Responsible Corporations Gain Protection


Responsible Corporations Gain Protection

By Denise Bedell


Safekeeping: New law will protect companies’ ethical goals

For companies that aim to always be socially and environmentally minded, achieving growth without giving up that goal can be difficult. But a new designation signed into law in Maryland should make it a little easier for companies to hold onto those triple-bottom-line objectives even when bought by a larger entity with a potentially very different business model.

The Benefit Corporation—or B Corporation—designation sets a legal structure and performance standards to help companies follow a sustainable and socially responsible agenda even if shareholders are opposed to it. Getting a B Corp designation obliges the company to generate a positive social and environmental impact and requires that boards of directors take into account the impact of their decisions on employees, the environment and the local jurisdictions, rather than simply shareholder interests. Just as important, it provides a legal framework and protection for board members who act contrary to shareholder interests in order to meet social responsibility and sustainability goals.

Non-profit organization B Lab helped design the legislation and is a driving force behind the development of the designation. The organization crafted a sustainability rating system for corporations—the B Impact Rating System—that is used as part of the assessment process in getting a B Corp designation. The B Corp designation and the B Impact Rating System could prove invaluable for companies increasingly focused on corporate social responsibility. Proponents of B Corp are pushing for similar legislation in other states.

B Lab—in conjunction with diverse organizations such as the Rockefeller Foundation, Prudential, USAID and Deloitte—is also now testing a rating system for investment firms to assess their own social and environmental impact and that of their funds. Consisting of a number of ratings that measure environmental and social impact, its goal is to provide a concrete structure for evaluating sustainability in order to attract green investors leery of unproved sustainability claims.