The Appearance of Benefit Corporations

The Appearance of Benefit Corporations

Benefit corporations are for-profit businesses that formally and legally commit to act for public and environmental benefit.


What is a Benefit Corporation?

Patagonia’s Mission is to “build the best product, cause no unnecessary harm, use business to inspire and implement solutions to the environmental crisis.” This is a prime example of the mission of a benefit corporation. Benefit corporations are for-profit businesses that formally and legally commit to act for public and environmental benefit. The District of Columbia and 12 other states have recognized benefit corporations as a new type of corporate entity that businesses and entrepreneurs must consider when forming a business. By becoming a benefit corporation, Patagonia can remain the mission driven company that it is.


Beyond the bottom line

Directors of benefit corporations owe a duty above and beyond the bottom line. Benefit corporations voluntarily meet higher standards of corporate purpose, accountability and transparency by:

  1. Protecting directors and officers from liability for making decisions that further the public good but not necessarily the bottom line.
  2. Accepting accountability in the event the company abandons its commitment to the public good.
  3. Having a duty to consider both the shareholders and the stakeholders, ie. the employees, the customers, the community and the environment.

In addition to new purposes and duties, benefit corporations commit to filing a report that is based on standards set by a third party. This report describes a benefit corporation’s impact, much like an annual statement, to shareholders and the public. Patagonia, for example, commits to higher standards in dealing with factories and clothing mills to ensure that it produces the best product without causing any unnecessary harm.

Benefit corporations still want to make a profit and still want to pass that profit along to shareholders. The difference, though, is that the benefit corporation also wants to have a positive impact on society and the environment.