SUMMARY: The state of Texas recently passed legislation that will allow businesses to voluntarily register as public benefit corporations (PBCs) which are for-profit companies that must consider the social good as well as their own bottom lines.

Pioneering Texans, Unite!

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Great news, y’all!  On June 14, 2017, the great state of Texas passed HB 3488, making it the 33rd state to establish public benefit corporations (PBCs) since 2010.  As a social entrepreneur and proud Texan, I couldn’t be happier!

So what exactly is a PBC, and what’s all the fuss about?

A PUBLIC BENEFIT CORPORATION is legal business structure and corporate governance model through which a for-profit business voluntarily commits itself to heightened standards of purpose, accountability, and transparency.

Basically, a PBC is a way to make your triple-bottom-line commitment legit by building it right into your founding paperwork, protecting your mission in the long-term and providing legal protection from corporate bullies.

Beginning this month (September 2017), businesses can incorporate as PBCs in the Lone Star State.  Although no one knows for sure what will happen, in other states where benefit corp legislation has passed, an abundance of creative and sustainable businesses (with ambitious missions such as improving health in the built environment and fighting homelessness) have rocked local economies!

Similarly, I predict that as we roll into 2018 a wave of socially responsible Texas entrepreneurs will start letting their freaky flags fly and launch innovative and sustainable businesses para el bien de todos (for the good of all).

Related: Home Health Concerns in the Aftermath of Hurricane Harvey

 

A Whole ‘Nother Way of Doing Business

The traditional role of business requires corporate directors to focus primarily on making money for shareholders.  This type of growth-at-all-costs thinking is precisely what got us into such financial sagas as the 2008 subprime mortgage crisis.

By contrast, a PBC’s guiding principles focus on the impact on all corporate stakeholders, rather than just those who own company shares.  This leads to a more holistic approach to business where individual business decisions are weighed against their impact on people, profit, and the planet.

[Being a Benefit Corporation] expands the obligations of a company’s board of directors by requiring them to balance benefits to the public with the financial interests of shareholders. This gives directors the legal protection to pursue a social purpose mission and not just profits.

– Gina Hinojosa, Texas State Representative and author of Texas HB3488

The three primary characteristics of a public benefit corporation are:

  1. Expanded purpose.  PBCs must explicitly commit to one or more public benefit purposes (listed in the certificate of incorporation) in a socially responsible and sustainable way.
  2. Expanded accountability.  PBCs must widen their circles of concern from purely financial interests, to their businesses’ impacts on society and the environment.
  3. Expanded transparency.  PBCs are required to publish – and make publicly available* – annual benefit/impact reports which evaluate their overall social and environmental impact.

*In most states, a regular self-assessment using a 3rd party standard is required.

 

What is a Public Benefit, Exactly?

According to HB3488, a public benefit is a “positive effect, or a reduction of a negative effect, on one or more categories of persons, entities, communities, or interests, other than shareholders in their capacities as shareholders of the corporation, including effects of an artistic, charitable, cultural, economic, educational, environmental, literary, medical, religious, scientific, or technological nature.” 

If that definition is clear as mud, here are a few examples of public benefit purposes:

  • Affordable healthcare. Facilitating the creation of free and open markets for healthcare commodities, thereby reducing the overall cost of healthcare for all Americans.
  • Childhood nutrition. Delivering nourishing, organic food to the nation’s little ones and raising awareness and advancing solutions for childhood hunger and malnutrition in the United States.
  • Alternative energy. Assisting communities with increasing the production of electricity via alternative and sustainable technologies.
  • Community literacy. Promoting literacy and reading proficiencies including (but not limited to) in low income and underserved communities.
  • Sustainable living. Creating environmentally sustainable products and encouraging the pursuit of healthy lifestyles and sustainable living while supporting global charities.

A company’s public benefit purpose is often further explored in its mission/values/commitments and/or stakeholder impact report. But unfortunately, because the first PBC incorporated just 7 years ago, there isn’t a tremendous amount of guidance in preparing these documents.

On the bright side, however, business owners have a lot of latitude when it comes to sharing their company’s unique impact story, both in mission and reporting.  Check out Kickstarter’s public charter or Badger’s 2016 annual impact report for some great inspiration!

 

How Public Benefit Corporations Could Impact Wholesome Housing

Postmodern Solar Design

In the past, many well-intentioned architects, engineers, and designers felt forced to choose between building the right way and building the profitable way.  I don’t know about you, but that doesn’t seem like a very fair choice to me.

I believe that PBC legislation will make it easier to do both.

I hope that as more states adopt similar bills, public benefit corporations become an empowering vehicle for for the healthy housing sector.

 

 

Sources:

What is a Benefit Corporation / BenefitCorp.net
Gina Hinojosa / TribTalk
Texas House Bill 3488 / LegiScan
Jeff Cullinane /  Cullinane Law Group

 

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