Is it a corporation’s responsibility to make the world a better place as well as deliver profits? New Hampshire’s Benefit Corporation designation says it is.
The Benefit Corporation designation changes the fiduciary duty of the corporation’s directors and officers so they are required to consider the societal impact of their business, not just the shareholder impact. It provides legal protection from shareholder lawsuits that could arise if some profits are invested in a decision made for the public benefit.
A single-minded focus on profits can and has led to decisions that financially benefit a small group of people at the expense of social and environmental justice for all. Since it was signed into law in 2014, the Benefit Corporation designation has sought to change this, acting as a hybrid form of corporate entity that holds for-profit corporations accountable to pursue social responsibility as a specific business purpose.
I founded Good Start Packaging 14 years ago to supply non-toxic, compostable alternatives to plastic takeout food containers. In 2022, we re-registered Good Start Packaging as a Benefit Corporation in New Hampshire.
Through publicly available annual reports, Benefit Corporations like Good Start Packaging are held accountable for exactly how they create a public benefit in addition to generating profits. If we don’t file the required report and share it publicly, we could lose corporate standing.
Why not just “do good” without making such a public declaration? Because we want to make sure that we don’t lose our way by getting too addicted to profits over people and the planet when we make business decisions. The annual report we file to the public holds us accountable to do the right thing, not just when it’s convenient. We also want to preserve the social mission-oriented legacy of our company regardless of its ownership and management in the future.
Despite this powerful opportunity, as of 2022, only 27 Benefit Corporations were registered in the state. The growing ESG investing and B Corp movements may help to change that.
The nonprofit B Corp Lab is leading the charge to recognize corporations that are contributing to the greater good. Large multinational companies like Warby Parker and Patagonia tout their B Corp designations from the Lab, and rightfully so. Certified B Corporations balance profit and purpose by meeting the highest standards of verified social and environmental performance, public transparency, and legal accountability. That is the Holy Grail of what it means to be a great company.
Many businesses like mine register as a Benefit Corporation as part of the B Corp certification process. It’s an important and necessary step in accountability and we’re looking forward to joining a slightly smaller handful of New Hampshire companies with B Corp certification – only 14 as of October 2022.
It is time that corporations are held accountable to be good citizens. Reporting and measurement through Benefit and B Corp certifications are a step in the right direction.