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Start-Ups

What is a Benefit Corporation?

By Townes Haas   |    October 26, 2016   |    1:23 PM


A typical corporation’s core goal is to make money, but increasingly corporations are motivated beyond profit, aiming for tangible social or environmental goals. Who are these companies and what are benefits and drawbacks to this model?

There are many preconceptions about businesses. One of these is that firms should only exist to make profits, as this is the best model for businesses. Notwithstanding, if you take a closer look at profit mandates these are not always positive; those in leadership roles may feel that operating a company with solely profit in mind entails much less choice over decisions and is not always the best for a sustainable future in line with personal goals and ethical considerations. This is where benefit companies come in; they offer a solution to this quandary by allowing firms to not only seek profits but also offer potential benefits to our planet.

Advantages

There are many advantages to opening a benefit corporation. For example, due to the legal status that such companies operate under, entrepreneur’s philanthropic goals are protected and they are not obliged to only exist for profit. Instead of legally compelling leadership to only consider the shareholders who elected them, this legal status allows them to evaluate the position of stakeholders ensuring the company addresses the social and environmental challenges they deem important.

In today's world, corporate accountability is seen as more crucial than ever. Discerning customers increasingly chose to spend their hard-earned money on products from companies who align with their personal values. Benefit corporations are able to differentiate themselves from the competition, gaining profits due to their ethical outlook.

Disadvantages

There are drawbacks. For example, benefit corporations have expanded reporting requirements. This means they have to provide an annual report, devised by a third party, to shareholders to demonstrate whether that the company is operating according to its stated philanthropic goal. Additionally, how easy it is for benefit corporations to raise capital from angel investors and others, remains to be seen; especially as regulatory and legal problems may still arise given the dual purpose of benefit corporations.

Benefit Corporations in Canada

There are a number of benefit corporations in Canada. For example Bullfrog, based out of Toronto, provides green electricity that comes exclusively from wind and hydro facilities certified as low impact. It  supplies Canadians with 100% renewable energy solutions, not only giving them power but empowering them to create a sustainable world for future generations.  On top of that Bullfrog Power donates 10% of its profits to organizations that support sustainability.

Enviro-Stewards Inc in Elmira, Ontario, provide industrial, commercial and institutional facilities with sustainable solutions to improve their businesses. They simultaneously ensure increased margin on sales while reducing environmental footprints and improving social conditions. For example they provide services such as energy conservation and greenhouse gas reduction planning or help with product design for environment and sustainability strategizing.

Oliberté is a Canadian premium leather goods company that sources its  goods from free-range, hormone-free sources in Africa, where the items are also made. It creates and maintains sustainable jobs in Africa whilst bringing excellent quality garments for consumers in Canada.