Benefit Corporations – are they a solution?

What if corporations had to prove they were having a net and material positive impact on society and the environment?

A Benefit, or “B” Corporation status is a relatively new legal structure for public corporations available in some, but not all states. It addresses some of the most problematic corporate law that encourages businesses to operate criminally. It isn’t a full solution but a step in the right direction. “The  purpose of a benefit corporation is to create general public benefit, which is defined as a material positive impact on society and the environment.” (Wikepedia)

What if all corporations had to demonstrate twice yearly in a questionnaire that their operations were having a material positive impact on society and the environment?  What if shareholders had to demand that of the company they invested in?

This is a paradigm shift from the current model, where shareholders can and do sue companies that put people or the planet ahead of next quarter’s profits.

Of course, material positive impact is a relative term. But B Lab, the non-profit behind the creation of B Corporate structure appears serious about addressing environmental and social issues. http://www.bcorporation.net/

This legal structure allows corporations who feel that people and planet are important to make a public statement about that. It also protects them from greedy shareholders who could cut across the ability of the company to make positive environmental and social decisions if it affects profits.

The concept of passive investors who do nothing but rake in profits and who feel entitled to as many profits as possible needs to be seriously questioned. It is not a sustainable paradigm because it rewards and encourages criminal behavior from many angles.  But Benefit Corporations are a step in the right direction. And well known companies such as Patagonia and Ben and Jerrys are taking the lead.

http://www.patagonia.com/us/patagonia.go?assetid=68413

Another relatively new legal structure, for privately held companies, is the L3C.  A gradient step between for profit and non profit corporations, this structure allows a privately held, for profit company to accept money from both investors and grants/foundations.  It is a “low profit” corporation, operating much as a non profit, but retaining for profit abilities. This structure was created to meet the needs of “social entrepreneurs” who run businesses that have positive social and environmental purposes.

All in all, it’s good to see some people in the business community working to come up with solutions to existing structures that encourage destructive, irresponsible and criminal behavior. Much more work is needed, in every sector.