Prosperity and Integrity: Harnessing the New Power of Benefit Corporations

Given the economic volatility our country has endured during the past three years, it’s easy to think of corporations as faceless, legal entities that care only about bottom lines. And in the face of reduced government funding and support from private foundations and corporate giving programs, nonprofits have been feeling the pinch more sharply than most. But, in this era of “too-big-to-fail,” “bailouts,” and perceived greed, it’s important to remember that corporations were originally conceived with both economic prosperity and the protection of public welfare in mind.

Early American corporations were not given unlimited reign, but were closely guided by the views of their investors and the tenets of their charters. Transparency and accountability were not just marketing buzzwords, but common standards of practice.

There has been a recent movement-which many in the nonprofit sector have observed-of for-profit entities engaging in socially-conscious endeavors.  This trend falls under the broad umbrella of “social entrepreneurship” and, very recently, states have begun to recognize a new incorporation option available for businesses that wish to be both financially successful and socially conscious.

This new construct, called a “Benefit Corporation,” stresses sustainability along with financial success. More to the point, this new model is a boon to the non-profit world. It provides the opportunity for increased cooperation with a conscientious corner of the for-profit sector and the potential to leverage more sustainable impacts on business practices beyond existing corporations. Benefit or “B” Corporations redefine the modern notion of commercial success by valuing “stakeholders” above “shareholders.” Unlike traditional corporations, B Corporations must facilitate, and publicly report, positive social and environmental impacts through their work in order to register with the non-profit organization, B Lab (http://www.bcorporation.net). This third-party validation process provides a number of valuable benefits to participating businesses:

1. Save Money.  B Corporations have the potential to deliver immediate financial value, and B Lab has already saved B Corps over $1M through service partnerships.
2. Set Yourself Apart.  B Corporations differentiate themselves in the marketplace, and the certification process allows companies to generate press, meet sustainability requirements set by other companies, enhance reputation and mitigate potential trust erosion from consumers.
3. Find Common Ground.  B Corporations offer a “common ground” for businesses that are committed to both the mission-driven ethos of the non-profit world and the best practices of the for-profit section.
4. Connect With Your Peers.  Through B Lab, B Corporations are encouraged (and incentivized) to collaborate amongst themselves and share best practices in sustainability, marketing, finance, IT, and HR.
5. Grow Faster and Smarter.  The raw numbers (http://www.bcorporation.net/resources/bcorp/documents/2011-AR_B-Index.pdf) demonstrate that registered B Corporations expand at a more consistent rate, work more closely with other area organizations, offer better benefits to their employees, and foster more positive change within their communities than traditional corporations.

Here’s a look at other companies that have already taken advantage of the B Corps model:

Impact Makers, Inc: Impact Makers delivers information technology and management consulting professional services, focused on the healthcare industry. They are a non-stock, “competitive” social venture – the critical difference between Impact Makers and their competitors is that all of Impact Makers’ profits go directly to their charitable community partners. (http://www.impactmakers.org/)

PhilanTech: PhilanTech provides the PhilanTrack™ online grants management system – an innovative online grant proposal, reporting and management system that enhances accountability, transparency, and efficiency. This online system enables valuable resources to be redirected towards service delivery and greater social impact rather than to grants administration. (http://www.philantech.com/)

Fair Trade Sports: Fair Trade Sports, Inc is the first sports equipment company in the US to launch a full line of eco-certified Fair Trade sports balls, ensuring fair wages and healthy working conditions for our adult workers. They have sports balls for soccer, football, basketball, rugby, volleyball, and more. (http://www.fairtradesports.com/)

Seventh Generation: Seventh Generation is the nation’s most recognized brand of natural household and personal care products. For 20 years, the company has been recognized for its non-toxic cleaners and personal hygiene products. (http://www.seventhgeneration.com/)

Practical Energy Solutions: Practical Energy Solutions is a privately owned partnership located in West Chester, Pennsylvania. Their talented and passionate team provide common sense solutions for reducing energy consumption and costs. The business operates as an independent consultant for clients so there is no conflict of interest on any recommended efficiency and conservation measures. (http://www.practicalenergy.net/)

We hope that you’ll take the time to look at B Lab, investigate some of the other companies that have already taken advantage B Corps, and in general think about what this new model could mean for the future of business.

We’re excited. We hope you are too.

Please feel free to contact Elliott & Davis, PC with all of your questions about nonprofit formations and management.  Elliott & Davis is a full service law firm with expertise in the areas of nonprofit law, civil litigation, corporate law, real estate law, estates & trust, immigration law, entertainment law, civil rights law and domestic relations law.

For more information about these, or any of our other practice areas, please visit our website at: www.elliott-davis.com.

Please feel free to give us a call at 412-434-4911 ext. 25 for a free phone consultation.

 

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