The Rise of the Benefit Corporation and Rethinking the Business Model

A Benefit Corporation is a type of corporation that is required to consider the positive impact of its decisions on society, the environment, and stakeholders. In other words, a Benefit Corporation must balance profit with purpose. This type of model is relatively new; the first was established in 2010.

Since then, Benefit Corporations have been gaining traction, with over 2,000 in existence today. The terms “social enterprise” and “impact investing” are often used interchangeably with Benefit Corporation, as all three concepts share a common goal: to create positive change.

We are at a turning point in corporate America. More and more, we are seeing social good at the heart of business models. As a direct reflection of consumers’ tendency to buy with purpose, companies are taking note and reinventing how they approach business.

Benefit Corporations have been credited with helping to address social and environmental problems, and they have the potential to transform the way businesses operate. As more consumers become aware of the importance of sustainability, it is likely that this business model will continue to grow in popularity.

The Benefit Corporation arose from the unmet need that the traditional business model left when companies dared to venture into projects other than profit maximization. A new legal structure had to be created to allow for the evolution of sustainable business and social entrepreneurship.

Now, 30 states and the District of Columbia have established legal structures for a Benefit Corporation to be established, that distinguish themselves from your average C Corporation in terms of accountability, transparency and purpose.

The Rise of the Benefit Corporation

Benefit Corporation states have specific laws that allow companies to balance profit and purpose. In this business model, the protecting the environment and other public good are equal to making a profit. The key difference between a Benefit Corporation and a regular corporation is that Benefit Corporations have a “triple-bottom line.”

This means that they consider their impact on people, planet, and profit, not just profit alone. As a result, Benefit Corporations are able to make decisions that are in the best interest of all stakeholders, not just shareholders.

Some examples include Patagonia, King Arthur Flour, and Etsy. These companies have all made a commitment to using their businesses to benefit society as well as shareholders. By contrast, traditional corporations are only required to maximize profits for shareholders.

This difference has led to benefit corporations being hailed as a more socially responsible way of doing business. While there are currently only a handful of benefit corporations in existence, it is likely that this model will continue to gain popularity in the years to come.

“Benefit corporation legislation creates the legal framework to enable mission-driven companies like Patagonia to stay mission-driven” – Patagonia founder Yvon Chouinard

Chouinard said it perfectly. Companies that become Benefit Corporations embed their companies’ goals with social good as a leading force. What are some benefits that can stem from this change? Here are just a few examples of what forward-thinking companies are doing today:

  • Kickstarter donates 5% of annual post-tax profits to arts education and organizations fighting inequality.
  • Warby Parker counts the total number of eyeglasses sold monthly and donates the cost of outsourcing that number of eyeglasses to nonprofits working to provide eyecare in developing countries.
  • Patagonia donates 1% of sales to grassroots environmental organizations every year, an ongoing effort for over 30 years.

These examples are only brushing the surface of what these amazing companies are doing to push their causes to the next level. And we can expect many more brands to participate in this mission-driven movement given the increasingly valuable millennial outlook on business.

Not only are millennials quickly increasing their buying power (globally, it adds to trillions) and taking over the workforce, but they are also a highly conscious group that uses companies’ activism as the compass needle for their buying habits and workplace decisions. Socially and environmentally conscious companies and consumers is something Charity Charge can celebrate anytime.

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