The Many Bottom Lines Of Businesses

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Sixty-three percent of the Fortune 500, and more than half of all American businesses, are incorporated in Delaware. The state’s laws protect corporate directors and enable them to focus on the bottom line. Traditionally, that has meant maximizing profits and shareholder value.

But a new trend is emerging to counter Delaware’s influence on American corporate policy, and it’s pretty thrilling for those of us in the social enterprise sector. In April, Maryland became the first state to allow entrepreneurs to form Benefit Corporations. Also known as “triple-bottom line” businesses (so named for their consideration of people, planet, and profit), B Corps now include over 300 companies representing $1.1B in revenue, including Amazon competitor Better World Books and GoodGuide, a site that rates consumer products for safety, environmental impact, and social responsibility. B Corporation, the nonprofit behind the legislation, is growing in influence — in the organization’s hometown of Philadelphia, B Corps now receive tax incentives.

Benefit Corporations aren’t the only newfangled legal structures available to mission-driven entrepreneurs. Several years ago, Vermont created Low-Profit Limited Liability Corporations, or L3Cs (Vermont, bless those hippies, also approved Benefit Corporations in May). Michigan, Utah, Wyoming, Illinois, and New York followed suit.

I can hear some of you scoffing. How can a business optimize across multiple types of return? How can one measure social and environmental impact consistently across the full range of businesses? Is Adam Smith turning in his grave?