Insight

A Better Bottom Line

How Benefit Corporations are leading the charge to save the world.

A Better Bottom Line
MP

Margaret Pierce

June 30, 2016 12:00 AM

A single business can’t cure the world’s ills, but one can address existing problems. Some call it being a “social business.” In 32 states with new corporate legislation, another term is a “benefits corporation,” or a corporation that amends its charter to provide for stakeholder value, not purely stockholder benefit, and mandates its directors consider the impact on all stakeholders—from immediate neighbors to society at large to the environment.

Considering everyone and everything affected by a company’s operations makes it possible to address the broad impact business decisions can have. The expansion of corporate responsibility is growing in popularity, due in large part to technology. Some tech companies were born with that sense of responsibility, but technology is also a tool for making an expanded bottom line possible.
Increasing awareness about stakeholder impact could be seen as just another business marketing fad, like “going green” in the 90s, but consider these questions:

  • When buying a book online, would you prefer a company that offers free shipping and donates a book (at no cost to you) to a person in need?
  • If you could choose your power company, would you rather pay a little more to one using renewable sources (wind, solar) or pay a little less to one dependent on fossil fuels?
  • When you travel, would you choose a well-known hotel chain or stay with a “local,” having a chance to see the community for lower cost?

Everyone won’t make the same choice, but support for environmentally and socially conscious businesses is getting attention in the for-profit world. And employees are raising expectations for employers.

“Consider the impact on all stakeholders—from immediate neighbors to society at large to the environment.”

“In the war for talent in the millennial generation, being able to show that you walk the walk of corporate purpose is a huge advantage,” says Frederick Alexander, head of legal policy for B Lab. “In recruiting and engagement of the employees you already have, it’s very big.”

Creating a Conscience

The non-profit agency B Lab was founded in 2006 with the mission to serve as “a global movement of people using business as a force for good.” In addition to helping companies define their stakeholders and embody responsible social, environmental, and governance practices, the group developed the B Corp Certification program. Since its founding, the number of certified companies has grown to more than 1,700 in 50 countries across 130 industries. Every two years, B Lab updates and strengthens the mandatory requirements to verify that a company has “overall social and environmental performance, public transparency, and legal accountability.” Now on version five of the rigorous standards, B Lab anticipates the launch of version 6.0 in 2018.
Becoming a B Corp tells consumers that a company embodies conscientious principles, and many B Corps appreciate the benefits of a healthier, more balanced internal structure, says Alexander.

“Practical needs are too great for business as usual.”

“For the people I’ve talked to, the number-one theme is employee engagement,” he says. “It’s how you treat your employees. It’s also how you treat the community; it’s your environmental footprint; it’s your charitable giving programs—everything across the board.

“The certification assessment, called the Impact Assessment, has embedded tools for self-improvement,” says Alexander. “The idea is that you don’t just use it to get a static score; rather, you use it to improve your performance.”

Better World Books says accountability is “part of our DNA.” A B Corp certified company, Better World began selling new and used books online in 2002. Three friends from the University of Notre Dame in South Bend, Indiana, wanted to do more than just make cash. So they developed a business plan that included a mission to promote literacy. They established “the online bookstore with a soul,” believing “education and access to books are basic human rights.”

Better World funds literacy projects and donates one book for every one sold. The program, called Book for Book™, has donated over $20 million in books. They’ve also donated more than $25.5 million to literacy campaigns.

Every order shipped from their Mishawaka, Indiana, warehouse is “carbon balanced with Green-e Climate certified offsets.” Better World Books has developed a network of 5,300 college campuses and libraries to collect books; they’ve diverted more than 73,000 tons of material from landfills by recycling or reselling more than 233 million books. Customer happiness is also part of the bottom line: free shipping on all orders.

Challenging Existing Law

The opportunity to improve an existing business model by leveraging the Internet is challenging laws, regulations, and tax codes. One such challenge is in the short-term-stay industry, according to Jennifer L. Hernandez, a land use and zoning attorney with Holland & Knight in San Francisco, California.

