The Benefits of Becoming a Benefit Corporation

More Businesses Seek Structure That Puts Stakeholder Interests on Equal Footing with Bottom Line

Fetzer Vineyards employees participate in Force for Good Day, a paid volunteer day earlier this year. In 2017 Fetzer Vineyards became a benefit corporation, making a legal commitment to business as a force for good. (Photo courtesy Fetzer Vineyards)

As consumers and employees look to buy from and work for companies that align with their social values, more businesses are seeking a structure that puts stakeholder interests on equal footing with the bottom line in corporate decision-making.

Those businesses have two structural options: the benefit corporation and the Certified B Corporation. Companies can be incorporated as a benefit corporation and certified as a B Corp, or just one or the other. And B Corps must achieve benefit corporation or equivalent status to maintain certification in states where such opportunities are available.

Benefit corporation structures require corporate directors to consider all stakeholder interests (e.g. shareholders, community, environment, employees and customers) in company decision-making, and not let the interests of one group dominate others. In this way, directors are discouraged from letting short-term shareholder profits — or short-termism — dictate corporate decisions and must include other stakeholder interests in the mix.

For companies to incorporate as a benefit corporation, the state must first pass a law allowing this new corporate form. So far, 34 states, the District of Columbia and Puerto Rico have passed benefit corporation legislation, meaning several states have yet to adopt this better business structure (see map below).

It can be tricky for most people to explain the differences between Certified B Corporations and benefit corporations. For a clear picture of the differences — and similarities — between the two, check out this overview on B the Change.

Two B Corps that also are among the 2018 Best For The World: Changemaker honorees recently made a legal commitment to business as a force for good by becoming benefit corporations. Through this step, Fetzer Vineyards and EILEEN FISHER are legally bound to ongoing accountability, purpose and transparency.

These values aren’t new to Fetzer Vineyards or EILEEN FISHER, which both became Certified B Corporations in 2015 and have long been committed to the environment, their employees and social good. But becoming a benefit corporation formalized many of their everyday practices and beliefs.

EILEEN FISHER, a women’s apparel company with headquarters outside New York City and 1,200 workers around the world, has been a champion of women in business since it was founded in 1984. In the 1990s, it adopted standards for human rights and sustainability under its social consciousness team. Earlier this year, the company hosted an event for female CEOs of B Corps, “We the Change. Women Together,” that launched conversations and collaborations on topics including gender parity, growing the B Corp brand, and diversity and inclusion.

Fetzer Vineyards, a California-based winery with 350 employees nationwide, has been a steward of the environment since its founding in 1968 by Barney Fetzer. A solar array tops Fetzer Vineyards’ corporate headquarters as part of the winery’s commitment to using 100 percent green power and reducing its carbon footprint. Fetzer Vineyards was the first winery in the world to be zero-waste certified; in 2017 it diverted more than 98 percent of its waste from landfills or incineration, and the company aims to hit 99.9 percent by 2020.

Each company says adopting the benefit corporation structure formalized many of its everyday practices and beliefs — in a public, official, legally bound and protected way.

Read more about the process of becoming a benefit corporation on B the Change.

Fetzer Vineyards and EILEEN FISHER are part of the community of Certified B Corporations. Read more stories of people using business as a force for good in B the Change, or sign up to receive the B the Change Weekly newsletter for more stories like the one above, delivered straight to your inbox.