Finally, a way to pursue the “triple bottom line” (people, planet and profits) with legal backing! It is called the Benefit Corporation (as opposed to a normal C or S Corporation for example). Signed into NY legislation by Governor Cuomo the new law allows businesses to be recognized and filed a for more than their financial goals.
Benefit Corporations have a legal responsibility to all stakeholders, not just the shareholders like a traditional C or S Corps. This means they are obligated to take into account the effects of their decisions on the community, the environment, employees, etc. Benefit Corporations can also voluntarily undergo certification by the nonprofit organization B Lab that makes them “Certified B Corporations” and ensures they have a social purpose and benefits for stakeholders. More on that here .
With the new law, New York is joining states that have already passed similar legislation, including Maryland, Vermont, New Jersey, Virginia, Hawaii, California.
The key distinctions of Benefit Corporations from traditional corporations are these three things:
1) Purpose: They must have a corporate purpose to create a material positive impact on society and the environment;
2) Accountability: They must expand the directors’ and employees’ fiduciary duty to require consideration of the interests of workers, community and the environment and all stakeholder
3) Transparency: They must publicly report annually on overall social and environmental performance against a comprehensive, credible, independent, and transparent third party standard
Other than these three additions, the Benefit Corporations is set up and taxed as a traditional corporation would be. However, for social entrepreneurs like EcoBrooklyn, this changes everything. It protects the mission and purpose of the business and holds up the triple bottom line as a priority. In other words, it legally never puts profits for shareholders above the stakeholders – something that social businesses have been trying to do for decades.
B Lab is a nonprofit that helped create the Benefit Corporation and now works to establish the option of a Benefit Corporation in all states through legislation. Much of the above information came from their website. More information on the requirements and specific details of a Benefit Corporation here.