Today, it’s not uncommon for entrepreneurs to be more concerned with the social purpose of their companies than with their bottom lines. Thanks to Florida Statutes, Chapter 607, Parts II and III, those entrepreneurs can pursue those social purpose goals more freely. In 2014, Florida passed legislation creating two special types of corporate entities that permit their directors to prioritize social purpose goals – like the environment or other charitable causes – over profit maximization. Those two corporate entities are: (1) the benefit corporation; and (2) the social purpose corporation. Florida is one of 31 states with similar laws.
In a traditional corporation, the fiduciary duty obligations of a director can restrict socially-conscious decision making. In the new benefit corporation and social purpose corporation structures, a director is free to make those types of decisions, which might include using revenue to contribute to social causes, choosing more expensive but more environmentally sustainable suppliers and paying workers higher “working” wages, and prioritize them over the goal of maximizing shareholder return.
Under the Florida statutes, benefit and social purpose corporations must: (1) incorporate for the purpose of engaging in public benefit activities; (2) consider the effect of any corporate decision upon the public benefit goals of the company; and (3) file an annual shareholders report accounting for the activities of the company that furthered its public benefit goals. A benefit corporation has a broadly stated and generalized goal of prioritizing public benefits, defined in the statute as “a material, positive effect on society and the environment, taken as a whole . . ..” A social purpose corporation may have a single or more limited social mission.
Many companies are choosing these benefit corporation structures over a traditional corporate structure in order to better lead a mission-driven corporate life. The structure can ensure that after time, leadership changes and capital raises, the socially-driven mission of the company remains the same. In addition, many investors in these socially-conscious companies want assurance that they can hold the company accountable for its mission.
Why aren’t these companies using a traditional non-profit corporate structure to accomplish their socially-driven missions? Many of these companies have found that the for-profit structure gives them an advantage when raising capital, seeking investment and obtaining financing.
And, how are consumers responding to these new entity structures? Conscious consumerism is driving organics, fair trade, “buy local” movements and environmentally conscious business practices. Companies like Klean Kanteen®, Ben & Jerry’s® and New Belgium Brewing Company® have chosen to incorporate as benefit corporations in order to demonstrate to their customers that they are dedicated to their social purpose mission.
So, you’ve incorporated as a benefit corporation, should you get “certified”? B Lab, a nonprofit organization, has created a certification process for benefit corporations. Through its impact assessment, B Lab evaluates a company’s corporate documents, books and records, practices and mission to determine if the company meets its standards for a Certified Benefit Corporation™. If the company qualifies, after paying B Lab an annual fee, that company can become a Certified Benefit Corporation™, demonstrating to the public that it has been through third party scrutiny and met certain third party standards in its corporate performance and behavior.