With the introduction of Benefit Corporation legislation across America, the business world might want to brace for change. In December of 2012, the DC Council became most recent body to pass legislation allowing for the existence of Benefit Corporations as an alternative and innovative corporate form. The DC Council joined twelve states which passed similar legislation in the past two years and fourteen more states (including our own state of West Virginia) which are currently working on passing similar bills. This quickly emerging legislation recognizes the growing desire of some entrepreneurs and businesses to not only earn profits but also impact communities and the world at large in a positive way.
What exactly is a B Corp?
Some consider B Corps a kind of meshing of the for-profit corporation and the non-profit corporation.A B Corp commits itself to benefiting society, the environment, its workers, its community, and/or some other specific cause while still pursuing a positive bottom line. Some people say that B corps have a triple bottom line: people, planet, profit. The B Corps represents a new form of corporate entity that allows boards of directors to make decisions based on interests other than pure profit-maximization without the threat of litigation from shareholders. B Corps do not have the advantage of tax exemption like non-profits, and they are held accountable to their stated public-benefit commitment by an independent, third-party standard. In its certificate of incorporation, a B Corp must identify that it was formed to create a material positive impact on society. Basically, a B Corp is a form of incorporation which allows for stakeholder consideration along with that of the shareholders. Generally, B corps serve dual purposes. They not only intend to make money, but also to make a positive impact on the world around them.
What does the B Corp and the legislation mean?
The legislation and discussions of B Corps speaks to the growing interest in consumers to know about the companies and products they are supporting financially. Like the growth of the locavore movement, B Corps represent a new kind of consumerism and entrepreneurism. The B Corps seems to encapsulate the idea that making money and doing good can go hand in hand. Presumably, having a label as a B Corps will be an advantage in some markets against pure profit ventures much like an organic label can sway a consumer’s choice on how to spend her money. And, much like organic vs. non-organic companies, one does not preclude the other. The B Corp is simply another way to do business. At the end of the day, some people are watching where their money goes and are making consumer decisions based on the actions of the companies.
This legislation could be important for business as a whole because it allows some businesses a way to differentiate themselves to their investors, employees, and the community. It could also allow for transparency in an increasingly muddied marketplace where many companies claim to have jumped on the “green” or socially responsible bandwagon in order to increase profits. The B Corp label might allow consumers to make informed choices.
