Student Spotlight: It’s Time to Walk the Walk

We are proud to introduce this spring’s Student Spotlight Series, a weekly posting on social entrepreneurship trends and topics from Notre Dame students. Today we hear from Soren Rucker, a senior Finance and Economics major from Oakton, VA. He highlights how Benefit Corporation qualifications will not only please consumers, but also prospective employees as more people are looking for credibility and authentic commitment to social impact in businesses

There is no question that our communities around the world face serious unaddressed issues, challenges, and critical deficiencies.  As David Bornstein, the keynote speaker at the Irish Impact Social Entrepreneurship Conference, put it,  “It’s a wonderful time to be alive if you like to fix things. Because everything is broken.”

bcorporation-small-logo1It begs the question: how in the heck does the world go about addressing these issues? If we think about it, there is no greater question facing our world today.

Given the amount of problem solving and innovation required to address these needs, solutions must come from private markets.  Governments, NGOs, and non-profits cannot do it on their own.  There are several private enterprises in various organizational forms that are working to address these needs. Examples include: large for-profits through corporate social responsibility initiatives, hybrid for-profit models with not-for-profit subsidiaries and vice versa.  One particular organization structure that has emerged over the last several years and has received significant interest across legislatures is the Benefit Corporation (B corporation).

What is a Benefit Corporation?  

Wikipedia defines a benefit corporation as a for-profit entity that considers society and the environment in addition to profit in their decision making process. defines B corps as, “a new class of corporation that are required to create a material positive impact on society and the environment to meet higher standards of accountability and transparency.   The major characteristics of the benefit corporation are:

1)   a requirement that a B corporation must have a corporate purpose to create a material positive impact on society and the environment

2)   an expansion of the duties of directors to require consideration of non-financial stakeholders as well as the financial interests of shareholders

3)   an obligation to report on its overall social and environmental performance using a comprehensive, credible, independent, and transparent third-party standard[1]

Why recognize B Corporations?

Consumer trust in social responsibility

Market research shows that consumer demand for socially responsible products and companies is increasing. At the same time, consumer trust in corporations is decreasing.  Consumers are bombarded frequently with the terms “green”, “fair trade”, “sustainable”, and “charitable”.  While many organizations commit to a focus on these, others use the terms for marketing campaigns.  In addition to a growing consumer demand for socially responsible companies, there is also a high demand from prospective employees for a commitment to social impact.  Evidence shows that this preference is increasing in education.  Not only do socially conscious companies have an advantage in greater consumer loyalty, but also in attracting the best talent. But how do end consumers and prospective employees know which corporations actually commit to impact communities and which are just trying to profit financially by making “noise”?

Only those that demonstrate commitment will be permitted to label themselves B Corps

The recognition of B corporations as a new legal entity would force companies to provide evidence of a commitment to social impact.  Determining the factors that constitute whether an organization qualifies as a B corporation would necessarily present a unique set of challenges for regulators.  What qualifies as a “material positive impact on society and the environment?”   What duties are included as part of “an expansion of duties of directors to require consideration of non-financial stakeholders?”  However, the fact that companies would have an obligation to report on their overall social and environmental performance to third parties would lead only those companies that can concretely demonstrate a commitment to social or/and environmental impact to be designated as B corporations.

The criteria in the selection process will improve over time as regulators gain experience.  Growing consumer and prospective employee demand for socially impactful companies, in conjunction with a regulatory body that distinguishes between the truly socially impactful companies and those that do so through marketing campaigns, will encourage and reward companies that “walk the walk” in social impact.

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