OUR GREAT MINDS

    by Shannon Mitchell and Sameena Sarangi

    Dual Purpose Corporations: 
Expanding Your Gain

    Corporate social responsibility is creating a buzz in today’s marketplace, especially among those seeking innovative business strategies.

    Corporations are shifting their business models from focusing solely on maximizing profit for their shareholders, to a model that creates value for all of their stakeholders. The concept of stakeholders has expanded; employees, contractors, clients, consumers, creditors, government, environment, and local communities, to name a few, are now often thought of as stakeholders.

    This shift is reflective of an understanding that sustainability and profitability are not mutually exclusive. This strategy is particularly appealing to the newer generation of entrepreneurs, employees and consumers alike, who seem to focus more on corporate social responsibility than previous generations. As the current workforce progresses through their careers, this trend is likely to gain momentum in light of a shift in priorities, legislative changes, and growing social movements.

    Legislative Response

    The legal structure of corporate entities is ever-evolving. The latest form is often being referred to as a dual purpose corporation or benefit corporation. The mandate of a dual purpose corporation has been expanded to what is known as having a triple bottom line – people, planet and profit. These businesses essentially operate as traditional corporations; however, they have higher standards of corporate purpose, as well as accountability and transparency towards all of their stakeholders.

    In Canada, British Columbia was the first province to create a legal process to operate as a dual purpose corporation. The hybrid business model is called a Community Contribution Company, which allows the corporation to operate for profit (capped at 40%) while also attracting investors who are keen on not only the business but also, the societal value it creates. Presently, other provinces are also in the process of developing legislation relating to dual purpose corporations. Approximately 30 US states have implemented legislation to establish benefit corporations, with many other states in the process of creating similar statutes.

    In jurisdictions that do not have existing or proposed legislation for dual purpose corporations, such as Alberta, adjustments can be made to the constating documents of a corporation. This allows the directors and officers flexibility in how they conduct business operations. These amendments can include a requirement to act fairly in considering the interests of the corporation’s stakeholders.

    Social Movement

    Similar to certifications introduced by Fair Trade for coffee and LEED for commercial buildings, B Lab is a non-profit organization that advocates for sustainable business by issuing Certified B Corporation (B Corp) status to corporate entities. Unlike the legislative changes discussed above, B Lab does not alter the structure of a corporation. Rather, it acts as an independent third-party that grants certification to those who meet the B Lab standards for social and environmental performance, public transparency and legal accountability. Thus, B Corp certification allows an entrepreneur to run a for-profit company with operating elements of non-profit status. These elements are beneficial to a company, as consumers are becoming more conscious of their dollar’s political power and are looking for ways to support socially responsible businesses. At an increasing rate, these conscientious consumers are even willing to pay a premium in support of such causes.

    It should be noted that this social movement is not advocating for leaders to be any less driven to grow their businesses or bottom lines. Free enterprise promotes economic growth and grants corporations the freedom to implement dual goals – making a profit while accomplishing some good in the world. To date, B Lab claims to have certified over 1,500 B Corps from more than 40 countries and 1200 industries, and these numbers continue to grow.

    Is it for Everyone?

    We are beginning to see more companies driven by tangible social and environmental benefits, alongside profit. For those considering moving towards a dual purpose structure, it can potentially result in reaching socially conscious consumers who may have a positive impact on your market share. However, this undertaking may be burdensome due to the requirement for increased transparency, such as higher levels of shareholder and public reporting. Therefore, depending on where your business operates and the nature of your industry, this change in corporate structure may or may not be right for you.

    In Canada, people are encouraged to strive for a high quality work life. For some, this may be based primarily on income; for many, income alone may not be enough. A well-balanced career often includes financial stability as well as other considerations, including physical wellbeing, environmental health, intellectual engagement, social respect, and acceptance. If this holds true on an individual level, it seems appropriate that a similar shift is making waves in the business world. Businesses may find a competitive advantage from voluntarily expanding their focus, whether formally or informally. Broadening corporate goals to include a mixture of people, planet and profit can distinguish an enterprise by offering a progressive way of doing business.

    Shannon and Sameena are associates at Du Plooy Law. Du Plooy Law is a boutique corporate commercial law firm based in Calgary, AB.

    Did you enjoy this article?

    OGM - Our Great Minds

    * = required field

    We respect your privacy and will never share your information with third parties.