By Risa De Ferrari, Green Chamber of Commerce
Certified Benefit Corporations and B Corps are a new classification of business joining the ranks of certifications such as: sole proprietorships, standard incorporations (C Corps or S Corps), and limited liability corporations (LLCs) to name a few. Benefit Corporations are unique in that they build upon the legal framework of an organization the opportunity to legally consider the impact decisions will have on the triple bottom line: business, society, and the environment. This differs from current corporate structures, which legally restrict the focus of the company to maximizing shareholder value. Benefit Corporations facilitate this triple-bottom-line mission by aiding organizations in reframing their usual business practices by incorporating commitments to greater accountability, transparency, sustainable business practices, and socially responsible initiatives into the bylaws of the company.
There are many long-term potential benefits to becoming a B Corp certified organization. For starters, the certification may lead to uncovering opportunities for cost savings in waste, water, and energy. In relation, the sustainable & clean tech business sectors are the only area of the economy growing consistently and a major incentive for this kind of certification is to attract more of the billions of dollars that are being invested, which has the added benefit of promoting job creation. As companies become B Corp certified through B Lab (an independent third-party verification) for their sustainable practices, major investment can be attracted because sustainable and clean tech investors are using the B Corp status recognition as a way to vet companies to invest in.
Additionally, as more states legally recognize B Corp certifications there is potential for creating tax incentives. Philadelphia is the first city in the nation to create a pilot tax incentive program for certified B Corps and if it proves successful, other cities and states may follow. Ultimately, the B Corp certification will provide an avenue for aligning employee, community, and corporate values, and uphold these commitments in the case of a merger/acquisition and when seeking investment; in this way the holistic mission of the company will remain intact.
Today, we stand on the brink of a sweeping movement for B Corporations across the US that represents a vital step in transforming the commerce of today into the thriving green economy of tomorrow. States throughout the country including Virginia, Maryland, Vermont, and New Jersey, have already successfully passed Benefit Corporation legislation into law. Additionally, a number of other states including Colorado, Hawaii, New York, North Carolina, Pennsylvania, and Michigan introduced and hope to pass forthcoming Benefit Corporation legislation into law by the end of this year. We’re excited that California is one of them.
The California Benefit Corporation bill AB 361, introduced by Marin County, California Assemblymember Jared Huffman in February of this year, has had a great deal of attention and support from its beginning. Major support from organizations such as: the American Sustainable Business Council, Green America, the Green Chamber of Commerce, Silicon Valley Leadership Group, Social Venture Network, and the US Green Business Council, in addition to the passage of B Corp laws in other states previous to California have made for a very convincing argument. AB 361 sailed past the first round of state assembly committee hearings, recently passed through the State Assembly itself, and is now expected to go to the state senate for review before going before California State Governor Jerry Brown.
For California, AB 361 represents a major tipping point in the US economy and may one day redefine what it means to do business as usual in this country. As Adam Lowry, Co-Founder and Chief Greenskeeper of Method Inc., a rapidly developing consumer products company based in San Francisco put it, “Benefit Corporations represent the corporate model of the future, and AB 361 will allow California to establish leadership in developing this new economy.”
AB 361 has only taken its first few steps in the long walk to the final vote in November but the amount of enthusiasm and support shown at this early stage demonstrates that the timing is right for this transformational bill to pass into law.
Written by Risa De Ferrari, an intern for the Green Chamber of Commerce with review by Alexia Marcous, Vice President of the Board of Directors for the Green Chamber of Commerce
This post originally appeared in American Sustainable Business Council‘s Blog
Discussion: 3 Comments
Risa: This is very informative and good luck in getting this done. I would think CA is on the cutting edge in this area of law.
As of July 1, we have what I assume is a similar law here in Virginia, as you noted, and I hope a few rather technical comments on your article are not out of line.
Perhaps this is obvious by your 4th paragraph, but there is a general tendency to confuse the terms “B Corp” and “Benefit Corporation”. Accordingly, I think your first sentence is a little misleading. First of all, at least in Virginia,a Benefit Corporationis not a new classification of business as you use that term.In our statute, a business must first qualify as a corporation under Virginia law and then it may adopt or “add on” the designation of “Benefit Corporation” if it follows another set of requirements.In our laws, LLCs or other non-corporate entities do not qualify,a defect we hope to cure next year.
Also, a B Corp is not a business classification at all, although it does require that a business change it’s charter to comply with the B Lab certification. It does not give any specific state law protection, however.
Your second sentence is more descriptive and and accurate, in my opinion, at least for a Virginia business.
As you note in the 2nd and 3rd paragraphs, being certified as a “B Corp” by B Lab may have some real business advantages and states may look to B Lab to set a standard for independent 3rd party review, as required by the Virginia law.
Finally, I suspect most states,like Virginia,will provide the officers and directors some relief from potential litigation.
I hope this is helpful and look forward to any comments.
Respectfully yours.
Carter,
You are absolutely right. Certified B Corporations are not recognized by the state statutes that create Benefit Corp legislation, and the advantages of being certified are related but separate.
Second, Benefit Corp status is indeed a layer on top of C or S status. Since it does have additional accountability, purpose, and transparency requirements it is often referred to as a separate structure; it does not, however, change anything else related to a corporation’s formation or tax status.
The last point about offering relief to officers and directors is spot-on, as one of the main drivers behind Benefit Corp legislation is to enable those officers and directors to make decisions based on considerations beyond the bottom line. Virginia, along with other states that have adopted Benefit Corp legislation, has done so by created the Benefit Corp status.
Does anyone have bylaws for B Corp.????
thanks.