Apparel company Patagonia is known for its commitment to social and green causes, but now it is making that commitment official: The company was among the first businesses in the state of California to apply this week for official "benefit corporation" status.
That status will legally require Patagonia:
- To specifically declare that it intends to have a positive impact on society
- To redefine its fiduciary responsibilities to consider workers, the community and the environment
- To report on its social and environmental performance transparently
By registering the company in this way, Patagonia stands a better chance of protecting its longtime commitment to social causes if the company is acquired or if it decides to go out and raise money.
"Patagonia is trying to build a company that could last 100 years," said founder Yvon Chouinard. "Benefit corporation legislation creates the legal framework to enable mission-driven companies like Patagonia to stay mission-driven through succession, capital raises, and even changes in ownership, by institutionalizing the values, culture, processes and high standards put in place by founding entrepreneurs."
California is the latest state to embrace this sort of legal entity for businesses. New York passed similar legislation just before the new year, and New Jersey, Virginia and Hawaii also took the plunge in 2011. Similar initiatives are under way in Michigan, Pennsylvania, North Carolina and the District of Columbia. There are slightly more than 500 companies now listed in the official B Corp directory.
There were almost a dozen companies that joined Patagonia in filing for benefit corporation status earlier this week, including DopeHut, Dharma Merchant Services, Give Something Back Office Supplies, Green Retirement Plans, Opticos Designs, Rimon Law, Scientific Certification Systems, Solar Works, Sun Light & Power, Terrassure Sustainable Land & Resource Development, and Thinkshift Communications.
So, here's the real question? Will switching your business to this status hurt or help your profit?
I think if the commitment is genuine, it will absolutely help. For evidence, let's consider two different companies: Patagonia and Salesforce.com.
Patagonia's interest in the environment is sort of a given. The company was founded with this commitment in mind, doing things like sourcing 100 percent organic cotton, over the years its customer base has expanded accordingly. But late last year, the company made a pretty business-savvy move, teaming up with eBay to create take the Common Threads clothing exchange and "recycling" business online. Instant scale and an instant new source of revenue that dovetails beautiful with Patagonia's cause-based messaging.
Did you know that cloud software powerhouse Salesforce.com also has an active corporate social responsibility mission?
The company's Salesforce.com Foundation arm founded in 1999 has a pretty humble mission: use 1 percent of Salesforce.com employee time, 1 percent of the pre-IPO equity and 1 percent of the company's product installations to help companies that have a social mission. The foundation has helped encourage more than 12,000 organizations to use Salesforce.com software that might not have used it otherwise. As of Jan. 1, 2012, benefit corporations calling for a license quote on the company's cloud-delivered customer relationship management software will receive a 20 percent discount. Clearly, this sort of program could benefit Salesforce.com's bottom line.
It is interesting that Salesforce.com has chosen to keep its foundation separate from its main business charter. But the fact is that its foundation definitely helps distinguish this cloud provider from its competitors, especially among other businesses with an interested in corporate sustainability.
It should be intriguing to see which big companies jump on board the benefit corporation movement, as more states begin to recognize the legal status of these companies. I also believe this movement will help address a lot of the greenwashing that has been going on over the past two years. It is one thing to declare that your business is green or sustainable in an advertisement or marketing message, it is another thing entirely to commit to that mission legally.
Image: Stock.xchng/Leroy Skalstad