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Beyond Corporate Social Responsibility
In its most simple form, company success is defined by the bottom line – revenue and profits. Organizations can expand upon this to include making a positive social and environmental impact. Typically called Corporate Social Responsibility (CSR), these good-will efforts usually exist as a separate program within an organization conducted apart from meeting financial goals.For instance, if an organization sells clothing, its CSR program may include quarterly clothing drives to benefit those in need. In traditional corporate structures, philanthropy is not the main focus nor is the company legally required to conduct these activities. But now many organizations take their charitable efforts out of the CSR department. They instead choose to legally formalize their social and environmental mission-related endeavors as the main business objective.
The Birth of Benefit Corporations
Benefit Corporations go beyond CSR or hybrid nonprofit ventures. They are for-profit organizations that are required by law to create a material positive impact on society and the environment in addition to generating a profit. The mission is embedded into day to day operations. Directors and shareholders define what it means to be good for society and the environment — not a predetermined set of rules created by the government. These corporations are a fairly new type of corporate form that gives entrepreneurs and investors more freedom when determining what incorporated entity best meets their needs. A registered publicagent is a helpful resource when making this decision.
Currently, 31 states have legislation recognizing this corporate form which demonstrates not only their popularity but that a business with a charitable mission can be profitable. Over 1,800 companies registered benefit corporations in 50 countries, including well-known businesses like Etsy, Method, Plum Organics, Klean Kanteen and Patagonia.
Benefit Corporation vs. Certified B Corporations
It is important to note the difference between a benefit corporation and a Certified B Corporation. A benefit corporation is incorporated in the same manner as a traditional for-profit corporation. A Certified B Corporation is a company that meets B Labs rigorous standards of social and environmental performance, accountability and transparency. A benefit corporation is not legally required to obtain the certification, but it adds to the entity's credibility. For example, certification is similar to how many foods claim to be "all natural", but only those that meet certain standards are "certified organic". Certification is considered a best practice.
Benefit Corporation Advantages
Benefit corporations go beyond Corporate Social Responsibility, by legally ingraining the social and environmental mission of the company as a core business objective. Benefit corporations are required to create a material positive impact on society and the environment, and must consider the impact of their decisions not only on shareholders but all stakeholders including workers, community, and the environment.
They must produce an annual public “benefit report” that assesses their overall social and environmental performance against a third party standard (except in Delaware where making it public is optional and it can be published every other year). In addition to the obvious advantage of creating legal protection to consider other stakeholders rather than solely profit, there are numerous advantages to incorporating as a benefitcorporation such as:
Protect and Maintain Mission
Benefit Corporations are Profitable
Not only can businesses with a charitable mission turn a profit, their revenues can be quite substantial. One of the best examples of a B Corp that turns a profit is Etsy, an online marketplace that connects creative business owners with buyers. Etsy is one of the first B Corps to become a publicly traded company. Over a year after its IPO, their latest earnings report shows a revenue of $85.3 Billion in Q2 2016.
This shows that businesses can be charities while continuing to make a profit and appease shareholders.
To learn more about becoming a Benefit Corporation, contact your CT representative or call us at (844) 234-4745 (toll-free U.S.).
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