The Failed Attempt to Enact Benefit Company Legislation in Australia and the Rise of B Corps
23 Pages Posted: 1 Mar 2021 Last revised: 3 Mar 2021
Date Written: March 1, 2021
A majority of states in the United States (US) have enacted benefit corporation legislation, as have the Canadian province of British Columbia, the US territory of Puerto Rico, and Columbia, Ecuador and Italy. Over 5,000 US corporations have incorporated or re-incorporated as benefit corporations under the US legislation. Under the ‘model’ US legislation, benefit corporations are required to pursue a ‘general public benefit’ purpose, defined as ‘a material positive impact on society and the environment’ and may also pursue a more specific public benefit purpose. In addition, directors of a benefit corporation must consider the effects of any action or inaction on a wide range of stakeholders of the corporation.
Benefit corporations incorporated under the benefit corporation legislation are different to Certified B Corporations, or B Corps. A benefit corporation is a specific type of company whereas a B Corp is a corporation that has been certified by B Lab as achieving a minimum verified score on the B Impact Assessment – an assessment of the company’s impact on its workers, customers, community and environment. Certified B Corps amend their legal governing documents (for example, their articles of association or constitution) to require the board of directors to balance profit and purpose. There are over 3,500 certified B Corps in more than 70 countries.
Given this history, there is understandable interest in countries that are or have considered enacting benefit corporation legislation. One of these countries is Australia. The Australian subsidiary of B Lab prepared draft legislation and lobbied for this to be enacted. However, the attempt to introduce legislation in Australia was unsuccessful and B Lab ceased its advocacy for the draft legislation in 2020. The authors explore the reasons for the unsuccessful attempt to introduce benefit corporation legislation in Australia. They also explore the parallel increase in the number of B Corps in Australia - in 2019 the Australian subsidiary of B Lab reported that Australia and New Zealand was the fastest-growing region per capita for B Corps in the world and corporations from a broad range of industries are now certified Australian B Corps. However, the authors argue that while B Lab certification achieves, in some important respects, some of what was contained in the draft benefit corporation legislation, had it been enacted, the draft legislation would have ensured greater transparency and accountability for those corporations electing to become benefit corporations than is currently the case for B Corps.
Keywords: benefit corporations; directors' duties; corporate social responsibility; stakeholders of corporations
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