Why We Need Benefit Companies
Striving for equality and equity in business is an idea whose time has come. However, in Australia there is no framework for companies to pursue purpose alongside profit. B Lab Australia and New Zealand wants to introduce legal reform to enable companies to opt-in to become a benefit company. A benefit company registration will allow company directors to pursue both profit-making and the public good, which considers all stakeholders in decision-making, not only those with a financial interest in the company.
"There is a critical need for businesses to step up and build a sense of trust and confidence with the community,” says Alicia Darvall, Executive Director of B Lab Australia and New Zealand, “becoming a benefit company will allow people to confidently support private enterprise."
B Lab Australia and New Zealand is advocating for a new voluntary corporate structure. This new structure will let existing for-profit companies choose to enshrine the triple bottom line principles of "profit, people and planet" into their constitutions. The voluntary structure will expand directors' duties to require directors to consider the interests of all stakeholders, and report on social and environmental performance as well as financial indicators.
"The Benefit Company embodies a sustainable approach to business which recognises the responsibility of companies to their many stakeholders, from shareholders, employees and customers through to society-at-large," according to Phil Vernon, Managing Director of Australian Ethical.
This change will give company directors legal protection to consider public benefit when making managerial decisions, provide companies with a way to adopt policies that create social, environmental and economic benefit, enshrine these values in the company constitution and attract impact investment. It also provides certainty for shareholders, directors and officers in change of control situations providing a clear framework and legal protection for company directors to stay mission-focused throughout these transactions.
"Becoming a benefit company will allow us certainty to pursue a broader social purpose alongside profitability and help catalyse a shift in how business success is defined," says Allan English, Founder and Executive Chairman of Silver Chef Ltd.
By passing changes to legislation, Australia will become a world leader in advancing business alongside social impact objectives. Joining over 4000 benefit corporations in the US, where a similar legal reform was agreed to across 32 US states, and also in Italy.
According to Yvon Chouinard, Founder of Patagonia Adventure wear in the US, "Benefit corporation legislation creates the legal framework to enable mission-driven companies like Patagonia to stay mission-driven through succession, capital raises, and even changes in ownership, by institutionalising the values, culture, processes, and high standards put in place by founding entrepreneurs."
B Lab Australia and New Zealand hopes the Australian government will embrace this initiative and ensure benefit companies become synonymous with success in business creating a fairer and more inclusive economy for all.
Please register your interest if you would like to be involved or follow this legislation reform push.