In a major act of affirmation for Delaware’s recent legislation legalizing benefit corporations, New Leaf Paper and Alter Eco last week joined more than a dozen other companies in registering as the new class of corporation.
Other registering companies included fast-growing organic baby food brand Plum Organics, online personal delivery farmers' market Farmigo and popular home goods brand Method Products.
Not to be confused with a B Corp, which is a certification offered by a non-governmental organization called B Lab, benefit corporations are state government legal corporate structures. Like an LLC, S-Corp or C-Corp, it is a way to legally structure a company.
According to BenefitCorp.net, benefit corporations create a material, positive impact on society and the environment; expand fiduciary duty to require consideration of non-financial interests when making decisions; and report on overall social and environmental performance using recognized third-party standards.
“Benefit corporations meet a market need and a societal need,” said Delaware Governor Jack Markell. “They have the potential to create high-quality jobs and improve the quality of life in our communities.”
While Delaware is the 19th state (plus the District of Columbia) to enact benefit corporation legislation, as legal home of most venture-backed businesses, the majority of publicly traded companies and nearly two-thirds of the Fortune 500, it is the most important state for businesses that seek access to venture capital, private equity and public capital markets. In other words, the state’s legalization of benefit corporations signifies they are here to stay.
Many of the companies that registered last week are backed venture capital investors, corporate investors and parent companies, which have shown support for the benefit corporation legislation. Some of these include San Francisco Equity Partners and European eco-leader Ecover (Method), Campbell's Soup Company (Plum), Benchmark Capital and RSF Social Finance (Farmigo), Pacific Community Investors (New Leaf Paper) and Good Capital (Alter Eco).
"With the passage of Delaware Benefit Corporation legislation, the path is now clear to scale business as a force for good," said Andrew Kassoy, B Lab co-founder. "It's great to see venture capital and corporate investors taking advantage of this new tool to scale mission-driven businesses on the very first day."
Current Delaware law requires corporations to prioritize the financial interests of shareholders over the interests of workers, communities and the environment. Benefit corporations enjoy legal protection to create value for society, not just for shareholders, while meeting higher standards of accountability and transparency.
“Part of Method’s mission is to show that business can be a force for social and environmental good,” said Adam Lowry, Co-Founder and Chief Greenskeeper of Method Products. “Delaware benefit corporation law enables responsible businesses like Method to practice a more enlightened form of corporate governance that includes not only financial objectives, but social and environmental objectives.”
In recognition of what some members of the Delaware Bar have called a “seismic shift in corporate law,” more than 600 business leaders from the community of certified B Corporations have signed an Open Letter inviting their colleagues to join them in redefining success in business. Signatories include well-known businesses like Patagonia and Ben & Jerry’s, and high-growth businesses such as online marketplace Etsy and eyewear company Warby Parker.
SustainAbility, Honest Company, GOOD Inc. and Performance Management Institute also have committed to registering as benefit corporations in the coming year.
Currently based in Washington, D.C, <strong>Mike Hower</strong> is a new media journalist and strategic communication professional focused on helping to drive the conversation at the intersection of sustainable business and public policy. To learn more about Mike, visit his blog,<a href="http://climatalk.com/" > ClimaTalk</a>.