Friday
June 13
2014

Carolina Gherghi, Constanza Connolly, Soledad Noel and Fernanda Mierez

The Path Toward a B Corp Law in Argentina

Editor’s note: This article originaly appeared in Spanish on NextBillion en Espanol. It was translated by Carlos González-Rivera.

Recently, commerce, and, consequently, enterprises, have been deemed responsible for several of the sustainability problems that ail the planet. In response to the situation, and in order to reverse this perception, companies have incorporated social, ethical and environmental perspectives, such as Corporate Social Responsibility (CSR). Despite these actions, enterprises still have a long way to go to acquire real protagonism when accepting the challenge to act in favor of sustainability*.

On the path to become protagonists of change, a new business model that integrates social and environmental purposes is emerging. This spirit for change urges companies to focus on the creation of long-term economic value (as opposed to short-term profitability), while generating social value.

In Argentina, this trend towards a more sustainable economy is illustrated by the growth of B Corporations (Benefit Corporations), which arrived in the country and Latin America along with Sistema B**, a B Corps partner. These companies consider financial performance a tool – not a goal – and maximize value to all stakeholders (employees, suppliers, the community), not just shareholders. There are currently 100 B Corps in South America.

Also, notions such as conscious capitalism, inclusive businesses, triple impact businesses, and ethical consumerism, are increasingly widespread and accepted in our society. All these issues become important items in governments’ public agendas, on the one hand, as well as in the academic world. (Today, major business schools in Argentina offer specialization and training in these areas).

And, thus, we ask: What should the legal framework be for B Corps in Argentina?

In Argentina, legal entities are classified in three sectors: a) private (commercial companies); b) public; and c) third sector (civil associations, non-profits). The current system is fragmented due to the fact private organizations must opt between becoming NGOs or commercial companies. Thus, for-profit B Corps that also have social or environmental goals would not currently have an adequate legal status for their type of business.

In light of this legal void, and of the need for the legal system to take heed to contemporary social and economic demands (there are more than 950 B Corps in 30 countries representing 60 industries), we, as part of a team of lawyers, were invited by Sistema B to form the B Legal Group. The main purpose of the Group is to draft a bill to grant legal protection to this new type of company in order to offer legal safety and foster its development. By the end of 2014, the B Legal Group should have the bill ready, which will be submitted to the Argentinian Congress.

The three main aspects of the bill are:

(i) The business purpose to create material impact for society and/or the environment. That is, to redefine the social interest on B Corps, which will no longer be just to maximize profit, but also to create social value by introducing the concept of social interest to civil society.

(ii) The way in which a B Corp managers should lead their businesses: Their decision-making process must not only consider the interests of their business partners, but that of all stakeholders, too, as well as their social and environmental purposes or objectives. This would mean that partners may not request administrators to adopt decisions that would contradict said interests, nor could they make them responsible for placing the fulfillment of those duties ahead of maximizing profit.

(iii) The obligation to report to independent third parties, under transparency standards, about their social and environmental behavior to certify that they are fulfilling their business purpose.

Until such laws are passed, commercial companies that become or are born as B Corps may adopt the following internal procedures to reflect their specific purposes and rules:

  • (i) Reform the corporate purpose and/or including an article in the bylaws that specifically defines those special social purposes;
  • (ii) Encouraging stockholders to consider said concepts; or
  • (iii) Write up rules for the operation of the administrative body in order to set guidelines to manage the social business.

We believe that the principles of autonomy that apply to corporations would allow the adoption of any of the aforementioned procedures.

Finally, we believe that the State should be actively involved and support the development of this new sustainable business model, which provides benefit for the community as a whole. Such support should be comprised of actions, including incentives, access to credit facilities, and consideration for public contracting and purchases.

Without a doubt, this new inclusive business model is here to stay and will continue to grow, making it everyone’s responsibility to attempt to reorient organizations and prepare them for the economy of the future.

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* Ten years later, the Global Compact is still the largest worldwide initiative for business sustainability; The United Nations Conference on Sustainable Development, or Rio + 20, was convened to obtain renewed political commitment in favor of sustainable development.

** Sistema B is an organization that fosters the creation of companies that use the power of business to solve social and environmental problems.

Categories
Entrepreneurship
Tags
business development, corporate social responsibility, public policy, regulations