In April of 2010, Maryland became the first state to pass the benefit corporation legislation. Since then, many have wondered who exactly are these benefit corporations, how many are there, what they do, or if the legislation helps or hurts them.
In attempt to shape meaningful answers to these questions, MBA students from the University of Maryland and ChangeMatters began a research study last summer, tracking the first two years since Maryland passed the benefit corporation legislation.
The study reveals that there are currently 32 Maryland companies filling under the Benefit Corporation Act, of which 24 are LLCs and eight are corporations. They operate in a wide range of industries including retail, food and beverage, technology, consulting, and finance. Maryland is the only state with an LLC option, which is proving to be more favourable, especially for small businesses, because filing articles of amendment is costly and time-consuming.
While the legislation was introduced to legally recognize companies that pursue profit and a social or environmental mission, the difference between its benefits and those derived from getting the B Corp certification issued by private, nonprofit organization B Lab is unclear. In fact, some feel that their goals can be achieved through third-party certification rather than legislation. The lack of understanding among the public, investors, and potential benefit corporations as well as active participation from all stakeholders is fueling low levels of implementation.
As a benefit corporation, companies are required to file an annual Benefit Report that assesses overall social and environmental performance. However, only 30% of respondents said they had an internal system that measures impact. This presents a risk of “greenwashing”.
As the first state to pass the legislation, Maryland’s benefit corporation framework was modeled on the one developed by B Lab. States that subsequently passed benefit corporation legislation have made slight modifications and improvements. For example, New Jersey may terminate a company’s benefit corporation status if it hasn’t delivered a Benefit Report for a period of two years. In California and Virginia, there is a visible network of professional support for benefit corporations.
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