Click anywhere on Our CI4SI Model to learn more and to see examples of each business type within the continuum!
What is a Social Impact Legal Entity?
Social Impact Legal Entities for the time being are for-profit companies.
The legal entities that are most common right now, in 35 states and the District of Columbia have approved Benefit Corporations in some form.
The B Labs group has done a great job leading the spread of Benefit Corporations across the United States as an option for a legal entity. Several states have other options, in addition, or as a substitute to a Benefit Corporation. Oregon, Washington, Texas, California, all have some other legal entities as well to be able to identify yourself as a Social Impact company and keep that as a core part of why you exist.
Back in 2012, Patagonia incorporated as a Benefit Corporation in California. The founder of Patagonia, Yvon Chouinard, said that he did this or a couple of reasons.
He incorporated as a Benefit Corporation to make sure that his legacy would be in place as he prepared to transition the company.
He wanted to ensure that the Patagonia brand and the logo would not be used to just throw on any old jacket, and to make sure that the environmental support plus the responsibility that he felt very strongly about would be maintained. Incorporating as a Benefit Corporation also lets his investors know that this is going to be a core part of what the company is doing, that Patagonia is going to spend money on research & development to produce organic cotton, make sure that their reuse program tells people to not buy a new Patagonia jacket and to just fix your old one, as well as that it may change the profits of the organization.
Interestingly, these values have actually grown the company in the past several years since they've been implemented. Incorporating as a Benefit Corporation or Social Impact Legal Entity is something that your investors may have a response to. Patagonia is somewhat protected from the responses of its investors because these values are legally embedded into why Patagonia exists, to be a socially responsible or environmentally responsible company.