The “Benefit Corporation” Movement

A new corporate structure requires companies to look beyond the interests of shareholders and to consider the effect of decisions on employees, the environment and the surrounding community.

Image courtesy of Eugene Chan of Hub Bay Area, via B Corporation Facebook.

There’s a young movement underway that takes a new twist on efforts toward corporate social responsibility and sustainability: it’s a push to get companies to incorporate as something called “benefit corporations.”

Ben Schreckinger, an Atlantic Media fellow reporting for National Journal, writes in “Virtue Inc.” in the Boston Globe that “the idea of a benefit corporation is to weave some social responsibility into the DNA of the company itself through its charter.” A benefit corporation, he writes, is ” required by law to create ‘a material, positive impact on society and the environment,’ and — while still making a profit — to consider the effects of its actions on its customers, its employees, society, and the environment.”

The idea emerged from nonprofit called B Lab. B Lab certifies companies according to its own standards of social and environmental performance, accountability and transparency and calls those companies “B Corporations.” It says that “B Corp certification is to sustainable business what Fair Trade certification is to coffee or USDA Organic certification is to milk.”

B Lab’s website says there are 650 B Corporations in 19 countries and 60 industries. While some of the founding companies are smaller business, including Seventh Generation, Comet Skateboards and King Arthur Flour Company, they have been joined by larger profile companies that include Patagonia and Ben & Jerry’s. The program has received funding from donors that include the Rockefeller Foundation, Deloitte LLP and the United States Agency for International Development.

On December 1, Massachusetts will become the eleventh state to allow companies to incorporate as benefit corporations. See the state’s notice about the new legislation (pdf).

Boston law firm Foley Hoag clarifies in a press release that there is a difference beyond semantics between benefit corporations and B Corps: “Benefit corporations should not be confused with ‘B Corps’ . . . [whose] status is conferred by B Lab on business entities that meet certain criteria.