Social Impact B Corporations are on the Rise

A little provision was sneaked into the Italian parliament’s big end-of-year budget package: it will now be possible for Italian companies, new or already existing, to incorporate as “Società Benefit,” or Benefit Corporations. These companies will be officially allowed to put societal benefit on a par with profits.In the US, 30 states plus Washington, DC, have such legislation, and the new Italian law could inspire similar legislation in other European countries. Such legislation is considered important because otherwise a for-profit company’s management could, in theory, be held legally liable if it doesn’t put short-term profit maximization for shareholders ahead of all other criteria. Normally a societal benefit, such as reducing carbon emissions, will also be beneficial to shareholders, but that benefit might not be as immediate or as direct as shareholders would like. So having the specific corporate legal structure of a Benefit Corporation alleviates any doubt on this question. Benefit Corporations, also known as B Corporations, aren’t off the hook on generating profits: any for-profit company needs to grow in order to be sustainable, and in fact the new laws don’t discourage profit making.The drive for more B Corporations can be traced to an initiative called B Lab, founded with the publication of a “Declaration of Inter-Dependence” on July 5, 2006, which stated that “we envision a global economy that uses business as a force for good.” The statement suggested that the economy of the future could be “comprised of a new type of corporation – the B-Corporation – which is purpose driven and creates benefits for all stakeholders, not just shareholders.”

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