Recently, New Jersey became the third state to enact something called a B corporation, which is short for “benefit corporation.” The designation is for companies that fulfill social or environmental goals, in addition to a for-profit traditional business model. The corporation must provide a “genuine public benefit,” which could include helping low-income people, defending the environment, improving health, promoting the arts and sciences, etc.
The law allows companies to designate themselves as ones who aspire to hold themselves to higher standards. The hope is that this will make the companies more attractive to consumers who value sustainable and/or charitable business practices. These socially-minded companies are also allowed to incorporate their goals into their corporate charters. This effectively cements the companies as socially conscience by making it more difficult to change their policies. This in turn allows the corporation’s founders to have some degree of assurance that its social and charitable goals will not be corrupted in the event of a sale.