Historic Benefit Corp Legislation Passed in SF

Board of Supervisors Unanimously Approves City Incentives for New Type of Socially Responsible Corporations

Legislation Provides Bid Preferences to Benefit Corporations Contracting With the City

San Francisco, CA – The Board of Supervisors on Tuesday voted unanimously to support an ordinance sponsored by Board President David Chiu that will provide bid preferences on City contracts to Benefit Corporations, a new form of a corporate entity recently authorized by the State of California. The ordinance will be voted on for a second time next Tuesday, April 24, with passage expected. 

“As the first city to provide contracting preferences to Benefit Corporations, San Francisco is again leading the nation by supporting new types of socially responsible companies” said Supervisor Chiu. “Since benefit corporations create value for shareholders and society at the same time, we are demonstrating our commitment to sustainability, economic innovation, and social entrepreneurialism.”

The City currently provides contract bid preferences to local businesses, a program administered by the Human Rights Commission.  This new bid preference for Benefit Corporations is modeled after this existing program. However, the bid preference for Benefit Corporations cannot be used to outbid a local business.

In October 2011, Governor Jerry Brown signed Assembly Bill 361, making California the sixth state to charter this new kind of corporation, joining New Jersey, Virginia, Hawaii, Vermont and Maryland.  A Benefit Corporation is defined as 1) having a corporate purpose to create a material positive impact on society and the environment; 2) redefining fiduciary duty to require consideration of non-financial interests when making corporate decisions; and 3) reporting on its overall social and environmental performance using recognized third party standards.

Currently, there are over 450 Certified Benefit Corporations in 60 different industries nationwide. These companies measure their impact on society and the environment with a third party standard and include stakeholder considerations in their business decisions.  San Francisco has the most Certified Benefit Corporations of any city, and the Bay Area is the home of approximately one quarter of all Certified B Corporations.  San Francisco will be the first U.S. City to provide contracting incentives to these companies, which will further encourage the formation and growth of Benefit Corporations here.

“Contrary to traditional corporations where the maximization of profit is the sole requisite purpose, benefit corporations are required to create a material positive impact on society and the environment,” said Matt Bauer, of BetterWorld Telecom, which is a Benefit Corporation. “We appreciate Supervisor Chiu’s work to pass this legislation, which will help the City and County of San Francisco purchase goods and services from the sorts of businesses that San Francisco should be supporting.”