Benefit Corporations for a Sustainable Economy

Sustainable Economy by Liam Andrew

Image courtesy of Liam Andrew at https://unsplash.com

In 2015, we witnessed what is possible when large groups of people come together to change the world. But with the adoption of both the Sustainable Development Goals (SDGs) and the Paris Agreement, we have a lot of promises to keep and work to get done.

A sustainable economy is within our reach, but it will take the cooperation of multiple stakeholders, the investment of billions of funds and the dedication of the entire world.

Lobbyists, activists, scientists and politicians have already—quite successfully—mapped out some of the very important policies that need to be adopted by governing bodies around the world in order to propel us into a sustainable economy by 2030.

Many of these policies relate to agriculture, deforestation, water, research and development, technology, renewable energy and transportation. And they all have the capacity to create synergies that would—no doubt—encourage the private sector to invent, create, produce and sell goods and services for a more sustainable future.

Any policy that can boost cooperation, facilitate multi-channel communications, incentivize information-sharing, strengthen scalable impact, create new sustainable capital, mitigate environmental degradation, motivate early adoption and provide long-term solutions are policies worth lobbying for.

Today, I’m lobbying for a policy that can do all of those things.

I strongly believe that governments should adopt policies that provide companies with the ability to register as purpose-driven corporations. Purpose-driven corporations are different from traditional for-profit companies and non-profit organizations because they operate with a triple bottom line, equally valuing profits, people and the planet.

Legislative terminology refers to them as Benefit Corporations.

Benefit Corporations are for-profit entities that seek to create social and environmental benefits in addition to the traditional aim of generating profit. Only two countries in the world, Italy and the USA, have adopted legislation that enables businesses to register as Benefit Corporations.

This policy gives for-profit businesses the opportunity to define themselves as for-purpose companies within their articles of incorporation, protecting directors who may make business decisions based on societal or environmental needs that run against traditional short-term, profit-generating norms.

If governments around the world want to encourage public-private partnerships that help us transition towards a sustainable economy, then they must also create new guidelines and frameworks that clearly enable companies to operate via a triple-bottom line.

To be candid, I’m not trying to suggest that this lack of policy has stopped the world from embracing purpose-driven business.

But the void certainly hasn’t helped.

In my home country, the Canadian Bar Association is putting pressure on our government to act quickly. And B Lab, a non-profit which serves a global movement of people using business as a force for good, also believes that Benefit Corporation policies could change our economy for the better.

Both groups argue that the introduction of such a policy would increase business transparency, protect for-purpose companies’ missions, provide more freedom to entrepreneurs, attract further investment and create economic development, all at no additional cost to the government.

Beyond this, experts also indicate that this policy shift would protect purpose-driven companies during capital injections, through leadership changes and help prepare businesses post-IPO.

Our next move is clear.

Benefit Corporation legislation has the potential to be our best next step forward on our journey towards a new sustainable economy.

This blog post has been entered into Masdar’s 2016 Engage Blogging Contest: The Transition to a Sustainable Economy by 2030.

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6 replies

  1. Hey great article, I really like the paragraph that starts “Any policy that boosts cooperation…”
    I am wondering if you could give a few specific examples of how benefit corporations do this, and what exactly incorporating as a benefit protects businesses from. I ve done a bunch of reading about them but have still not grasped exactly what makes them so awesome. Is it really that corporations are forced to ignore being good if they are not a benefit corporation?
    Thanks for the great blog!

    Liked by 1 person

    • Thanks Greg!

      As you know, Benefit Corporations are interested in the triple bottom line, valuing business practices that focus on people, the planet and profits. This prompts such businesses to share their best practices, patents and information for the benefit of our world, sometimes at the cost of maximizing profits.

      Benefit Corporation legislation holds businesses accountable to their triple bottom line, mandating certain reporting requirements. Many Benefit Corporations use B Lab’s assessment tool to comply. Many go a step further and certify as B Corporations (something you can learn more about at http://www.bcorporation.net or by checking out The B Series section of this website). From there, many B Corporations cooperate on many different levels, meeting at B Corp conferences and conducting business with one another. They’ve even established a network for themselves called the B Hive.

      To answer the second half of your first question, Benefit Corporation legislation legally protects businesses, allowing them to make decisions based on their triple bottom line. This type of protection doesn’t explicitly exist for companies in Canada (and elsewhere around the world) who must register as regular for-profit entities.

      It’s not that corporations are forced to ignore being good if they are not registered as Benefit Corporations. This legislation doesn’t exist in Canada, yet we see many incredible purpose-driven companies operating here and changing the world. Benefit Corporation legislation creates a stronger relationship between the public and private sectors. It signifies the governments acknowledgement of such corporations. We need definitions–written in our rule books–that signify and promote the purpose-driven business sector. This is where we need to start if we really want to form meaningful partnerships that will help us transition into a sustainable economy.

      Hopefully I was able to provide a bit of clarity! Feel free to reconnect if you have any other questions. I’m also available to chat on Twitter, @CSRtist.

      Like

  2. I came across this article this morning, http://www.theguardian.com/sustainable-business/b-corps-markets-corporate-law , and came here to share, but it looks like you already know! Thanks for the answer. The article is definitely worth reading for those who are looking for a clear idea of the legalities of benefit corps though.

    That is a good point about Canada not having benefit corps and still having purpose driven companies. I read somewhere that benefit status gives people the ability to sue a company for not doing good, just as not having benefit status gives people the ability to sue for not maximizing profit. From reading that article, I am guessing that both of these abilities are highly theoretical and that the real purpose is create clear definitions which will allow more powerful and trusting collaborations as well as protect consumers (and The Guardian authors) from companies that spend more money advertising the good they do than they spend on actually doing good (I’m not sure that Starbucks and Nike qualify as sustainability leaders).

    Exciting times!

    Liked by 1 person

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