First benefit corporations taking root in R.I.
On the last day of the
2013 legislative session, the General Assembly enacted Rep. Teresa Tanzi’s bill
allowing the establishment in Rhode Island of “benefit corporations,” companies
that simultaneously pursue their commercial endeavors while also supporting
social or environmental efforts.
Two years later, Rhode
Island now has its first legally registered benefit corporations — or “B corps”
— led by entrepreneurs who want their businesses to succeed not only in
profitably making products, but also in helping the earth and the people on it.
“Rhode Island has this
remarkably active and vibrant community of makers and innovators, and many in
that community have wider ideals than personal advancement; they are focused on
what their ideas can do for the world. I’m proud that we’ve been able to adapt
Rhode Island’s laws to establish this middle ground between the corporate world
and the nonprofit sector, because it gives people with great plans to use their
innovations for the good of others the latitude they need to succeed. Their
efforts can help our state and our economy as well as our communities, our
environment and the world,” said Representative Tanzi, who added that she is
interested in spreading the word that this designation exists so more
corporations will consider it.
The event was held at
Sachuest Beach in Middletown prior to a coastal cleanup hosted by Clean Ocean
Access, an environmental initiative supported by Packaging
2.0, the first Rhode Island
company to establish itself as a B corp under the new law.
Packaging 2.0,
headquartered in Providence, was founded in 2002 and primarily sells and
markets thermoformed plastic packaging made from post-consumer recycled
materials. The company seeks to bridge the worlds of plastics packaging design,
manufacturing, reuse, recycling and sustainability, to raise levels of
awareness about plastic packaging pollution and drastically increase recycling
rates.
The company’s founder,
Michael Brown, said he became aware of the idea of benefit corporations on a
2013 ocean expedition with the owners of Klean Kanteen, a certified benefit
corporation that makes stainless steel reusable water bottles. He thought it
sounded like the perfect way to meld his personal passion for the environment
with the environmentally conscious bent that his company already had.
He created
a social mission arm for his company, Mission 2.Ocean, which supports a wide
range of efforts and organizations on both the local and global levels that
share its goals to reduce ocean plastic pollution. In addition to becoming the
first B corp recognized under Rhode Island law, Packaging 2.0 also worked
through a third-party certification organization to earn its separate
designation as a “certified” B corp in 2014 as well.
Through Mission
2.Ocean, his company supports Clean Ocean Access – which sponsors weekly beach
cleanups around Newport, including the one after today’s event – and numerous
other organizations connected to clean oceans, especially keeping plastic out
of the ocean. Brown says he also pursues the company’s environmental mission by
influencing his suppliers to make better environmental decisions, and by
connecting the environmental activists he meets through his efforts to those in
the industry, so they can better understand one another.
Brown said becoming a B
corp not only better connected his company and his own environmental interests,
but it also gave his company a designation that matters to the kind of
environmentally conscious customers that seek his products. Among his customers
is Whole Foods, which this year made Packaging 2.0 a preferred supplier, and
will soon expand the use of its packaging from 100 Whole Foods stores to all
Whole Foods locations.
“We offer an
environmentally friendly product, so our customers are socially minded. They
could buy their plastic packaging from anyone, but they value our socially
conscious efforts. Being a benefit corporation helps us stand out in the pack
and makes us more appealing to the customers who are in the market for our type
of products,” said Brown.
At today’s event, in
addition to presenting Clean Ocean Action with a $500 check, Brown presented a
representative from Secretary of State Nellie Gorbea’s office with his
company’s annual impact report, a requirement under the law establishing the B
corp designation. The report provides a detailed analysis of the corporation’s impact on society and
the environment over the course of its first year as a Rhode Island B corp.
The report lists the
wide range of activities in which the company participated, from presentations
at environmental solutions conferences to speaking with suppliers about taking
a pledge to prevent spilling plastic pellets into the ocean to shoreline
cleanups like today’s.
“The opportunity for
benefit corporations and social enterprise to effect real, lasting social
change while engaging in productive commercial activity and job creation is
remarkable,” said Secretary of State Gorbea. “I can’t think of a better place
to leverage this new sector than right here in Rhode Island, with our rich
legacy of entrepreneurship and world-class creative talent. The Rhode Island
Department of State is ready to help Rhode Island businesses succeed and
prosper.”
The B corp designation
is completely voluntary, and gives the directors of corporations more leeway to
pursue socially responsible initiatives. While regular corporations can pursue
activities that have a social or environmental benefit, such as making
donations to community organizations, these actions must always be in the
long-term interest of profit, or shareholders could seek the removal of
corporate leaders or sue the company.
Under the law
establishing B corps, businesses need the support of two-thirds of all classes of
their shareholders to convert into (or out of) benefit corporation status. Once
a company becomes a benefit corporation, its leaders are accountable to those
shareholders both for making a profit and for pursuing its mission through
every aspect of their decision-making process.
Examples of well-known benefit
corporations include Vermont-based King Arthur Flour Company, an employee-owned
company committed to environmental sustainability and volunteerism, and
California’s Patagonia, Inc., a high-end outdoor clothing outfitter that funds
environmental causes.
While only 12 other
states recognized the designation when Rhode Island passed the law in 2013, B
corp status is now available in 31 states. The designation does not cost the
state anything, because it does not provide any tax breaks and has no effect on
traditional corporations.
“Allowing benefit
corporations to incorporate in Rhode Island encourages business growth and
investment in Rhode Island, helps us attract socially conscious entrepreneurs
to the state, provides high-quality jobs and provides businesses with the
freedom they need to help solve problems in society,” said Representative
Tanzi.
There are currently four
benefit corporations that have registered with the Secretary of State’s office
in Rhode Island, in various stages of incorporation.
Increment Studios, also located in Providence, is another company
that has incorporated as a B corp since the law was established. Founded by
Cynthia Poon and Maeve Jopson, both 2013 Rhode Island School of Design
graduates, its goal is to make toys for children with special needs that
promote the inclusion of all children.
The two set out to address problems they
see with toys designed for kids with motor or vision impairments: they often
look like utilitarian devices rather than fun playthings, and they tend to be
very expensive. They wanted to create toys that would be attractive not only to
kids with special needs, but also to their siblings and friends to promote play
among them.
Jopson and Poon worked closely with Meeting Street School and
Sensation Station, a therapy center, to develop Increment’s first product, the
“O-Rings,” large stuffed rings of various colors, textures, filling and weights
to help with tactile stimulation, gross motor skills, spatial awareness and all
types of open-ended play. That product is expected to launch this fall.
Increment’s social
mission is to furnish schools, therapy centers, children’s museums and other
places with some of its products to help children with and without disabilities
play together.
Poon and Jopson, who
both participated in several entrepreneur and social enterprise programs before
starting Increment, said they were unaware of the concept of benefit corporations
when they started, but knew they wanted their company have a positive social
impact in addition to being profitable.
“From the beginning, we
knew that we wanted to be more than just a business that creates products for
kids. We design our business and our products for social change, for a shift in
perception of disabilities, and for the advocacy of inclusion through play.
Being a benefit corporation provides a clear direction for our company as we
aim to do well as a business and have a positive social impact for kids of all
abilities. We hope that the benefit corporation status sets a standard for more
and, eventually, all businesses to come,” said Poon.