Benefit Corporations Make A Difference and a Profit

Business is all about making money, right? Except when money isn’t the only bottom line. This will confuse some of you: not all corporations seek to maximize profits for shareholders! It’s true, Directors must make sound judgment so shareholder value isn’t negatively impacted but there’s no legal obligation to maximize short-term profits — but other goals aren’t considered. Some for-profit corporations, however, have goals beyond profit and shareholder value.

First we need to review some terms:

Triple Bottom Line:

The phrase “the triple bottom line” was first coined in 1994 by John Elkington, the founder of a British consultancy called SustainAbility. His argument was that companies should be preparing three different (and quite separate) bottom lines. One is the traditional measure of corporate profit—the “bottom line” of the profit and loss account. The second is the bottom line of a company’s “people account”—a measure in some shape or form of how socially responsible an organisation has been throughout its operations. The third is the bottom line of the company’s “planet” account—a measure of how environmentally responsible it has been. The triple bottom line (TBL) thus consists of three Ps: profit, people and planet. It aims to measure the financial, social and environmental performance of the corporation over a period of time. Only a company that produces a TBL is taking account of the full cost involved in doing business. (The Economist)

Benefit Corporation:

Incorporating as a benefit corporation legally protects an entrepreneur’s social goals by mandating considerations other than just profit. By giving directors the secured legal protection necessary to consider the interest of all stakeholders, rather than just the shareholders who elected them, benefit corporations can help meet the needs of those interested in having their business help solve social and environmental challenges.

Additionally, the demand for corporate accountability is at an all-time high, with many consumers already aligning their purchases with their values. The benefit corporation status is a great way to differentiate your company from the competition and capitalize on these customers. (Forbes)

Certified B Corporation: 

B Corp is to business what Fair Trade certification is to coffee or USDA Organic certification is to milk.
B Corps are certified by the nonprofit B Lab to meet rigorous standards of social and environmental performance, accountability, and transparency.

Today, there is a growing community of more than 1,000 Certified B Corps from 33 countries and over 60 industries working together toward 1 unifying goal: to redefine success in business. (B Lab)

 

B Lab, a nonprofit organization, certifies B Corporations, the same way TransFair certifies Fair Trade coffee or USGBC certifies LEED buildings. However, all B Corps meet a wide range of comprehensive and transparent social and environmental performance standards.

There are over 1,200 Certified B Corporations in 38 countries across 121 different industries. (MaRS Centre for Impact Investing)

This B Corp video explains:

http://youtu.be/V-VFZUFJwt4

Impact Investing:

And around the world, there are stories of how impact investments are meeting needs in areas as diverse as childhood education, clean technology, and financial services for the poor.

Last year, New York State, Social Finance and Bank of America Merrill Lynch teamed up to launch a “social impact bond” designed to cut New York City’s seemingly insoluble recidivism problem. The $13.5 million raised will extend the proven approach of the Center for Employment Opportunities. If the Center meets targets for reducing recidivism rates, investors stand to earn up to a 12.5% return.

Or take d.light – a company that manufactures and distributes solar lighting and power products to those without access to reliable electricity, transforming lives in the developing world.  Over eight years, d.light has reached more than 30 million people worldwide.

Recently, J.P. Morgan and the Global Impact Investing Network studied 125 major fund managers, foundations, and development finance institutions and found $46 billion in sustainable investments under management.  That’s up nearly 20% from last year.

Some estimate that the impact investment market could grow to $3 trillion. And as the more socially conscious millennial generation of entrepreneurs build impact-driven businesses, you can be sure the supply of impact investment opportunities will vastly expand. (Forbes)

All sound too abstract for you? Here are some examples you might be familiar with:

• Ben and Jerry’s — “Ben and Jerry’s produces a wide variety of super-premium ice cream and ice cream novelties.”
• Cabot Creamery Cooperative — “Cabot Creamery is a 1,200 farm family dairy cooperative with members in New England and upstate New York”
• Change.org — “Platform that empowers anyone, anywhere to start, join and win campaigns for social change”
• Etsy — “We are bringing heart to commerce and making the world more fair, more sustainable, and more fun.”
• King Arthur Flour Company — “America’s oldest flour company and 100% employee-owned”
• New Belgium Brewing Co, Inc. — “100% Employee owned brewer of fine Belgian inspired ales”
• Patagonia, Inc. — “Outdoor clothing, apparel and gear for climbing, hiking, surfing, running, travel”

780 of the 1,179 B Corps are located in the US — at least one in each state! Here are some examples, including both from Missouri:

• AE Works; Pittsburgh, PA — “AE creates social, environmental, and technical capital as a TBL design firm for the built environment”
• The Arnold Development Group; Kansas City, MO — “Mixed use real estate development and real estate services”
• Manitoba Harvest Hemp Foods; Winnipeg, Manitoba Canada — “Manitoba Harvest Hemp Foods is the world’s largest vertically integrated hemp foods manufacturer”
• Microgrid Energy, LLC; St. Louis, MO — “Microgrid Solar is a clean energy company committed to operating on a triple bottom line basis.”
• The Natural Baby Company; Bozeman, MT — “The Natural Baby Company builds and sells earth-friendly baby brands including GroVia and Ovolo.”
• Renewal Funds; Vancouver British Columbia Canada — “Social venture fund investing in environmental and social mission businesses in Canada and the USA
• Telesis Corporation; Washington, D.C. — “Planning, financing and building urban communities that are livable, beautiful, and safe”
• Union Kitchen; Washington, D.C. —  “Food incubator catalyzing small business growth by lowering barriers to entry for food businesses.”
• WasteZero, Inc.; Raleigh, NC — “WasteZero works with municipalities to deliver the most effective waste reduction programs in the US.”

You can search certified B Corps here. I can think of a number of St. Louis companies that could likely become certified.

There are now more than a thousand B corps in the U.S., including Patagonia, Etsy, and Seventh Generation. And in the past four years twenty-seven states have passed laws allowing companies to incorporate themselves as “benefit corporations”—which are similar to B corps but not identical. The commitments that these companies are making aren’t just rhetorical. Whereas a regular business can abandon altruistic policies when times get tough, a benefit corporation can’t. Shareholders can sue its directors for not carrying out the company’s social mission, just as they can sue directors of traditional companies for violating their fiduciary duty. (The New Yorker)

Missouri doesn’t yet have a Benefit Corporation provision, existing corporations can still become certified. Three neighboring states, Arkansas, Illinois, & Nebraska have Benefit Corporation legislation; four neighboring states have introduced legislation: Iowa, Kentucky, Oklahoma, & Tennessee. Kansas, like Missouri, doesn’t have benefit corporation legislation or pending bills. For more information on states click here.

If you’re committed to social/environmental change, but also want to make a profit, consider working for, or starting, a benefit corporation.The fact so many people around the world are working for more than to line their own pockets is comforting.

— Steve Patterson