Andrew Kassoy, co-founder of Berwyn, Pennsylvania-based non-profit B Lab, spends a good amount of time listening to the complaints of institutional investors who are trying to invest sustainably.
Kassoy says he hears two main gripes: First, the lack of a common, transparent set of standards around sustainability reporting makes it difficult for investors to have a clear sense of the real social impacts of their investments (a company may have published plenty of brightly colored brochures about how much it values the environment, but is it actually dedicated to anything beyond lip service?).
And second, as companies scale up and mature, their founding visions involving funds for after-school programs or affordable healthcare for all employees are often shed, like sweet but naive adolescent daydreams they’ve grown out of. How can the sustainably minded investor keep up?
In hopes of offering a practical answer to this quandary, Kassoy and others at B Lab, which certifies socially responsible businesses, drafted model “benefit corporation” legislation that would create a new type of corporation – one that had its positive social impact written right into its DNA (or more specifically, its corporate charter). In the year since B Lab introduced the draft, eleven states have either passed or introduced the legislation (read more about it in Part 1 of this post).
Kassoy says that an investment in a benefit corporation should allay socially conscious investors’ most common complaints on both counts. First, since benefit corporations must undergo an annual, third-party assessment to verify that the social contributions spelled out in their charter are actually being provided, investors are afforded more transparency – and spared the companies’ glossy PR skullduggery – in determining the social impact of their investments.
And with regard to the second point, the idea is for the founding vision to be tattooed on the forehead of the company, so that rather than being incentivized to forget its idealistic roots, a benefit corporation is legally bound to stick by them – through changes in the executive team, venture capital investments, and even acquisitions.
“For the investor who wants it,” says Kassoy, “this legal structure ensures that the company will meet higher standards of purpose and transparency and accountability.” And perhaps that can mean that sustainable investors with firm, long-term convictions can firm up their convictions even more, and extend them even further into the future.
