B Corporations

In a huge stride forward for business and communities alike, Governor Brown signed into law the historic Assembly Bill 361, creating a new class of corporation, a benefit corporation. The legislation, introduced by Assembly member Jared Huffman (D-San Rafael) legally requires benefit corporations to prioritize positive impact on society and the environment, while meeting higher standards of accountability and transparency. Current law requires corporations to prioritize the financial interests of shareholder over the interests of workers, communities, and the environment.

The California legislation is unique, providing the strongest consumer and investor protection, with more rigorous transparency provisions than  the states that have so far enacted benefit corporation legislation. California is the sixth and largest state to enact benefit corporation legislation and has a strong existing base of entrepreneurs connected to sustainability.

Benefit Corporations are identical to existing California corporations except that a benefit corporation is required to: 1) have a corporate purpose to create a material positive impact on society and the environment; 2) redefine fiduciary duty to require consideration of the interests of employees, community and the environment when making decision; and 3) publicly report annually on its overall social and environmental performance using a comprehensive, credible, independent, and transparent third party standard.

New Jersey, Virginia, and Hawaii passed similar legislation earlier this year, joining Vermont and Maryland who did so in spring 2010. Benefit corporation legislation is on the Governor’s desk in New York and has also been introduced in Michigan, Pennsylvania, and North Carolina. Legislation has enjoyed strong bi-partisan support in every state.

“Entrepreneurs, investors and consumers are calling for this type of legislation,” said Assembly member Huffman. “They believe this is the start of something transformational. AB 361 rolls out the welcome mat for businesses and investors ready to create high quality jobs in California and make economic and social contributions that will improve the quality of life in communities across to our state for years to come.”

The California bill had significant business support, including that of more than 200 individual California businesses, including Patagonia and RSF Social Finance, 12 business associations, including the Silicon Valley Leadership Group and the U.S. Green Building Council, standards organizations like GreenSeal, and more than 3,000 California citizens.

“California is the seat of innovation; now California entrepreneurs are free to innovate to create value for society, not just shareholders,” said Jay Coen Gilbert, co-founder of B Lab, one of the sponsors of the legislation. “The enactment of benefit corporation law will give entrepreneurs the legal protection they need to maintain their mission and attract needed capital to grow.”

“This is an important and much needed step forward to grow our economy and create more jobs which can also provide greater social and environmental benefit,” says David Levine, co-founder of the American Sustainable Business Council whose members organizations represent over 100,000 businesses.

The bill was sponsored by the American Sustainable Business Council, New Voice of Business, and B Lab; and the effort to pass AB 361 was led by a legal working group co-chaired by John Montgomery from Montgomery & Hansen LLP, Donald Simon from Wendel Rosen Black & Dean LLP, and Jonathan Storper from Hanson Bridgett LLP.

BetterWorld Telecom is proud to be a founding B Corporation and hopeful for the opportunity this new category of business represents for our collective future. We believe in business as a lever of change.

You can find out more about the new Benefit Corporation legislation signing at CSR Wire.