Corporate Social Responsibility has been taken a step further by the advent of Benefit Corporations. Maryland was the first state in the U.S. to pass benefit corporation legislation and now 33 states plus the District of Columbia allow for companies to be registered as benefit corporations.
A benefit corporation is a for-profit organization that is legally required to create a positive impact upon society, its workers, and the environment. The mission of the corporation and its specific public benefit purposes are decided together by the directors and shareholders. This social and environmental mission is then a core business objective in addition to the goal of making a profit.
There are currently around 1,800 registered benefit corporations in 50 countries. Among them are well-known ventures like Patagonia, Klean Kanteen, and Etsy. Etsy is a benefit corporation that ultimately became a publicly traded company. Their 2016 second quarter earnings report showed revenue of $85.3 billion, and is a premier example of how a socially responsible company can also be profitable.
Choosing to be a benefit corporation is purely voluntary. By declaring a mission that will benefit the public good, benefit corporations provide an opportunity for investors and entrepreneurs to invest and help build businesses that have profit as a goal while remaining socially and environmentally responsible.
The United States Forum for Responsible Investment (USSIF) reports that their members represent more than $3 trillion in assets being invested in socially responsible companies. Benefit corporations are attractive to investors and employees alike. Surveys by the Nielsen company indicate that 56 percent of North Americans would rather work for a company that gives back to the community. The same survey found that 64 percent of North Americans would prefer to buy from companies that give back to the community, demonstrating that consumers are also drawn to benefit corporations.
An established business entity that wishes to become a benefit corporation may do so by a two-thirds vote of the shareholders. Those wishing to form a benefit corporation must file an application with the Bureau of Corporations and Charitable Organizations. The application must include the Articles of Incorporation, a docketing statement, as well as the following information:
The intent to file must be published in two newspapers of general circulation – one of which should preferably be a legal journal.
Every benefit corporation must also file an annual report with the state that assesses their operations by a third-party standard. This report describes their efforts to create public benefit during the preceding year and must be distributed to all shareholders.
A Certified B Corporation is a benefit corporation that meets rigorous standards of social and environmental performance, accountability, and transparency, as set forth by B Labs. There is no requirement for benefit corporations to be certified, but certification adds to a company’s credibility and is considered a best practice. Well known Certified B corporations include Eileen Fisher, Fetzer Vineyards, and Badger Bodycare.
MacMain, Connell & Leinhauser is well versed in the complexities of benefit corporations and can provide you with highly skilled representation. Contact us online or call 484-318-7106 to schedule a consultation with one of our experienced attorneys.