A public benefit corporation is a type of entity where profit is considered as important as societal, environmental, employee, and community-based impact.
Understanding public benefit corporations
Public benefit corporations are those that are required by law to balance the needs and outcomes of stakeholders with financial considerations. In the United States – where such entities have been authorized in 45 states and the District of Columbia – they are sometimes referred to as B Corporations or PBCs.
Unlike traditional corporations, public benefit corporations must positively contribute to society in some way. It may be that the company creates jobs by establishing a presence in an underprivileged area. Alternatively, some may donate money to charity or invest in sustainable business practices.
In either case, the company must strike a balance between profit maximization and social good. Indeed, some public benefit corporations may still choose to invest in a sustainability initiative even if short-term profits are sacrificed in the process.
Key components of a public benefit corporation
Five key components define a public benefit corporation and its various obligations:
- Purpose – the purpose of a PBC is to create general public benefit. This includes society and the environment, but also any stakeholder that is materially affected by the company’s decision-making.
- Accountability – in a PBC, the board of directors has extra accountability in that the financial interests of shareholders must be considered with various environmental and social factors. They are also afforded the legal production to define a mission that does not prioritize profit.
- Transparency – benefit corporations must report on how they achieve public benefit. The exact mechanism differs by state or country, but in many locations, a third-party standard must be used to measure performance or progress.
- Performance – in the United States and Canada, PBCs must be recertified every three years and achieve a minimum verified score.
- Cost – like reporting mechanisms, the cost of registering a PBC depends on location. In general terms, fees range from $70-350.
Examples of public benefit corporations
With public benefit corporations now authorized in the majority of U.S. states, there are thousands of them in existence. Two examples are listed below.
Green Mountain Power
Green Mountain Power (GMP) is a Vermont-based company that provides cost-effective, clean, reliable electricity that is close to the source. When GMP was recertified for a third time in 2021, the company remained the first and only electricity provider to meet B Corp’s strict social, environmental, and transparency standards.
Creative project crowdfunding platform Kickstarter is also a public benefit corporation. When the company became known as Kickstarter PBC in 2015, it outlined a new charter to explain how the mission would look beyond profit potential.
Some of the key points of this charter include:
- The donation of 5% of after-tax profit toward music and art education and also to other organizations tackling systemic inequality.
- Extra paid leave for employees to mentor and train underrepresented groups in art, business, and technology, and
- Investment in green infrastructure, support of sustainable modes of transportation, and the use of key environmental criteria when selecting vendors.
- A public benefit corporation is a type of entity where profit is considered as important as societal, environmental, employee, and community impact.
- Five key components define a public benefit corporation and its various obligations. These include purpose, accountability, transparency, performance, and cost.
- Two examples of public benefit corporations include sustainable utility company Green Mountain Power and the creative crowdfunding platform Kickstarter.