The benefit corporation is the most significant innovation in corporate law since New York combined free incorporation and limited liability in 1811 because it allows corporations to put the power of law behind their purpose, values and culture. 35 US states, including California and Delaware, and Columbia, Italy and the Province of British Columbia have adopted benefit corporation legislation since 2010. There are now over 8,000 benefit corporations, including Laureate Education, Danone WhiteWave, Patagonia and Kickstarter.
Generally, the benefit corporation differs from the traditional corporation in four aspects:
First, it must create general public benefit by providing a material positive impact on society and the environment from its operations taken as a whole.
Second, it must be accountable by measuring the provision of such impact against a third-party standard.
Third, it must provide a report about such impact annually to stockholders and the public.
Fourth, it has a multiple stakeholder model in which the fiduciary duties of directors extend to all of the corporation’s stakeholders, including stockholders, employees, customers, vendors and suppliers, the communities in which the corporation does business, society and the environment.
Finally, many people refer to benefit corporations and Certified B Corporations, as “B Corps” and assume that they are the same. They are not. “Benefit corporation” is a legal term referring to a particular type of for-profit corporation and a “Certified B Corporation” is a term of art referring to a business that has passed the most popular third party assessment tool, B Lab’s Certified B Corporation assessment.