Kentucky voices

Kelly Flood: Businesses can embrace social responsibility and profit

December 20, 2013 

Rep. Kelly Flood is a Lexington Democrat.

Several years ago, a group of business leaders was asked a simple question: Would they make an investment that would reduce short-term earnings but increase their company's long-term profitability? Nearly 80 percent said "No."

In today's corporate culture, where it seems success is only measured in three-month increments, this should come as no surprise. It is a little sad, however, that only a fifth of business leaders realize their job is to focus on the full season, not the next few quarters.

Fortunately, there is a growing movement showing that there is an even better way to play the game. These companies are proving that they can do well by doing good, and that money alone is not the only barometer of a healthy bottom line.

In almost 20 states and nearly 30 countries, more than 800 companies have solidified their commitment to these values by becoming Public Benefit Corporations, a legal designation that changes their very DNA and strengthens the bond among investors, employees and the communities they serve.

As Delaware's governor wrote this year when his state became the latest to authorize what are often called B Corporations, the goal is to "harness the power of private enterprise to create public benefit."

I have pre-filed a bill that would make this type of incorporation possible in Kentucky. If the General Assembly adopts it — the concept already has strong bipartisan support — it would be a significant step forward for our business community and the commonwealth as a whole.

While they may share some of the same goals, public benefit corporations are not nonprofit organizations. Instead, they focus on how to conduct their business in a sustainable way, from conserving energy and resources to supporting local supply chains and donating a significant portion of their profits to charity and neighborhood needs.

This is not something that can be accomplished simply by filing a document with the Secretary of State's office and issuing a press release; instead, they would be called upon to balance their profitability with social responsibility and to report on their beneficial work at least once every two years. Some of the more well-known companies that have chosen this path include Ben & Jerry's, Patagonia and the online craft store known as Etsy.

For business leaders who believe this approach hinders rather than helps make money, there is a growing body of evidence otherwise from such well-respected groups as Goldman Sachs, Harvard Business Review and the U.S. Department of Energy.

B Corporations are sturdier, too, with another study indicating they were two-thirds more likely than their private counterparts to survive the recession that began six years ago. They are also much more likely to invest in renewable energy, to have a higher percentage of women and minorities in management and to give their employees at least 20 hours of paid leave annually for community volunteering.

B Corporations are attracting a growing percentage of young adult workers who want to further their careers and the causes that are important to them. Helping that along is the fact that several prestigious universities, including Columbia and Yale, are offering college loan-forgiveness programs to graduates who pursue these types of jobs. Over the years, businesses have found that they really can do more with less — less energy, less waste, less employee turnover. B Corporations embrace that equation but take it to the next level, understanding that more attention to their surroundings means they are more likely to thrive for years to come.

Every state should enact this legislation, because it costs nothing and yet can make a significant difference in the bottom line, both for the companies and the communities that benefit.

Eventually, I'm confident that even the 80 percent of business leaders who won't look more than three months ahead will learn that B Corporations are not the ones taking a step back. They are.

Rep. Kelly Flood is a Lexington Democrat.

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