First Benefit Corporations Taking Root in RI

On the last day of the 2013 legislative session, the General Assembly enacted Rep. Teresa Tanzi’s bill allowing the establishment in Rhode Island of “benefit corporations,” companies that simultaneously pursue their commercial endeavors while also supporting social or environmental efforts.

Two years later, Rhode Island now has its first legally registered benefit corporations — or “B corps” — led by entrepreneurs who want their businesses to succeed not only in profitably making products, but also in helping the earth and the people on it.

Representative Tanzi (D-Dist. 34, South Kingstown, Narragansett) today hosted an event to draw attention to the first B corps in Rhode Island, their work for social and environmental advancement and the availability of this business designation to other entrepreneurs who wish to make a positive mark on the world.

“Rhode Island has this remarkably active and vibrant community of makers and innovators, and many in that community have wider ideals than personal advancement; they are focused on what their ideas can do for the world. I’m proud that we’ve been able to adapt Rhode Island’s laws to establish this middle ground between the corporate world and the nonprofit sector, because it gives people with great plans to use their innovations for the good of others the latitude they need to succeed. Their efforts can help our state and our economy as well as our communities, our environment and the world,” said Representative Tanzi, who added that she is interested in spreading the word that this designation exists so more corporations will consider it.

The event was held at Sachuest Beach in Middletown prior to a coastal cleanup hosted by Clean Ocean Access, an environmental initiative supported by Packaging 2.0, the first Rhode Islandcompany to establish itself as a B corp under the new law.

 Packaging 2.0, headquartered in Providence, was founded in 2002 and primarily sells and markets thermoformed plastic packaging made from post-consumer recycled materials. The company seeks to bridge the worlds of plastics packaging design, manufacturing, reuse, recycling and sustainability, to raise levels of awareness about plastic packaging pollution and drastically increase recycling rates.

The company’s founder, Michael Brown, said he became aware of the idea of benefit corporations on a 2013 ocean expedition with the owners of Klean Kanteen, a certified benefit corporation that makes stainless steel reusable water bottles. He thought it sounded like the perfect way to meld his personal passion for the environment with the environmentally conscious bent that his company already had. He created a social mission arm for his company, Mission2.Ocean, which supports a wide range of efforts and organizations on both the local and global levels that share its goals to reduce ocean plastic pollution. In addition to becoming the first B corp recognized under Rhode Island law, Packaging 2.0 also worked through a third-party certification organization to earn its separate designation as a “certified” B corp in 2014 as well.

 Through Mission 2.Ocean, his company supports Clean Ocean Access – which sponsors weekly beach cleanups around Newport, including the one after today’s event – and numerous other organizations connected to clean oceans, especially keeping plastic out of the ocean. Brown says he also pursues the company’s environmental mission by influencing his suppliers to make better environmental decisions, and by connecting the environmental activists he meets through his efforts to those in the industry, so they can better understand one another.

Brown said becoming a B corp not only better connected his company and his own environmental interests, but it also gave his company a designation that matters to the kind of environmentally conscious customers that seek his products. Among his customers is Whole Foods, which this year made Packaging 2.0 a preferred supplier, and will soon expand the use of its packaging from 100 Whole Foods stores to all Whole Foods locations.

“We offer an environmentally friendly product, so our customers are socially minded. They could buy their plastic packaging from anyone, but they value our socially conscious efforts. Being a benefit corporation helps us stand out in the pack and makes us more appealing to the customers who are in the market for our type of products,” said Brown.

At today’s event, in addition to presenting Clean Ocean Action with a $500 check, Brown presented a representative from Secretary of State Nellie Gorbea’s office with his company’s annual impact report, a requirement under the law establishing the B corp designation. The reportprovides a detailed analysis of the corporation’s impact on society and the environment over the course of its first year as a Rhode Island B corp.

The report lists the wide range of activities in which the company participated, from presentations at environmental solutions conferences to speaking with suppliers about taking a pledge to prevent spilling plastic pellets into the ocean to shoreline cleanups like today’s.

“The opportunity for benefit corporations and social enterprise to effect real, lasting social change while engaging in productive commercial activity and job creation is remarkable,” said Secretary of State Gorbea. “I can’t think of a better place to leverage this new sector than right here in Rhode Island, with our rich legacy of entrepreneurship and world-class creative talent. The Rhode Island Department of State is ready to help Rhode Island businesses succeed and prosper.”

The B corp designation is completely voluntary, and gives the directors of corporations more leeway to pursue socially responsible initiatives. While regular corporations can pursue activities that have a social or environmental benefit, such as making donations to community organizations, these actions must always be in the long-term interest of profit, or shareholders could seek the removal of corporate leaders or sue the company.

 Under the law establishing B corps, businesses need the support of two-thirds of all classes of their shareholders to convert into (or out of) benefit corporation status. Once a company becomes a benefit corporation, its leaders are accountable to those shareholders both for making a profit and for pursuing its mission through every aspect of their decision-making process. Examples of well-known benefit corporations include Vermont-based King Arthur Flour Company, an employee-owned company committed to environmental sustainability and volunteerism, andCalifornia’s Patagonia, Inc., a high-end outdoor clothing outfitter that funds environmental causes.

While only 12 other states recognized the designation when Rhode Island passed the law in 2013, B corp status is now available in 31 states. The designation does not cost the state anything, because it does not provide any tax breaks and has no effect on traditional corporations.

“Allowing benefit corporations to incorporate in Rhode Island encourages business growth and investment in Rhode Island, helps us attract socially conscious entrepreneurs to the state, provides high-quality jobs and provides businesses with the freedom they need to help solve problems in society,” said Representative Tanzi.

There are currently four benefit corporations that have registered with the Secretary of State’s office in Rhode Island, in various stages of incorporation.

Increment Studios, also located in Providence, is another company that has incorporated as a B corp since the law was established. Founded by Cynthia Poon and Maeve Jopson, both 2013 Rhode Island School of Design graduates, its goal is to make toys for children with special needs that promote the inclusion of all children. The two set out to address problems they see with toys designed for kids with motor or vision impairments: they often look like utilitarian devices rather than fun playthings, and they tend to be very expensive. They wanted to create toys that would be attractive not only to kids with special needs, but also to their siblings and friends to promote play among them. Jopson and Poon worked closely with Meeting Street School and Sensation Station, a therapy center, to develop Increment’s first product, the “O-Rings,” large stuffed rings of various colors, textures, filling and weights to help with tactile stimulation, gross motor skills, spatial awareness and all types of open-ended play. That product is expected to launch this fall.

Increment’s social mission is to furnish schools, therapy centers, children’s museums and other places with some of its products to help children with and without disabilities play together.

Poon and Jopson, who both participated in several entrepreneur and social enterprise programs before starting Increment, said they were unaware of the concept of benefit corporations when they started, but knew they wanted their company have a positive social impact in addition to being profitable.

“From the beginning, we knew that we wanted to be more than just a business that creates products for kids. We design our business and our products for social change, for a shift in perception of disabilities, and for the advocacy of inclusion through play. Being a benefit corporation provides a clear direction for our company as we aim to do well as a business and have a positive social impact for kids of all abilities. We hope that the benefit corporation status sets a standard for more and, eventually, all businesses to come,” said Poon.