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Huffman bill would reclassify companies that pursue social, environmental goals

By CATHY BUSSEWITZ
THE PRESS DEMOCRAT

A bill that would allow companies to incorporate in a way that demonstrates their commitment to social and environmental goals is close to passage in the Legislature.

The bill, AB 361 by Assemblyman Jared Huffman, D-San Rafael, would create a new class of companies called “Benefit Corporations.” Companies under the umbrella could focus on implementing social and environmental ideals, in addition to generating a profit.

Each company would be required to create an annual report on its positive impacts on society and the environment.

“Many companies want to do more for social responsibility, for the environment, but they don’t want to get sued for their decisions,” Huffman said.

Under current law, California companies exist to conduct business in a manner that maximizes shareholder value. Companies that make decisions to prioritize environmental or social values over profit are at risk of lawsuits from shareholders.

The bill was passed by the Assembly and Senate, and it needs final approval of amendments in the Assembly before it goes to the governor’s desk.

Opponents fear the new class of corporations could be less accountable to the public, and say there should be more dialogue about the proposal.

“We’re creating, frankly, massive change to the corporate structure in California, and part of what we’re not seeing are proper oversights for these new corporations,” said Jim Anderson, president of the California Society of Association Executives, a group with 1,300 members that hail from trade and professional associations. Anderson said the bill includes limits on why and by whom a company can be sued.

Nonprofit organizations were not really a part of the crafting of the law, said Ken Larsen, director of public policy for the California Association of Nonprofits. Larsen worries the new benefit corporations may seek tax advantages, a perk that nonprofits are losing.

“Right now the tax benefits for nonprofits are under great pressure,” Larsen said.

The bill was sponsored by B Lab, a nonprofit organization that certifies companies as “B Corporations.” That certification is similar to organic or fair-trade, but evaluates how a company conducts its business practices as a whole.

The bill would not require companies to attain such certification. Instead, companies would select a set of environmentally and socially conscious standards developed by a third party such as B Lab, and then evaluate its own performance on those standards.

“The transparency requirements are the heart of the legislation,” said Jay Coen Gilbert, co-founder of B Lab. He said shareholders will have expanded powers to hold companies accountable for adhering to those standards, including legal action.

The bill was modeled after similar legislation in Hawaii, Maryland, New Jersey, New York, Vermont and Virginia. Many businesses have signed on to support the proposal, such as Solar Works in Sebastopol.

“It’s the right thing to do for our business, and it’s the right thing to do for our planet,” said Laura Goldman, vice president of Solar Works.

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Dig Deeper

Watch a video of Assemblyman Jared Huffman explaining his bill in an interview with Innov8Social.





7 Responses to “Huffman bill would reclassify companies that pursue social, environmental goals”

  1. Catherine West says:

    Unconstitutional violates 14th Amendment it that AB361 violates “It [is] intended, like plastic bags, to be applied selectively,..in violation of the equal protection provision of the Constitution that all laws must be applied uniformly.” Should be brought to the floor and challenged by Republican Senators. Also 10th Amendment – environment does not belong to either State or Federal Government. God gave enviroment He takes care of to mankind…not mankind as social-group-think for its own special interest. AB361 should Stopped from progressing as Law.

  2. BigDogatPlay says:

    As the bill proponent I’d say that B Lab, despite being a non-profit, has a financial stake in it. And there would seemingly be no recourse for investors if companies make stupid decisions, so long as they are green about it?

    Sorry Mr. Huffman but…. shenanigans!

  3. Victoria Hogan says:

    This legislation is motherhood and apple pie with some Ben & Jerry’s on top.

    It doesn’t hinder corporations from organizing to seek to maximize profits and to do so through creating goods and services but it opens up commerce to wider goals with benefits to the community.

    Most people want to encourage new businesses and the jobs that flow from them. One way to do that is through minimizing litigation. So this has the potential to strenghten California’s business climate and keep us competitive with the states who’ve already adopted this form of business.

    Assemblyman Huffman should be commended for finding creative solutions to our economic troubles.

  4. Steveguy says:

    ” The bill was sponsored by B Lab, a nonprofit organization that certifies companies as “B Corporations.” That certification is similar to organic or fair-trade, but evaluates how a company conducts its business practices as a whole.

    The bill would not require companies to attain such certification. Instead, companies would select a set of environmentally and socially conscious standards developed by a third party such as B Lab, and then evaluate its own performance on those standards.

    “The transparency requirements are the heart of the legislation,” said Jay Coen Gilbert, co-founder of B Lab. He said shareholders will have expanded powers to hold companies accountable for adhering to those standards, including legal action. ”
    ______________________

    How much did B Lab and their cronies ‘donate’ to Huffman ? This sure sounds like political favors for profit. Oops, NON-profit, while they laugh all the way the the banksters.

  5. David says:

    @ Greg Karraker

    Locally the politicians do it all the time. In Santa Rosa they have decided that Friedman’s deserves protection from competitors. In Cotati they have decided to protect Oliver’s Market. In Rohnert Park they are trying to protect local groceries from the evil WalMart. Cities have banned “chain” and “big box” retailers to protect local merchants.

    A business should rise and fall on it own merits, let the marketplace decide how and if they want to spend their money. That is the American way, I least I thought it was.

  6. Rick says:

    This law would certainly put an end to a lot of speculation in green projects. Investor generally like to get a fair return on their investments. If I invested in a company and all of a sudden a law is passed to protect them from investor lawsuits, so they can pursue goals that were not in their perspectus, or decide to change direction that loses money, on purpose because they decide it is better for the planet, I would at the very least pull my money. Current investors would be screwed, nothing new. New money would be very hesitant to get involved. Good luck. Good luck wiht the Global cooling/warming/climate change/not changing/whatever.

  7. Greg Karraker says:

    The purpose of business is to create goods or services that people approve of, and show their approval with their wallets. If those goods or services advance the general welfare, that is a welcome effect, but not a requirement. (If it were a requirement, the entire chewing gum industry would vanish.)

    One purpose of government is to serve as a referee that ensures that all businesses create legal products and services, and that they compete fairly. They are not entitled to impose their own social agenda on the free market.

    For example, if a state legislator thinks solar panels are a good idea, let him buy the overpriced things for his own use. In a free society, such as we were until recently, he would not be able to tilt the playing field to favor businesses he likes personally, and to disadvantage those that do not satisfy his whims.