Social enterprise offers an answer to the Occupy movement
April 5, 2012
Filed under Health & Life
In the refrigerator at Eat St., rows of white cartons are lined up, each one proclaiming in stark black letters, “Boxed Water is Better.” Better for the planet, that is. A second side of the carton explains that the cartons are made from 76 percent recycled material, and that ‘Boxed Water’ gives 10 percent of their profits to reforestation and 10 percent to cleaning the world’s water supply. The third side has just the single word “hello” printed in a friendly handwritten font at its center.
Boxed Water is an example of a social enterprise, a for-profit company whose business model seeks to positively impact the planet or society, and who operates business in a way that is both sustainable and socially conscious.
More consumers and investors are now paying attention to a company’s social footprint. According to the Cone Cause Evolution study, 75 percent of Americans say that whether a business is cause-related or not affects where they shop and what they buy, and the number jumps to 84 percent for Generation Y consumers.
While frustrations still fester against corporate America, the quiet revolution of social enterprise is changing the way businesses do business. Now, not only are attitudes trending toward more corporate responsibility, some states are writing the change into law.
The proposed legislation introduces the Benefit Corporation, commonly known as B Corp, a legal status that accommodates mission-driven business models that lie somewhere between the traditional for-profit and non-profit. California was the sixth of seven states to adopt the legislation thus far, and 12 California companies incorporated as B Corps on Jan. 3, the day the legislation took effect.
Incorporating as a B Corp allows businesses to make decisions that prioritize social good over shareholder profit. To qualify as a B Corp, a company is required to provide a public benefit, take non-financial stakeholders into account when making decisions, and produce an annual social report card based on a third-party standard.
John Montgomery, an attorney at Montgomery & Hanson in Menlo Park, Calif., was one of the contributing authors of the California B Corp legislation. Montgomery says that weaving the change into the legal framework is paramount.
“I’ve incorporated over 1,000 businesses,” says Montgomery. “And I see the correlation between law and behavior.”
Traditionally, the primary legal obligation for businesses is to create profit for shareholders. Directors have a fiduciary duty to their stockholders, and must act in their best interest.
“A business corporation is organized and carried on primarily for the profit of the stockholders,” according to a ruling made by the Michigan Supreme Court nearly 100 years ago in the Dodge versus Ford case. “The powers of the directors are to be employed for that end.”
Movements like those that support B Corp legislation are based on the idea that capitalism can evolve.
Part of the outrage of the Occupy movement, explains Montgomery, is the American concept of corporate personhood, whereby corporations, whose sole purpose is to maximize profit, are considered people.
“What they’re intuitively asking is, if the corporations have the rights that personhood provides, what about their moral duties?” says Montgomery.
The B Corp is not only allowed, but required, to operate with a moral conscience. It is only a slight semantic difference, but it can completely change the system, according to Montgomery.
Christina Hershey is the founder of a Certified B Corp called Hershey Cause, a Santa Monica based public relations and marketing company. Being Certified B Corp implies that the company follows the model of a Benefit Corporation, but has not been legally incorporated as one. Hershey Cause is now looking into making the legal change.
“We were mission-driven from the start,” says Hershey, whose company works with for-profits and non-profits. One of their recent projects involved a campaign with Kaiser Permanente to promote healthier lifestyles.
Hershey says the B Corp legislation is only one instance of the inroads being made into traditional business models.
“The business community is us,” says Hershey, expressing her concerns about the Occupy movement. “We need to stop demonizing each other and come together for solutions.”
The price of a large box of Boxed Water in the Santa Monica College cafeteria is $2, a dollar more than a water bottle at the vending machine 30 feet away. For some, a dollar is not a large price to pay to be a part of a revolution that could change the world.