35 Pages Posted: 8 Jul 2013 Last revised: 11 Jul 2013
In recent years lawyers have become increasingly active in the field of for-profit social enterprise and sustainable business. This is nowhere more evident than in the design of new organizational forms such as the low-profit limited liability company (L3C), the flexible purpose corporation, and the benefit corporation. In this emerging field, sustainability is perhaps the most prized quality as well as its most versatile construct. This Essay contributes to the debate over new legal forms by analyzing the multiple meanings of sustainability in this context. The analysis demonstrates the importance of distinguishing between the social enterprise as a dual mission or double bottom line endeavor (i.e., one that pursues both profits and a non-pecuniary mission) and the sustainable business as a triple bottom line endeavor (i.e., one that pursues the tripartite goals of profits, social equity, and environmental sustainability -- also known as people, planet, profit), and the critical yet unappreciated differences between the two types of undertakings.
Social enterprise and sustainable business each attempt to solve a different problem, and these problems differ vastly in scale. In the case of social enterprise, new forms such as the L3C and flexible purpose corporation address a relatively discrete and concrete problem: how can mission-driven for-profit businesses expand access to capital without endangering their missions, enabling them to combine the most advantageous features of the for-profit and nonprofit forms. The ability of new forms to achieve these aims has been extensively discussed, but relatively little has been said about the non-pecuniary missions of such businesses other than that they be legally charitable, social, or confer a public benefit.
In contrast, the sustainable business movement is more ambitious and specific in its aims: it seeks to enlist private enterprises in a global struggle to avert humanitarian disaster and ecological catastrophe. Although it has been little remarked upon, the benefit corporation form provides a good model for how triple bottom line businesses may be organized. At the same time, the benefit corporation could, if accepted as the model or archetypal social enterprise, serve as a Trojan horse for environmental sustainability by imposing an environmental mandate on every social enterprise, thereby eliminating the distinction between social enterprise and sustainable business. No longer could a social entrepreneur simply follow her bliss if that bliss is deemed environmentally unsustainable. The problems created by imposing an additional non-pecuniary bottom line on dual mission social enterprises have been neither acknowledged nor resolved.
Keywords: social enterprise, sustainable business, benefit corporation, L3C, organizational forms, double bottom line, triple bottom line, social entrepreneurship
JEL Classification: D21, K22, L20, L21, L33, L39, M13, M14
Suggested Citation: Suggested Citation
Katz, Robert A. and Page, Antony, Sustainable Business. Emory Law Journal, Vol. 62, No. 4, 2013; Indiana University Robert H. McKinney School of Law Research Paper No. 2013-24. Available at SSRN: https://ssrn.com/abstract=2291209
By Edward Rock