although they do have to use that third party standard mentioned above to assess their own performance.

A Market For Transparency and Accountability

I asked Nathan Gilbert of B-Lab why the organization decided not to include a certification requirement in the design of the benefit corporation. One reason, he said, was to avoid the appearance of B-Corp creating business for itself.

Singlebrook TechnologyAnother was to encourage states to adopt legislation making the benefit corporation available. “If we were to put more restrictions in the legislation, it would deter a lot of companies.”

But he’s not worried about compromising the strict standards B-Corp has adopted as part of its assessment process. Gilbert thinks the market will keep companies from selecting a more watered down standard.

“The key element is transparency,” Gilbert told CSRwire. The requirement of putting out a yearly public report will let the market decide:

“The public will be able to see what standard the companies are using and how they measure their performance. That way, they can put better pressure on a company to step it up.”

Elisa Miller-Out agrees. "People will demand this level of transparency and honesty,” she told CSRwire.

“There’s a grassroots movement in business, connected to Occupy Wall Street, that’s resonating with people all over the country that says the standard way of doing business is really hurting us, our economy and our reality. Once people see that the [true triple bottom line] is possible, they are going to demand that of all businesses."

Like other companies that are becoming benefit corporations, Miller-Out expects that adoption of the new form, “company by company,” will build a more vibrant economy and create a healthier environment in the process. “It’s about changing the whole fabric of society,” she says.

Expanding the Benefit Corporation Model

In the U.S., state legislatures are proving receptive to making the benefit corporation structure available – on a remarkably bi-partisan level. Its unanimous adoption by the famously rancorous New York State legislature is emblematic.

Democratic Senator Daniel Squadron sponsored the legislation. “The Republican majority rarely passes Democratic bills,” he told CSRwire.  Fear of the unknown often is the greatest barrier to passage, he added, but the benefits of the legislation as proposed were crystal clear. “All the stakeholders understood it.”

In a country where every state has different laws governing corporations, this clarity is a big plus that bodes well for future adoption by more states.

Other countries might also benefit.

B-Lab is currently doing an analysis of the legal framework in certain South American countries (Brazil, Argentina and Columbia) to see if legislation enabling corporations to consider stakeholders, as well as shareholders, is needed.

Depending on the results, B-Lab will determine whether it needs do anything, or promote amending corporation bylaws or new legislation, according to Nathan Gilbert.

In the U.K., Community Interest Companies provides a similar model of considering stakeholder interests along with those of shareholders.

Changing the underlying laws of how business can do business is what changes business overall, says social entrepreneur Andrew Greenblatt. He inspired Daniel Squadron, his representative in the New York State legislature, to introduce the benefit corporation legislation, as I reported last week.

“It’s earth-changing,” Greenblatt told CSRwire. “This is a very big deal.”

Related:

Part 1: Transforming Corporations From Psycopaths to Good Citizens
Patagonia Registers as First California Benefit Corporation
Maryland First State in Union to Benefit Corporation Legislation

The opinions, beliefs and viewpoints expressed by CSRwire contributors do not necessarily reflect the opinions, beliefs and viewpoints of CSRwire.

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