Benefit corporation
legal structure utilized by companies focused on renewable energy
Foley & Lardner
LLP, Laura J. Neumeister, USA October
1 2012
Socially and
environmentally-minded entrepreneurs who want to address societal problems
through a corporate structure have a relatively new legal structure available
to them. “Benefit corporations” are a new class of corporations that (1)
voluntarily create a material positive impact on society, their
employees and the environment, (2) expand the traditional fiduciary
duty to require consideration of financial and non-financial
interests when making decisions, and (3) report on their
overall social and environmental performance using recognized third-party
standards. In short, these are entities that operate as traditional
corporations, but are accountable to
the triple bottom line (i.e., people,
planet, profit).
(DO- (1) mission, (2)
fiduciary duty, (3) audit)
While the majority of
states have passed constituency statutes, or statutes that allow directors to
consider non-shareholder interests when making decisions, advocates of the
benefit corporation structure claim this permissive structure does not go
far enough in advancing societal and environmental goals. Eleven states
have now passed benefit corporation legislation, with Illinois and Louisiana
passing legislation as recently as summer 2012. Other states that recognize the
corporate structure include California, Hawaii, Maryland, Massachusetts, New
Jersey, New York, South Carolina, Vermont, and Virginia. Washington State has a
similar law for special purpose corporations, and is debatably on this list as
well.
Benefit corporations
must publish an annual public benefit report that includes an assessment of
their overall social and environmental performance against a third-party
standard. This allows the corporation, its directors, its shareholders, and the
public to determine whether the benefit corporation is meeting its statutory
requirement of creating a material positive impact on society and the
environment. A third-party standard is a standard for defining,
reporting, and assessing overall corporate, social, and environmental
performance that is comprehensive, independent, credible, and transparent.
Benefit corporation legislation does not require any particular third-party
standard to be adopted in preparing an annual benefit report, and the
government has no role in determining the sufficiency of such standards.
This movement has been
largely encouraged by B Lab, a nonprofit organization that certifies benefit
corporations having a high overall standard of social and environmental
performance. These certified entities are referred to as “Certified B
Corporations” or “B Corps” and should not be confused with the legal
distinction “benefit corporation.”
Newly formed and
existing corporations can elect to become benefit corporations. A corporation
may make this election in order to establish a clear mission that survives
change of management or ownership. Furthermore, holding the benefit corporation
distinction can help differentiate a company to investors and the public during
this era when branding as green or responsible is popular.
(DO- Benefit Corporation
gives a cover or provides excuse for directors to fall down on the job)
As mentioned above as
an additional advantage, benefit corporation directors are protected when
basing decisions on non-financial interests. While this last point is touted by
advocates as a benefit, some critics have argued that this corporate form
offers another way for directors who fall down on the job to escape
liability by pointing to “social benefits” as their ill-defined
guideposts. Either side of the argument would agree, however, that this
protection allows for a different type of decision-making.
Although benefit
corporations encompass a broad array of missions — from providing chemical-free
makeup to assisting in addiction recovery — this corporate form is being
utilized by a variety of green energy companies and companies with green energy
clients. Examples include:
- Solar Works: This private company in
Sonoma, California, provides energy-efficient solutions that conserve
natural resources and promote individual and community self-reliance by
offering in-house design and installation of on-grid and off-grid PV
systems
- SunCommon: This company’s purpose
is to increase solar energy production in Vermont by eliminating upfront
costs and charging a monthly fee that is the same or less than what
Vermonters are currently paying their utility for electricity
- Thinkshift Communications: This California company
creates strategic communications, planning, publications, and branding for
sustainability-oriented enterprises
- Ethical Electric Benefit Co.: This Maryland company, set to
launch in 2012, will offer clean energy from solar and wind sources to
residential customers
- Clean Currents LLC: With Maryland being the
only state allowing limited liability companies (LLC) to elect a benefit
structure, this LLC sells green power to residential and commercial
customers in the Mid-Atlantic, with solar and wind power options
