A new whitepaper posted on the Benefit Corporation website is a publication written by attorneys to discuss why the benefit corporation legislation is necessary.
The simple response is that the current legal framework is outdated. Specifically, the authors write that the sustainable business movement is “constrained by an outdated legal framework that is not equipped to accommodate for-profit entities whose social benefit purpose is central to their existence”.
The authors argue the legislation would benefit customers, investors, and social entrepreneurs.
In America alone, 68 million consumers have stated that they make purchase decisions that align with their social or environmental values. At the same time, marketers try to position their companies as “green” or “eco-friendly” but it creates the problem of “greenwashing”. Customers have difficultly determining what is a good company or simply good marketing.
Likewise, an investor may want to screen for socially- and environmentally-focused companies to ensure their investments align with their personal values.
As for the entrepreneur, the benefit corporation legislation will spell out their fiduciary duties to ensure that profit maximization doesn’t trump social mission.
Although the legislation is passed in 12 states across the U.S., only nine other states currently have the legislation pending.
