Today, people are more conscious of the companies they support. Company behaviors lead to outcomes that help or hinder the environment; therefore, consumers have a critical role in who they support. Investors are aware of this increasing consumer interest and strive to find companies that actively support humanity.
Ethical investors want to maximize human impact and contribute the least harm. Although protecting humanity is a top priority for sustainable investors, profit is still significant. For many ethical investors, maximizing human benefit and profit is the goal.
Companies looking to maximize profit and social benefit are called Benefit Corporations. Two methods of Benefit Corporations are ethical investing frameworks. For more on what benefit corporation can mean to ethical investors, continue reading.
How A Company Can Become A Benefit Corporation
There are two ways to obtain the title of Benefit Corporation: through B Corps (certified B Lab) or state governments (Public Benefit Corporations).
The B Corps Agenda
Companies can become Benefit Corporations by taking actions to better humanity. Nonprofit social impact organizations like B Lab give certificates to companies that meet sustainability requirements. This certification helps consumers identify companies doing good for society.
Prospective B Corps companies must score well on the B Lab’s Impact Assessment. Company bylaws must also include ESG principles. Additional requirements are recertifying on a three-year basis and publishing Benefit Reports.
The PBC Agenda
Public Benefit Corporations are Benefit Corporations that strive to meet public benefit and maximize stakeholder profits. By law, what benefit corporations can mean for investors is that PBCs consider how their actions influence society. State laws may also require Benefit Reports.
Here’s what benefit corporations can mean for investors.
Ultimately, what benefit corporations can mean for investors is the presence or absence of legal status. PBCs have legal status, while B Corps have B Lab certification. B Corps accreditation is still significant, but without legal status, it may appear less significant.
B Corps may face scrutiny.
For investors, what benefit corporations can mean is potential scrutiny- particularly over possible greenwashing. Although there have been steps to ensure stakeholders’ rights, improvement in verifying a company’s alleged contributions is still needed.
Location matters for company title.
For ethical investors, the location where companies choose to become Benefit Corporations is essential. In the US, some states only recognize one form (PBC). Investors must stay aware of the state laws that pertain to a company’s legal protection.
PBCs are safe bets.
Investors understand that the most sustainable investments are companies that generate maximum human benefit and the least societal detriment. The potential to maximize the earnings is greater with PBCs; what benefit corporations can mean for investors is that a win-win whereby sustainability and earnings are maximized is possible.
Investors: choose companies wisely.
PBCs are the safest route for investors interested in Benefit Corporations because they protect public benefit and profitability. B Corps do not need to be ruled out entirely, but until states start incorporating legal protections, investors should consider B Corps companies on a case-by-case basis.
