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Arizona companies that seek to create a positive impact on society – as well as a positive return for investors – now have a chance to apply for a benefit corporation class as new legislation takes effect today.
Goodmans Inc., a Phoenix-based office furniture dealer, is the first in the state to receive the new B Corp designation.
Arizona is one of three new states, along with Minnesota and New Hampshire, who passed the legislation in their most recent legislative sessions. Twenty-seven states now offer the benefit corporation class, and more than 1,600 companies have received it.
“Under the current legal structure, there are no legal protections in place to make a profit and create positive impact,” said Seed Spot co-founder and CEO Courtney Klein, who helped get the legislation passed. “Benefit corporations changes that. A company can now designate what public benefit they have. This legislation will change the legal structure. When you file for B corporation you dictate what the company is all about and no one can change that.”
Goodmans has several philanthropic efforts and believes taking care of their employees is key to a healthy work environment.
The new class of corporation requires companies to create a material positive impact on society and the environment and to meet higher standards of accountability and transparency.
A benefit corporation designation gives the entrepreneur protection when raising capital to ensure the mission of their business continues, proponents say. Investors are protected because the ideology cannot be changed over the years. And company founders can feel protected that after they step down from a company their business focus also continues.
“It gives businesses and entrepreneurs more freedom because they can enjoy the protection,” said Holly Ensign-Barstow, policy associate with B Lab, the original authors of the legislation that helped pass the first such bill in Maryland in 2012.
Goodmans’ vision statement, “We will change our community,” goes along with the company’s realization that its competitive advantages are the direct result of the quality of its people and their engagement with the company’s purpose, Goodman said.
“If that purpose resonates with an employee’s personal values, then we have a better chance to engage their heart as well as their mind. This kind of commitment translates to better customer care, more innovation and improved performance,” Goodman said in an email. “Of course, you can’t just pay lip service to such an ambitious purpose. To engage employees who believe what we believe, we need to validate our ideals with third-party verification. And that’s exactly what becoming a B Corp is for us: a validation that we are doing what we say we are doing. It’s a signal to our employees and future employees that we are serious about our beliefs.”
Goodman wants to see Arizona become a leader in helping companies discover their purpose.
“Imagine an employment brand for Arizona that is about employee engagement,” Goodman said. “This will happen when the state’s business leaders recognize that the principles that lead to B Corp status are highly compatible with capitalism, competition and profitability.”
Seed Spot jumped at the opportunity to work on this effort, getting help from B Lab, a Pennsylvania-based nonprofit whose mission is to use the power of business to solve social and environmental problems.
“For us it was all about creating more of a culture that embraced companies that have social impact, anything from startups to existing businesses,” Klein said.
Qualified companies can go through an attorney or go through the filing process to get designated by the Arizona Corporation Commission.
The public affairs team of Goodman Schwartz, who has expertise in passing legislation, was contracted by Seed Spot to help navigate through the process.