Patagonia Among California's First Benefit Corporations

It’s not surprising that Patagonia, known for its long-term deep commitment to sustainable business practices, rushed to register as a California "Benefit Corporation," a new class of corporation for businesses whose mission is to operate in an
environmentally and socially responsible manner.

Last year, California created this new corporate charter, which went into effect January 1. The Benefit Corporation class
legally requires a corporation to pursue a positive impact on society and the environment, broadening its duty to go beyond maximizing shareholder value – profits. 

As opposed to traditional corporations which, under current law are required to prioritize shareholder financial interests above those of workers, communities, and the environment, Benefit corporations are legally required to:

1) have a corporate mission to create a material positive impact on society and the environment;

2) redefine fiduciary duty to require consideration of the interests of workers, community and the environment; 

3) publicly report annually on its overall social and environmental performance using a comprehensive, credible, independent, and transparent third party standard. 

Why is a Benefit Corp Needed?
Because current law demands that corporations prioritize profits over social and environmental concerns, shareholders can sue a corporation for spending money to address climate change, for example, if that cuts into a company’s profits. But if a corporation legally pursues Benefit Corp status, it is required to pursue those missions.

"Patagonia is trying to build a company that could last 100 years," says founder Yvon Chouinard.  "Benefit corporation legislation creates the legal framework to enable mission-driven companies like Patagonia to stay mission-driven through succession, capital raises, and even changes in ownership, by institutionalizing the values, culture, processes, and high standards put in place by founding entrepreneurs."

California joins five other states who recently passed "Benefit Corp" legislation. New York, New Jersey, Virginia, and Hawaii passed similar legislation in 2011, joining Vermont and Maryland who did so in spring 2010. More states have introduced legislation: Michigan, Pennsylvania, North Carolina, and the District of Columbia. Legislation has enjoyed strong bi-partisan support in every state.

"This is California at its best, showing there is a way to create jobs and grow the economy while raising the bar for social and environmental responsibility," says Assemblymember Jared Huffman (D-San Rafael), who sponsored the law. "With this new law, we are attracting new socially-conscious companies, investors and consumers – we’re sending a strong message that California is open for this emerging form of business."

Well known green groups supported the California’s legislation (AB 361), such as the US Green Building Council and GreenSeal,
and the bill was sponsored by the American Sustainable Business Council, New Voice of Business, and B Lab. A citizen advocacy campaign was led by Care2.com.

First Day Registered Companies:

Other companies that registered on the first day: DopeHut, Dharma Merchant Services, Give Something Back Office Supplies, Green Retirement Plans, Opticos Designs, Patagonia, Rimon Law, Scientific Certification Systems, Solar Works, Sun Light & Power, Terrassure Sustainable Land & Resource Development, Thinkshift Communications