Today, the DC Council voted unanimously to approve the Benefit Corporation Act, bringing Washington, DC in line with 11 other jurisdictions that have enacted simlar legislation. This move creates a new type of business structure in DC — the benefit corporation — which combines the structure of a traditional for-profit corporation with the altruistic and mission-driven elements more akin to a non-profit organization. This new type of entity will be especially appealing to entrepreneurs that want to pursue profit and purpose without focusing exclusively on making a profit as in the traditional corporation or exclusively on making an impact as in the traditional non-profit.
Three of the main characteristics of a benefit corporation are:
- The corproation must have a corporate purpose to postively impact society or the enviroment: benefit corporations will be required to have the purpose of creating a general public benefit and are allowed to identify specific public benefits – like providing financial services to low-income and underserved communities.
- Directors of the corporation have a duty to consider the interests of all stakeholders, not just shareholders: in addition to considering shareholders when making business decisions, directors must consider how business decisions will affect the interests of stakeholders such as employees, customers, the community, and the environment.
- The corporation must report on its social impact using a third-party standard: benefit corporations are required to provide an annual benefit report to its shareholders, the public via its website, and file the report with DC government. This benefit report must be based on a third-party standard (like that of B Lab’s Impact Assesment) and describe the ways in which the corporation sought to create a public benefit and assess how successful it was at creating that public benefit.
Both new and existing corporations in DC can take advantage of this model and potentially attract the growing segment of impact investors — those investors seeking both a finanical return on their investment and a social return.
DC Social Innovation Project is excited to be a part of the growing social enterprise and entrepreneurship sector in DC and we look forward to supporting local entrepreneurs that take advantage of pursuing profit and purpose.