“Technology may introduce some disruption, but it’s also enabling the very change that’s needed.”

Internet matching companies like Airbnb allow homeowners to register rooms, apartments, or houses, offering out-of-towners places to stay. The host defines amenities and services. Airbnb does background checks on hosts and guests, provides insurance, and inspects listed properties, but some municipalities, neighbors, and homeowners’ associations are fighting this kind of rental.
“There have been short-term rentals in vacation communities…for as long as there have been vacation communities,” says Hernandez. “What’s new about this is how easy the Internet has made it.”

“The way we use our homes evolves over time. There were some homes with servants and servants’ quarters. That model disappeared. It’s really about repurposing space. How do you regulate the repurposing of an existing space?”

The answer is: You don’t. Existing case law clearly allows property owners (or, in this case, the “host”) to determine who resides in their spaces, Hernandez says. While municipalities might have some say in things like parking and littering, the inside of a home is off limits. Some zoning codes prohibit the operation of a business, hotel, or boarding house in residential areas, but this might not cover the occasional rental of personal space.

“This is a city-by-city, county-by-county regulatory drama,” says Hernandez. “When Airbnb had to defend its business model in San Francisco, hosts showed up. They were teachers, retired people, folks who really needed the income from renting that second bedroom…which is very different from some outside developer.”

Some places, such as San Francisco and Portland, Oregon, are exchanging legalization of most types of Airbnb listings for taxes and other concessions.

Empowered Individuals

Like the temporary-stay revolution, changes in the power industry are starting at a grassroots level.

“Residential solar is something that people want to do,” says Sheryl A. Sweeney, an energy law attorney with Ryley Carlock & Applewhite in Phoenix, Arizona. “They want to feel like they’re contributing to making the Earth a better place and that is going to change the industry.”

Sweeney believes the incremental changes she’s seen in 32 years in this field are inadequate. She recognizes that power companies have significant infrastructure investments, giving them a “natural monopoly,” but practical needs are too great for business as usual.

For example, solar-powered homes produce their own electricity. But on cloudy days or when the sun goes down, those homes need access to power from utilities. According to Sweeney, that’s five to six million people demanding power all at once—without the infrastructure to handle it.

“They need to find some way to smooth out [the power supply] when the sun goes down and they have four to five minutes to react—things like commercial-scale batteries for the home to store energy when the sun is out,” says Sweeney. “Then you don’t just turn off [the power] the minute the sun goes down.”

Those batteries are in development, but not the focus on extensive infrastructure upgrades.

“The biggest electric utility in Arizona has asked our corporation commission for [rate] changes,” she says, “to charge a flat fee for being connected so that they can try to cover their fixed costs, and to allow them to pay [lower than] market rates to each homeowner for electricity that’s coming into the grid.

The regulatory community and the utilities didn’t get out in front of this—they’re reacting,” says Sweeney. “The utilities are able to resist things they don’t like for a long time until they’re forced by law or regulation to do something different.”

Resistance to change, a common institutional response, can prove detrimental. Technology may introduce some disruption, but it’s also enabling the very change that’s needed. B Lab’s Alexander believes the growing interest in paying attention to stakeholders, not just stockholders, will erode even more of that resistance.

“Benefit corporation legislation can appeal to both sides of the aisle,” he says. “A lot of corporate-responsibility themes are thought of as liberal values, but it’s a very conservative principle in that it’s allowing businesses to choose to do these things, giving them flexibility. In a lot of legislatures, it’s bipartisan legislation.”

When he helped draft Delaware’s bill, Alexander says resistance came from the bar association and from lawyers. The typical arguments are that corporate law has evolved this way for a reason, that it’s best left as is, and that caring about stakeholders is “crazy.” Yet those same stakeholders are exerting enough pressure for companies to pay attention.

“A benefit corporation is like a lock on the refrigerator,” says Alexander. “You’re tying to your future hands so that you won’t betray all the promises you made at the beginning to all of your stakeholders.”

