On July 17th, Delaware became the 19th state to sign benefit corporation legislation—a move that will make a big difference for triple bottom line entrepreneurs across the country.
For years, companies that want to make money and still do good in the world have had the opportunity to become Certified B Corporations—a status that indicates they have met a rigorous set of standards laid out by B Lab, the organization behind B Corp certification. At the same time, B Lab has worked with entrepreneurs and investors across the country to enact benefit corporation legislation, which supports social entrepreneurs on a legal level. If an organization chooses to become a public benefit corporation, it is required to consider environmental and social impact along with shareholder value (benefit corporations don’t necessarily need to be Certified B Corporations, however). On the flip side, shareholders can’t sue the company if it doesn’t maximize immediate profits, and instead focuses on more long-term gains.
"It offers mission-driven entrepreneurs legal protection that they didn’t have before, and it gives them a freedom that they didn’t enjoy before," explains Jay Coen Gilbert, the co-founder of B Lab. 20 states have enacted benefit corporation legislation so far, but Delaware is by far the most important. The reason: over half of all traded companies and nearly two-thirds of all venture-backed companies are incorporated in Delaware, which is full of corporation-friendly laws.
Before this legislation was passed, any Delaware corporation that tried to serve a purpose outside maximizing shareholder-related financial value was at risk of being sued. Now, says Coen Gilbert, "[Companies] have the opportunity to have their cake and eat it too. They can incorporate their entity in the state that’s most comfortable for investors and do so using a corporate structure that makes them most comfortable that they’re going to be able to maintain their mission over time."
Farmigo, a venture-backed, Bay Area-based startup gunning to become the biggest online farmers market in the U.S, will be one of the first companies to take advantage of Delaware’s new benefit corporation law. Next year, Coen Gilbert expects five to 10 states to sign similar benefit legislation.