« View All Blog Posts

A Historic Step for For-Benefit Corporations
By Sara Laks

Another piece of the puzzle was put in place in the growing movement to harness the power of private enterprise to create public benefit.   It seems the puzzle pieces are coming together quickly these days.

On April 13th Maryland signed into law the first provision creating legal entities known as “benefit corporations”.  These “B Corporations” are a new class of corporation that is structured with a legal responsibility to consider the company’s material impact on employees, community and the environment instead of just the traditional bottom-line.  Similar legislation is close to being passed in Vermont, and other interested states for next year include New York, Pennsylvania, North Carolina, Colorado, Oregon and Washington.

The long-established tax system has categorized the corporate world into non-profit organizations and for-profit organizations, making it difficult for a for-profit corporation to develop and stay dedicated to a societal or environmentally based mission at the expense of violating its responsibility to protect the capital of its shareholders.  For those who see the synergy of making money and making a difference, or the value in simply making a difference, a for-benefit corporation provides a middle ground where this is legally possible.

These B-Corporations would "better insulate [companies] from the pressures of short-term­ism that dominate the public equity markets," says Jay Coen Gilbert, co-founder of B Lab, which has certified 296 companies as B Corporations.  By institutionalizing a corporate mission, it is more likely to survive changes in management, investors and even new ownership–making sustainability goals, well, sustainable.

The certification is also a useful tool to allow consumers and investors to determine which corporations are truly committed to their stated cause.  With the barrage of “greenwashing” in the marketplace today, it is important to set benchmarks to differentiate “good companies” from “good marketing”.  All registered B Corporations must meet comprehensive and transparent social and environmental standards set by the B Rating System

The change we are seeking is becoming a reality with the passage of legislation like Maryland’s new benefit corporation laws that encourages corporations to establish and protect a sustainable mission; recognizing the growing movement of entrepreneurs, investors, consumers, employees, and communities that are harnessing the power of business to solve environmental and social problems.

Sara Laks
Assistant to the President
saralaks@firstaffirmative.com

Posted: May 7, 2010