On Route 40, Latin Market's liquor application gives hope, draws critics

From Explore Howard: On Route 40, Latin Market's liquor application gives hope, draws critics

Benefit Corporations, Benefit LLCs, and Marketing

In June, Maryland saw the creation of America's first benefit LLC, Clean Currents, a green energy company. Clean Currents was created under the recently passed SB 595, a follow up to the state's benefit corporation law passed last year. SB 595 was sponsored by State Senator Jamie B. Raskin (D-Mont).

Two weeks ago, Governor Martin O'Malley attended the inauguration of Blessed Coffee, a Takoma Park coffee shop. Blessed Coffee is a registered benefit corporation under the law passed last year. The company has pledged to allocate 50% of its net profits from wholesale revenue to social programs in Ethiopia's coffee growing regions, and 50% to community based organizations. O'Malley said of Blessed Coffee that “(i)t's a corporation that looks at not only the bottom line of profit, but also the bottom line of social responsibility.”

The Washington Post article, Takoma Park coffee firm holds 'Blessed' event, in quoting Raskin highlights one of the challenges the state has in encouraging benefit corporations:

“'The law allows community-minded companies to take the high bid,'    Raskin said.

The main benefit of the law, however, is as a branding and marketing tool. The community feels that it's a part of the business, and people are often willing to pay for products when they know the money goes toward groups and causes they support, Raskin said.” (sic)

Cause marketing can be effective. A 2010 study said that 41% of Americans have purchased a product in the past year because the product was associated with either a social or environmental cause. The same study said that 88% of Americans think it is acceptable for a company to involve a cause or issue in its marketing; contrast this to the Millenial Americans, of whom 94% think it is acceptable for a company to involve a cause or issue in its marketing. Additionally, Millenials use a company's support of social or environmental issues to determine other corporate interactions. 87% of Millenials use social and environmental causes as a benchmark to determine where to work. 79% of Millenials use the same benchmark to determine where to invest. As Millenials become more active participants in the marketplace, benefit corporations and benefit LLCs are poised to reap the benefits (pun intended).

B Corps in Maryland

Benefit Corporations (also known as B Corps) are corporations formed with the intent to create a beneficial public good. B Corps are held to a higher standard than traditional corporations in that they must create social, environmental and community benefits. The first official B Corp was created in 2007, when Method, a manufacturer of green cleaning products, amended their corporate documents to reflect their intention of benefitting the public good through their business practices. Maryland became the first state to create a separate legal entity for B Corps in April 2010.

B Labs, is a non-profit which provides certification as a B Corp to qualified business applicants. The goal of B Labs is to prevent corporations from “greenwashing”, by providing a third-party stamp-of-approval for businesses that are actually fulfilling their claims. Certification is a stringent process, which requires passing B Labs B Impact Rating System. Applicants fill out a 220 question survey with questions delving into things such as recycling practices, employee demographics, community involvement, and employment benefits. B Labs compiles the results, and after tallying the points, grants certification to companies that have met the minimum passing rate.

On B Labs website, the organization features highlights of some corporations which have passed certification. Emphasized areas include employee demographics, sustainable environmental practices, and community involvement. For example, B Corporation says Method has “>50% women” as employees, has “>50% facilities LEED certified”, and that “>50% employees participate in company-wide service days”.

B Labs certification is not required for a Maryland company to register as a B Corp, but it certainly helps for the business to prove that the requirements of the Maryland law are being met. Additionally, certified B Corps can obtain discounted goods and services from other certified B Corps.

There are currently no tax incentives for B Corps at either the federal or state level. Philadelphia recently instituted a tax break for B Corps, a move that is expected to inspire other municipalities to offer similar incentives. Additionally, it is not unreasonable to assume that state and federal tax law will eventually be amended to reflect the unique nature of B Corps.

If you have any further questions about how becoming a B Corp can benefit your business, please feel free to contact our office.