Related Articles

2020 Vision


by Sean Devlin

What Does Corporate Environmental Concern Look Like in 2020?

Best Lawyers Ones to Watch Canada Legal Insights

Water Futures


by John Ettorre

By themselves, desalination, conservation, and system re-engineering won't solve our water puzzle. But together, they just might work.

Water Futures

IN PARTNERSHIP

Embedded Advantage: The Value in Partnering with Appellate Counsel


by Justin Smulison

Most litigants should expect the non-prevailing party in their case to challenge the trial court’s final judgment in post-judgment motions and/or on appeal. Robert A. Mandel discusses how aligning with a seasoned appellate lawyer can make all the difference in securing a favorable resolution.

Headshot of male lawyer with brown hair in dark suit

Protecting Small Business Owners: Trial Experts Connick Law LLC Notoriously Successful with Fire Litigation


by Justin Smulison

When small business owners become the target of insurance companies in fire-related lawsuits, hiring a firm with a reputation for understanding the science of fire suppression trials can save their livelihoods.

Gold Indoor Sprinkler Heads on Red Background

ESG Changing Texas’ Legal Landscape


by Gregory Sirico

Best Lawyers breaks down the growing industry trend of ESG standards and how its altering the field of law in the state of Texas.

Texas’ Ever Changing Legal Landscape

Will Recent Boeing Settlements Create Tailwinds In Corporate Law?


by Justin Smulison

Prominent litigation against Boeing is setting a precedent of accountability, professionalism and commitment among company boards as well as ushering ESG further into the courtroom to help monitor and prevent safety issues.

Recent Boeing Settlements and Corporate Law

Colorado's Best Lawyers 2022


by Best Lawyers

Our 2022 Colorado's Best Lawyers publication features top-ranked legal talent in Boulder, Denver and Western Colorado.

Colorado's Best Lawyers 2022

Newly Launched COVID-19 Litigation Project Offers Open Access To Pandemic-Related Court Judgments From Over 70 Countries


by Sara Collin

A worldwide database of COVID-19 cases is uniting more than 70 countries as judges, lawmakers and lawyers continue to navigate pandemic related litigation and the ways in which it’s evolving amid year three.

COVID-19 Worldwide Litigation Project

Road to Somewhere


by Mark LeHocky

How can attorneys take steps to improve settlement efforts and avoid unpleasant surprises as they map out a dispute resolution? One litigator-turned-general counsel-turned mediator (with some help from a distinguished rock star) points the way forward.

Improved Dispute Resolution Settlement

Look for the Zoom Label


by Anne R. Yuengert and Matthew C. Lonergan

Will the virtual platforms that got such a boost during the pandemic replace how you interact with your employees, unions, and lawyers?

Virtual Platforms Replacing Work Interactions

Discovery in the Time of COVID-19


by H. Barber Boone

The pandemic has affected the vital process of legal discovery in ways both good and bad. Which changes are likely to become widely accepted in the years ahead?

The Impact of COVID-19 on E-Discovery

Busting a Trust


by Joseph Marrs

The rules governing trusts and asset distribution are often much more flexible than many might assume. Here’s a primer.

Rules Governing Trusts and Asset Distribution

The Next Chapter


by Patrick M. Shelby

Among its uncountable other disruptions, the pandemic upended U.S. bankruptcy procedures. Congressional relief, legislative changes, amended legal provisions: What lies ahead for those looking to file?

COVID-19's Impacts on Bankruptcy Procedures

Phoning It In


by Alyson M. St. Pierre, Ashley C. Pack and Crystal S. Wildeman

It’s not easy for employers to weigh requests from employees to work from afar, even in the wake of the pandemic. Considerations include COVID-19, vaccinations, the Americans with Disabilities Act and the nature of the job itself.

Employer Considerations for Teleworking

Compelled to Compete


by Ashish Mahendru

Courts and legislatures—and now the White House—are taking an increasingly dim view of noncompete employment agreements, a development the pandemic has quickened. What can employers do to protect their confidential information?

