Benefit' Corporations: the Future of Business
Is there any hope for capitalism? The last couple years have seen a pounding of the system that most haven’t seen in their lifetimes. It has caused more than a few to look at the way we live our lives and ask the deep questions. If I want to make money, do I have to sacrifice the future of our children and planet? How do I tell who is actually a good company versus who has good advertising?
Until recently, regardless of your answers to the question, you had two options before you: work at a nonprofit or work at a for-profit. However, the state of Maryland recently passed legislation to offer another route: the ‘Benefit’ Corporation (B Corp). The B Corp concept is the shining light of capitalism, enabling companies to potentially have large sustainable impact quickly (due to receiving money from investors), while still making sure they serve people and planet.
Before the B Corp, a for-profit was defined by its number 1 priority of creating as much money as possible (what is called ‘shareholder value’). B Corp’s place number 1 priority on the needs of everyone touched by the company. This goes from the farmers who make a given product to the streams that have to absorb the waste. Going even further, a B Corp is required to measure and report on the benefits being provided so you can actually trust that companies are practicing what they preach. As a result, there is a dramatically larger opportunity to focus on environmental and societal service while still remaining a for-profit.
Let’s take an example. You work for a major shoe company, and your job is to make as much money for it as possible without breaking any laws. If you see that someone is willing to make your shoes for 50 cents an hour, you’ll go out there and hire that person. You have to, because if you don’t the company has a right to fire you. Remember, your job is to maximize shareholder value, that’s the rules of the game you signed up to play. In the end, this narrow-minded focus to make money just makes everyone ‘race to the bottom.’ You end up with an entire society doing anything they can to make a buck (sound familiar?)
Same example, but now the shoe company is a B Corporation. You see the same guy willing to work for 50 cents an hour. However, now the goal isn’t just to make money, it’s to make the world a better place for everyone your company serves. This is a harder question. You have to ask if losing local jobs, the bad PR, and the poor treatment of the 50 cent worker are all consequences that are worth having cheaper shoes. In addition, the world will know your decision because you’ll have to report it. These are the new rules of the game. If everyone cared to only buy from B Corporations, we could change the world pretty quickly!
There are many for-profit companies out there trying to do the right thing. However, without anything in their rulebook saying they must do the right thing, we as consumers have no protection.
If you’re wondering who is already on board with this, look no further than the household products company Seventh Generation, or check out this upbeat video sharing what Greyston Bakery is up to:
These are just two of hundreds of B Corps already proclaiming to the world that they’re in this to serve everyone involved while still being profitable.
Talk to the leadership at your company, connect with B Lab, write (with pen and paper!) to your congress-person asking to have this way of doing business passed in government.
This isn’t a Coke or Pepsi world anymore. There are many flavors in which to run a company that incorporate our hearts along with our heads. It’s time we stood up to ensure that right.
05:45 AM on 6/22/2010
“Before the B Corp, a for-profit was defined”
There’s an internatio nal dimension to this movement which may be interestin g for others. The profit-for -purpose model was incorporat ed in the UK in 2004 under the name of People-Cen tered Economic Developmen t. It had however been conceived in 1996 in a white paper delivered to US President Bill Clinton and published online in 1997.
The (then) theoretica l model proposed a revised constituti on to modify primary purpose to social benefit, as does B-Corps.
With a proof of concept project which leveraged investment for a developmen t initiative in Russia in 1999, founder Terry Hallman described both the success and the background developmen t of this reformed model of capitalism in a 2004 interview with a diaspora leader, at which point P-CED had incorporat ed in the UK as a guarantee company without share capital.
2005 saw the arrival of the Community Interest Company model which formalised the profit-for -purpose approach in UK Company Law.
Since 2004 operating as software developmen t business, revenue has been directed toward an humanitari an project in Ukraine, described as a ‘Marshall Plan’ strategy.
http://peo ple-center ed.net/Abo ut.aspx
This project, which has already resulted in impact on Ukriane’s childcare policy and consequent increase in domestic adoption set out a model for a social investment fund and faculty for social enterprise on a national scale.
http://en. for-ua.com /analytics /2007/08/0 6/121201.h tml
http://en. for-ua.com /analytics /2007/08/0 9/11000