B Corporations ‘Need More Oversight’

Source: Environmental Leader.com

“B Corporations,” for-profit companies that also have social or environmental missions, need more oversight by state regulators in California, legal experts said at a National Association of State Charity Officials conference.

About 75 companies have registered as “benefit” or “flexible purpose” corporations since Gov. Jerry Brown signed two bills into law last year to give businesses greater freedom to pursue social and environmental objectives, NBC reported.

Patagonia, which is a B Corp, was the first company to take advantage of the new California law.

Since the law went into effect in January, 60 firms have opted to become benefit corporations, which are required to meet third-party social, environmental, accountability and transparency standards. B Lab, a non-profit that created the new category, is responsible for certifying benefit corporations.

The other 15 companies are registered as flexible-purpose corporations, a category that has fewer requirements to ensure they have an explicit social or environmental mission.

But critics have argued that flexibility could allow bad actors to mislead the public and the benefit corporation model could give investors a false sense of security. Private attorneys at the conference said the new categories are not monitored by government agencies to ensure compliance with statutory requirements.

Proponents of the law argue there isn’t a need for state regulation. Like traditional corporations, these new kinds of companies are regulated by shareholders, Erik Trojian, director of policy at B Lab told NBC.

BBMG, Seventh Generation, Benchmark Asset Managers, Workplace Dynamics and New Leaf Paper were founding B Corp certified members. Since then, a number of companies have gained B Lab’s socially responsible business certification.

An increasing number of municipal and state governments have addressed B Corporations through legislation and tax incentives programs. Philadelphia was among the first cities in the US to provide a pilot tax incentive for certified B Corporations.