Benefit Corporations: Making Profits . . . Responsibly
By: Aimie Lockwood
A new business concept is approaching the Arkansas border—a corporation with a social conscience. This business model takes two forms: Benefit corporations and Certified B Corporations. Both forms allow companies to make profits while striving to create positive environmental and social change. Since 2010, seven states have passed legislation enabling the creation of benefit corporations: California, Hawaii, Maryland, New Jersey, New York, Vermont, and Virginia. Seven more states have legislation pending, including Louisiana, which introduced proposed legislation on April 4, 2012. A white paper with model statutes can be found at http://www.benefitcorp. net/storage/The_Need_and_Rationale_for_ Benefit_Corporations_-_April_2012.pdf. Benefit corporations differ from traditional corporations in that they commit to socially conscious corporate purposes, they expand fiduciary duties, and they are required to transparently report their progress on a number of socially relevant measures. Benefit corporations have a broader mission than just maximizing profits for shareholders. The directors of benefit corporations may consider more than potential financial gain when making decisions; they may also weigh the potential impact on the environment, the community, the workforce, or consumers. In states where benefit corporation legislation has not yet been established, businesses can join the movement by becoming Certified B Corporations. A Certified B Corporation may be an LLC or a traditional corporation, or even a sole proprietorship. The business, regardless of its current structure, must work with the nonprofit B Lab (http://www.bcorporation.net), which certifies, educates and monitors Certified B Corporations. Currently, 510 businesses have become Certified B Corporations,
ranging from distributors of free-trade coffee to solar energy specialists to manufacturers of organic skin-care products. A dozen law firms have become Certified B Corporations. Arkansas does not yet have any Certified B Corporations, but there are now two in Missouri, two in Louisiana, three in Tennessee, and twelve in Texas. To become a Certified B Corporation, a business must file an impact assessment with the B Lab, amend its governing documents, broaden its concept of stakeholders, and submit annual progress reports. Every year, ten percent of the Certified B Corporations are randomly selected for onsite reviews. Blog coverage of the companies who have joined can be found at http:// www.thechangeweseek.com. Kyle Berner is the kind of entrepreneur who embraces this new mode of business. Kyle is the owner of Feelgoodz (www.feelgoodz.com), a company based in Louisiana and North Carolina that produces flip flops billed as “natural, comfortable, and ethical.” Kyle believes that benefit corporations and Certified B Corporations are the business model of the future. Kyle graduated from Loyola New Orleans with a BBA in Marketing in 2003, and later spent a year backpacking across Thailand. When he formed his business, which sells high-end flip-flops to retailers such as Whole Foods, Kyle was determined to create a positive social impact by paying fair wages to the
Thai rubber farmers in his supply chain. Kyle had a vision for creating a successful business while using a progressive business model. Feelgoodz was formed as an LLC in 2008. When he read about Certified B Corporations from an article online, Kyle knew that he had connected with the right organization. Feelgoodz modified its governing documents to become a Certified B Corporation. Ensuring that his supply chain is socially responsible makes Kyle’s products more expensive. Kyle looked at his market price and then worked backwards to create a profit margin that would allow his business to expand. Kyle found that when mentioned that Feelgoodz used rubber from Thailand, people immediately thought of child labor. Kyle had to educate his consumers about his underlying mission to support sustainability for his suppliers. Kyle was inspired by the Footprint Chronicles of Patagonia (www. patagonia.com/us/footprint), a company which paved the way in social responsibility. Until Arkansas legislators find a niche for Benefit Corporation statutes in the subchapters of Title 4 of the Code, local businesses can still become Certified B Corporations. By complying with the standards set by B Lab and amending their governing documents, companies can still find a balance between earning profits and promoting positive change. n
Aimie Lockwood passed the Arkansas Bar in July 2011. She practices law in Central Arkansas, and can be reached at ajlockwood1@gmail.com. Aimie first learned of Benefit Corporations while visiting Stanford University with her husband, Frank Lockwood, who passed the Bar in February 2012.
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