SOURCE: Wolters Kluwer

April 14, 2015 09:00 ET

Earth Day 2015: Does the Earth Benefit From Benefit Corporations?

Making Sustainability Central to Business Strategy: Q&A on Benefit Corporations and Certified B Corps

NEW YORK, NY--(Marketwired - Apr 14, 2015) -  Wolters Kluwer CT: Earth Day represents an opportunity for business leaders to think about ways they can make sustainability a core part of their business model, and in doing so both protect the environment and tap into the growing demand for sustainable products and services.

A new type of corporation -- the benefit corporation -- requires companies to create a "material positive impact on society and the environment," and provides the legal freedom to help businesses achieve these goals. Method, Plum Organics and Patagonia are all examples of successful American benefit corporations.

In this Q&A, Jennifer Friedman, CMO of the Small Business Segment of CT -- the first public registered agent to formally offer benefit corporation entity services -- answers questions about the model and how it works. CT provides formation, incorporation and other compliance services to businesses of all sizes.

Q: What is a benefit corporation? What does this status entail?

Jennifer Friedman: Benefit corporations are unique because they balance shareholder profits and social responsibility. They must meet higher standards of corporate purpose, accountability and transparency than a regular corporation, in addition to meeting their state's traditional law and tax obligations.

This ability to combine individual profits with public benefits is a model that is gaining in popularity. The total number of benefit corporations nationwide is approaching 2,000, up from roughly 500 in 2012. Twenty-eight states have passed laws to pave the way for benefit corporations, and we expect more states will pass laws this year.

Any type of company in any industry can adopt these higher standards, even if it is not a state-recognized benefit corporation. There are several non-profit organizations that provide separate or additional certification for companies looking to cement their sustainable credentials without having to officially incorporate or reincorporate. CT's service partner, B Lab, is the largest non-profit to offer free "B Corp" certification, and has so far certified more than 1,200 firms across the United States.

Q: In the run up to Earth Day, corporate sustainability will be front of mind. Do benefit corporations have to follow a mandate for environmental change?

JF: In a word, yes. By definition, a benefit corporation must create a "material positive impact on the society and environment," so identifying and pursuing Earth-friendly policies must be part of the goals a benefit corporation works towards, alongside the generation of profit.

The exact legal requirements vary from state to state, however, as do the specific social and environmental actions a company must realize in order to fulfill its status.

Q: Are benefit corporations having a material impact on the environment?

JF: Yes, benefit corporations are doing everything from limiting the waste they produce to creating sustainable, recyclable products for public consumption.

Several benefit corporations that are also Certified B Corps are carbon neutral. World Centric reports it planted 175,000 trees in 2009 alone. Alter Eco Foods reports it has so far mitigated 207,895 tons of CO2 and planted 9,265 trees.

In addition, several benefit corporations run their offices using primarily or solely renewable energy. Benefit Corporation Sun Light & Power reports that it runs its main office on solar power.

When it comes to Certified B Corps, those who identify reducing or offsetting emissions as a core business model last year saved or offset a total of 17,626,084 metric tons of CO2. Those who identify reducing landfill waste as a core business model diverted 828,362 metric tons of waste last year, as tracked by B Lab in its Impact Assessment Tool.

Q: What are the business advantages of becoming a benefit corporation?

JF: As well as making a positive impact on the company's social and environmental footprint, benefit corporation status can attract customers, and impact internal culture, recruiting and retention. A 2012 Nielsen survey revealed that two-thirds of consumers around the world say they prefer to buy products and services from companies that have implemented programs to give back to society. The survey also revealed that people prefer to work for socially responsible companies (62 percent) and also invest in these companies (59 percent).

In terms of financing, many benefit corporations are actively raising venture capital and accessing credit from traditional investors and lenders. Many well-known early-stage investors have supported their portfolio companies' election of benefit corporation status, and have noted that the status is beneficial because it allows companies to think beyond short-term profits and scale without sacrificing their commitment to core principles.

Q: How does a company go about applying for benefit corporation status?

JF: Interested companies can find out more about the model on our website.

In addition, our service partner, B Lab, offers a wealth of information on B Corp certification and provides a useful (and free) impact assessment tool that evaluates a firm's impact on the local community, wider society and the environment. To take the B Impact Assessment for your company you can visit http://bimpactassessment.net.

The theme of this year's Earth Day is "It's Our Turn to Lead," underscoring the power businesses have to affect environmental change if they choose to -- and there are plenty of indications they are choosing to. According to MIT Sloan's latest Sustainability and Innovation report, the number of companies that have adopted sustainability as a top item on their management agenda jumped from 46 percent in 2010 to 65 percent in 2014, and this is set to increase further in 2015. All this bodes well for the viability and longevity of sustainable corporate practices, and gives us hope for the future as we celebrate Earth Day 2015.

About Wolters Kluwer's CT
CT works with businesses of all sizes to offer customized expertise and comprehensive solutions regarding everything from business formations to filing business licenses and ongoing compliance. Drawing on more than a century of experience, CT is focused on helping businesses succeed, offering a comprehensive suite of products and services including incorporation, llc formation, registered agent services and more. For more information, visit ct.wolterskluwer.com.

About Wolters Kluwer
Wolters Kluwer is a global leader in professional information services. Professionals in the areas of legal, business, tax, accounting, finance, audit, risk, compliance and healthcare rely on Wolters Kluwer's market leading information-enabled tools and software solutions to manage their business efficiently, deliver results to their clients, and succeed in an ever more dynamic world.

Wolters Kluwer reported 2014 annual revenues of EUR 3.7 billion. The group serves customers in over 170 countries, and employs over 19,000 people worldwide. The company is headquartered in Alphen aan den Rijn, the Netherlands. Wolters Kluwer shares are listed on Euronext Amsterdam (WKL) and are included in the AEX and Euronext 100 indices. Wolters Kluwer has a sponsored Level 1 American Depositary Receipt program. The ADRs are traded on the over-the-counter market in the U.S. (WTKWY).