In my last piece, I discussed Benefit Companies and their increasing importance as the world moves towards adopting sustainable business practices. Indeed, banks are being pressured to lend in accordance with ESG priorities, and Gen Z are notoriously purpose-driven, having grown up listening to, reading about and watching the ever-present environmental and societal challenges facing the world.
Adoption of the benefit corporation model has many potential benefits, but it also comes with its own set of challenges.
According to different studies and reports, benefits of being a benefit corporation are as follows:
- Improved reputation: Benefit corporations have a reputation for ethical business practices and are often more appealing to customers who value social and environmental responsibility. This can lead to increased brand recognition and customer loyalty, which is essential for a business to succeed.
By becoming a benefit corporation, companies are able to showcase their social and environmental values and promote their commitment to the greater good. This can result in positive media coverage, as well as partnerships with other businesses and organisations that share similar values. A positive brand image and reputation can also help to differentiate a company from its competitors.
- Attractiveness for customers and employees: Customers and employees are increasingly attracted to socially responsible companies. Benefit corporations can demonstrate its commitment to social responsibility and sustainability, attracting customers and employees who share those values.
These stakeholders may be willing to pay a premium for products and services that align with their values and may be more loyal to companies that are transparent about their social and environmental impact.
- Diversity and inclusion: One of the most important values that a benefit corporation upholds is social responsibility. This includes promoting diversity and inclusion within the company, and ensuring that employees from different backgrounds are treated fairly and equally.
By becoming a benefit corporation, companies can demonstrate their commitment to diversity and inclusion, and use their business practices to address social issues. Studies have shown that companies with diverse workforces are more innovative and profitable, and that diverse teams are better equipped to solve complex problems. Moreover, promoting diversity and inclusion can help companies avoid legal issues and create a more positive work environment for employees.
- Increased transparency and accountability: Benefit corporations are required to publish regular reports on their social and environmental performance.
This can help to increase transparency and accountability, demonstrate a commitment to social responsibility, and build trust with stakeholders. By being transparent about its impact, a benefit corporation can improve its reputation and strengthen its relationships with customers, employees, and investors.
- Encourages innovation: By prioritising a social and environmental mission, benefit corporations are incentivised to develop new products, services, and business models that have a positive impact. This can drive innovation and can have a positive impact on the broader economy. Benefit corporations can also collaborate with other like-minded companies to develop new solutions to social and environmental challenges.
- Access to impact investment: Benefit corporations may have increased access to impact investment and other forms of funding from investors who prioritise social and environmental impact. This can help to grow the business and increase its impact. Access to impact investment can also help to scale the impact and reach a larger audience.
- Positive impact on the environment and society: Benefit corporations can have a positive impact on the environment and society. This can include reducing carbon emissions, promoting sustainable practices, creating jobs, and supporting local communities. Benefit corporations can also use their resources and expertise to tackle broader societal issues and promote social justice.
Benefit corporations represent a new paradigm for business that prioritises not only environmental sustainability but also social sustainability. The social dimension of sustainability is crucial for building more equitable and inclusive societies that prioritise the well-being of all stakeholders.
By embracing the values of social sustainability alongside environmental sustainability, companies can become powerful agents of positive change. The adoption of a comprehensive approach to sustainability requires a long-term vision, strategic planning, and a commitment to continuous improvement. By doing so, benefit corporations can set an example for other businesses to follow and inspire a new era of responsible and sustainable corporate practices that place social and environmental responsibility at the forefront.
On the other side, like any other change, also deciding to become a benefit corporation can bring challenges in the implementation like:
- Increased costs: Incorporating as a benefit corporation can be more expensive and time-consuming than traditional incorporation. Benefit corporations are required to meet higher standards of transparency, accountability, and social responsibility, which may require additional resources and investment.
- Legal complexities: Benefit corporations must navigate a more complex legal landscape than traditional corporations. The legal requirements and obligations of benefit corporations can be difficult to understand and comply with, particularly for smaller companies without the resources to hire legal experts.
- Potential tension with shareholders: Shareholders who prioritise financial returns above all else may not fully support a benefit corporation’s focus on social and environmental responsibility, which can create tension.
- Difficulty balancing financial goals with social and environmental goals: Benefit corporations must find ways to balance their financial goals with their social and environmental goals, which can be challenging and may require trade-offs.
The journey towards becoming a benefit corporation requires companies to adopt a comprehensive approach to corporate social responsibility that prioritises diversity, equity, and inclusion alongside environmental sustainability. This can be a challenging task, especially for companies that are navigating new legal and ethical terrain.
Engaging the right support and consultant, such as the services dispensed by Global Mindset Development, can provide the necessary guidance, expertise, and tools to help companies implement sustainable practices that promote DEI and prioritise social and environmental responsibility alongside financial success.
With the right support and a commitment to continuous improvement, companies can become powerful agents of change, fostering diverse and inclusive workplaces that promote the well-being of all stakeholders.
The potential benefits of becoming a Benefit Corporation, such as greater long-term success and stakeholder engagement, can make it a worthwhile decision for many companies. CEOs can use their status as a Benefit Corporation to drive growth and build brand recognition, while also making a positive impact on society and the environment.
The author would like to thank Artem Filenko, GMD intern, for his support in research and writing for the present article.