Protection for Employers Beyond Noncompetes

Meeting Halfway


by Julia B. Meister

To resolve family and business disputes including wills, trusts, estates and more, mediation is often a more effective, gentler and cheaper option than litigation.

Mediation to Resolve Wills, Trusts, Estates

Trending Articles

Announcing the 2023 The Best Lawyers in America Honorees


by Best Lawyers

Only the top 5.3% of all practicing lawyers in the U.S. were selected by their peers for inclusion in the 29th edition of The Best Lawyers in America®.

Gold strings and dots connecting to form US map

Best Lawyers: Ones to Watch in America for 2023


by Best Lawyers

The third edition of Best Lawyers: Ones to Watch in America™ highlights the legal talent of lawyers who have been in practice less than 10 years.

Three arrows made of lines and dots on blue background

The Best Lawyers in South Africa™ 2023


by Best Lawyers

Best Lawyers proudly announces lawyers recognized in South Africa for 2023.

South African flag

Could Reign Supreme End with the Queen?


by Sara Collin

Canada is revisiting the notion of abolishing the monarchy after Queen Elizabeth II’s passing, but many Canadians and lawmakers are questioning if Canada could, should and would follow through.

Teacup on saucer over image of Queen's eye

IN PARTNERSHIP

2022: Another Banner Year


by John Fields

Block O’Toole & Murphy continues to secure some of New York’s highest results for personal injury matters.

Three men in business suits standing in office

Famous Songs Unprotected by Copyright Could Mean Royalties for Some


by Michael B. Fein

A guide to navigating copyright claims on famous songs.

Can I Sing "Happy Birthday" in Public?

Announcing the 2023 The Best Lawyers in Canada Honorees


by Best Lawyers

The Best Lawyers in Canada™ is entering its 17th edition for 2023. We highlight the elite lawyers awarded this year.

Red map of Canada with white lines and dots

Wage and Overtime Laws for Truck Drivers


by Greg Mansell

For truck drivers nationwide, underpayment and overtime violations are just the beginning of a long list of problems. Below we explore the wages you are entitled to but may not be receiving.

Truck Driver Wage and Overtime Laws in the US

What the Courts Say About Recording in the Classroom


by Christina Henagen Peer and Peter Zawadski

Students and parents are increasingly asking to use audio devices to record what's being said in the classroom. But is it legal? A recent ruling offer gives the answer to a question confusing parents and administrators alike.

Is It Legal for Students to Record Teachers?

Thirteen Years of Excellence


by Best Lawyers

For the 13th consecutive year, “Best Law Firms” has awarded the most elite and talented law firms across the country through a thorough and trusted data review process.

Red, white and blue pipes and writing on black background

The Upcycle Conundrum


by Karen Kreider Gaunt

Laudable or litigious? What you need to know about potential copyright and trademark infringement when repurposing products.

Repurposed Products and Copyright Infringemen

Choosing a Title Company: What a Seller Should Expect


by Roy D. Oppenheim

When it comes to choosing a title company, how much power exactly does a seller have?

Choosing the Title Company As Seller

Caffeine Overload and DUI Tests


by Daniel Taylor

While it might come as a surprise, the over-consumption of caffeine could trigger a false positive on a breathalyzer test.

Can Caffeine Cause You to Fail DUI Test?

Announcing The Best Lawyers in Australia™ 2023


by Best Lawyers

The results include an elite field of top lawyers and firms from Australia.

The Best Lawyers in Australia™ 2023

Announcing the 2022 Best Lawyers® in the United States


by Best Lawyers

The results include an elite field of top lawyers listed in the 28th Edition of The Best Lawyers in America® and in the 2nd Edition of Best Lawyers: Ones to Watch in America for 2022.

2022 Best Lawyers Listings for United States

Announcing The Best Lawyers in Germany™ 2023


by Best Lawyers

The results include an elite field of top lawyers and firms from Germany.

Black, red and yellow stripes