With the recent signing of Act 209, Governor Abercrombie made Hawai'i the fifth state in the union to enact legislation allowing for the formation of a new type of corporate structure: the sustainable business corporation (SBC). The former Senate Bill 298 of the 2011 legislative session allows companies to formally declare that they exist for the benefit of both owners and other stakeholders, such as the community, employees, customers and the local and global environment.
Nationally, corporations that operate for public benefit are often referred to as B Corps (B is for beneficial“check out bcorporation.net) and certified B Corps. These entities must meet strict environmental, social and governance standards. Per the terms of Act 209, Hawai'i registered corporations that select the SBC designation must so indicate it in their articles of incorporation. They must also serve one or more of these public benefits: Provide low-income or underserved individuals or communities with beneficial products or services; Promote economic opportunity for individuals or communities beyond the creation of jobs in the normal course of business; Preserve the environment; Improve human health; Promote the arts, sciences, or advancement of knowledge; Increase the flow of capital to entities with a public benefit purpose; The accomplishment of any other particular benefit for society or the environment.
Since Act 209 does not authorize government oversight of the sustainable practices of these businesses, Hawai'i SBCs must appoint a Benefits Director or Officer to monitor compliance with the law and produce an annual report that highlights the company's stakeholder benefits. The Benefits Director must be independent and not have any other material relationship with the company, which allows criticism of company operations to be freely expressed. The public benefit report must be posted on the company's website or be otherwise available.
All SBCs are required to use third party certification to authenticate their policies and practices, which should lessen the likelihood of "greenwashing." Nationally recognized B Corp or Green America standards, one of the Hawai'i-based green business program standards established by the Hawai'i Department of Business, Economic Development and Tourism, the Sustainability Association of Hawaii, Malama Kaua'i and the Kona-Kohala Chamber of Commerce all provide this crucial service.
While SBC designation is voluntary and can only be revoked by the company, businesses will choose the designation to stand out from their peers. While varying levels of experience and commitment abound, the objective third party standard of social and environmental performance offers systemic integrity that should satisfy cynics and proponents alike. Nevertheless, promotion is one of the primary benefits of SBC designation, as proven by the various Hawai'i green business programs' web-based directories, printed maps, trade shows, seminars and collaborative advertising. All SBCs will be encouraged to join the Sustainability Association of Hawaii, the statewide green business membership and educational organization, in order to be featured in the online directory and gain access to consultants and resources that can further their sustainable practices.
The public relations benefit matters because conscientious consumers are increasingly selective about those they do business with, and because there aren't that many sustainability-focused businesses in Hawai'i. Businesses that are highlighted with an SBC designation are likely to experience the loyalty of customers who prefer to shop, bank and invest with their values whenever possible. As such businesses experience success and gain market share, competitors take notice and will often adapt accordingly to tap into shifting consumer priorities, the net effect of which can transform entire industries and help bring costs down. The overall consequence is that a new norm is defined for how businesses within any sector can operate as responsive and responsible business citizens. Act 209 helps to facilitate this transition to a regenerative economy
Michael Kramer is Managing Partner and Director of Social Research at Natural Investments, LLC and a Board Member of the Sustainability Association of Hawaii and the Hawaii Alliance for a Local Economy.