Corporate social responsibility is more and more in the consciousness of business owners. Though political and regulatory realities drive some of the impetus towards corporate responsibility, sustainable business practice, and equitable operations, more and more corporations are voluntarily shifting their business models—from focusing solely on maximizing profit for their shareholders to a model that creates value for all of their stakeholders. The concept of stakeholders is expanding, with many businesses considering employees, contractors, clients, consumers, creditors, government, environment, and local communities as stakeholders with vested interests.
This shift is reflective of an understanding that sustainability and profitability are not mutually exclusive. The strategy is particularly appealing to millennial entrepreneurs, employees and consumers, who generally focus more on corporate social responsibility than previous generations. As the current workforce ages, this trend is likely to gain momentum in light of a shift in priorities, legislative changes, and growing social movements.
The legal structure of corporate entities is ever-evolving, with this latest form often being referred to as a dual-purpose corporation, or public benefit corporation (PBC). The mandate of a dual-purpose corporation has been expanded to what is known as having a triple bottom line—people, planet and profit. These businesses essentially operate as traditional corporations, while maintaining higher standards of social responsibility, accountability and transparency towards all of their stakeholders.
In Canada, British Columbia was the first province to create a legal process enabling companies to operate as a dual-purpose corporation. The “hybrid” business model is called a Community Contribution Company (CCC), which allows the corporation to operate for profit (capped at 40%) while also attracting investors who are looking specifically for investment vehicles with mandated social values. Other provinces are also in the process of developing legislation relating to dual-purpose corporations.
Approximately 25 US states have implemented legislation to establish benefit corporations, with many other states in the process of creating similar statutes. B Lab, “a nonprofit organization that serves a global movement of people using business as a force for good” with a vision “that one day all companies compete not only to be the best in the world, but the Best for the World”, has a list of states that incorporate, or are contemplating developing legislation around, PBCs. In jurisdictions that do not have existing or proposed legislation for dual-purpose corporations, such as Alberta, adjustments can be made to the constating documents of a corporation, which allow the directors and officers flexibility in how they conduct business operations. These amendments can include a requirement to act fairly in considering the interests of the corporation’s stakeholders.
Similar to certifications introduced by Fair Trade for coffee and LEED for commercial buildings, B Lab has also started an international certification program that “certifies” what they call B-Corporations, or companies (whether incorporated under for-benefit statutes or not) that demonstrate certain characteristics that imply a socially-responsible corporate mandate. Unlike the legislative changes discussed above, B Lab does not alter the structure of a corporation. Rather, it acts as an independent third-party that grants certification to those who meet the B Lab standards for social and environmental performance, public transparency and legal accountability. Thus, B Corp certification allows an entrepreneur to run a for-profit company with operating elements of non-profit status. These elements are beneficial to a company, as consumers are becoming more conscious of their dollar’s political power and are looking for ways to support socially responsible businesses. At an increasing rate, conscientious consumers are willing to pay a premium in support of such causes.
It should be noted that this social movement is not advocating for leaders to be any less driven to grow their businesses or bottom lines. Free enterprise promotes economic growth and grants corporations the freedom to implement dual goals: making a profit while accomplishing some good in the world. To date, B Lab claims to have certified over 1,500 B Corps from more than 40 countries and 1200 industries, and these numbers continue to grow.
Is it for Everyone?
We are beginning to see more companies driven by tangible social and environmental benefits, alongside profit. For those considering moving towards a dual-purpose structure, it can potentially result in reaching socially conscious consumers who may have a positive impact on your market share. However, this undertaking may be burdensome due to the requirement for increased transparency, such as higher levels of shareholder and public reporting. Depending on where your business operates and the nature of your industry, this change in corporate structure may or may not be right for you.
In Canada, people are encouraged to strive for a high-quality work life. For some, this may be based primarily on income; for many, income alone may not be enough. A well-balanced career often includes financial stability as well as other considerations, including physical wellbeing, environmental health, intellectual engagement, social respect, and acceptance. If this holds true on an individual level, it follows that a similar shift is making waves in the business world. Businesses may find a competitive advantage from voluntarily expanding their focus, whether formally or informally. Broadening corporate goals to include a mixture of people, planet and profit can distinguish an enterprise as a progressive player, offering positive steps towards social stewardship.