Anticipation grows for benefit corporation label
After General Assembly members ran out of time last year to vote on legislation to create a new classification for “benefit corporations,” advocates and politicians alike have doubled down on efforts to ensure the issue is one of the first taken up in the 2014 legislative session.
Similar to an organic or fair-trade label, the certification would allow companies with a social mission to publicly prove the impact they make on the environment and society, but also protect their business structure and interests legally.
“From a consumer perspective, you can tell the difference between a company that”™s talking the talk, versus walking the walk,” said James Woulfe, a public policy specialist at Social Enterprise Trust (reSET) who helped draft the legislation. “Right now there”™s no way of knowing whether they”™re having a social impact.”
Based in Hartford, reSET is a nonprofit with the mission of building a hub of social enterprises in Connecticut. The group offers a variety of tools and programming for entrepreneurs and in February will launch a new venture fund specifically for social enterprises.
Rather than being driven by profits alone, Woulfe said the bill would require decision makers within a benefit corporation to consider not only the interests of their shareholders but those of their workers, the community and the environment. Such a corporation would then be required to publish an annual report of its performance in achieving its goals, according to third-party standards.
Earlier this month Gov. Dannel P. Malloy announced plans to introduce the legislation at the start of the session with the goal of attracting more social entrepreneurs, jobs and the kind of social benefits that come from a benefit corporation. Nearly 20 other states have passed similar legislation including New York, Massachusetts, Rhode Island and Vermont.
“By creating a new corporate entity ”“ the benefit corporation ”“ Connecticut entrepreneurs can start businesses that compete in the private sector while also working to solve the toughest social and economic problems that our communities face,” Malloy said in a release. “This legislation will help ensure that social entrepreneurs create benefit corporations and jobs here in Connecticut, and encourage a new generation of social entrepreneurs dedicated to improving our communities and our state.”
In a 128-12 vote, members of the state”™s House of Representatives voted to approve the bill last year, but the session ended before Senate members could bring the bill to a vote. Now with the governor”™s support ”“ and the issue on the Democrats legislative agenda ”“ Woulfe said he expects the bill to pass early in the session.
“I think everyone is really galvanized and ready to support the passage of this bill so businesses can incorporate in Connecticut,” Woulfe said. “Otherwise, if it”™s not available in 2014, I think you will see them elect to incorporate in other states.”
The classification doesn”™t have any tax-related benefits, but it removes some legal impediments to running a social enterprise. The legislation is largely built off of a national model created by the nonprofit B Lab, but Connecticut”™s law contains one extra element Woulfe said he hopes attracts entrepreneurs to the state.
The legislation allows entrepreneurs to essentially “lock in” their business”™ social mission, so if the leadership of the company changes, the mission must be preserved. If the company is sold, any of the remaining assets after debts have been paid must also go toward the mission, as well.
“It gives businesses the freedom to use their profits and resources in the way they see fit,” Woulfe said. “It empowers the consumer to really drive their dollars toward the social enterprises that are having the most impact.”