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Sara Laks | Assistant to the President

The growing movement to harness the power of private enterprise to create public benefit took a significant step forward this spring.

So far this year, Maryland and Vermont have signed the first provisions creating legal entities known as “benefit corporations” into law. B Corporations are a new corporate structure with a legal responsibility to consider the company’s material impact on employees, community and the environment, instead of just the traditional bottom-line (profit). Similar legislation is being considered in New York, Pennsylvania, North Carolina, Colorado, Oregon, and Washington.

The long-established U.S. tax system has categorized the corporate world into non-profit and for-profit organizations, making it difficult for a for-profit corporation to develop and stay dedicated to a long-term societal or environmental mission if that mission should violate its short-term duty to maximize shareholder value. The legal structure of for-benefit corporations removes significant barriers to investors achieving the goal of both making money and making a difference.

B-Corporations can "better insulate [themselves] from the pressures of short-termism that dominate the public equity markets," says Jay Coen Gilbert, co-founder of B Lab. In addition, companies that institutionalize a purpose that embraces the common good are more likely to survive changes in management and ownership, and are more likely to become truly sustainable, eventually.

The B-Corp certification may be a useful tool to allow consumers and investors to determine which corporations are truly committed to their stated cause. With the barrage of “greenwashing” in the marketplace today, it is important to set benchmarks to differentiate “good companies” from “good marketing.” There are now over 300 certified B-Corps.

Benefit corporation legislation encourages companies to establish and protect a sustainable mission and recognizes the growing movement of entrepreneurs, investors, consumers, employees, and communities that are harnessing the power of business to solve environmental and social problems.