12 Apr Three Ways to Place Social Impact at the Heart of Your Organization
This is a guest blog post by Brett Heeger. Brett is an attorney with a passion for community economic development, social enterprise, and neighborhood-level work. His law firm, Gartenberg Gelfand Hayton LLP, is a boutique corporate and securities firm serving clients in Southern California and around the world. Brett loves supporting small businesses and nonprofits, and has substantial experience helping clients to find the best legal structure, build partnerships, and structure financing opportunities to achieve optimal growth. Brett graduated from Harvard Law School in 2014 and currently lives in Los Angeles with his partner and their awesome dog. He is a member of the 49th Class of the Riordan Leadership Institute and the California Center for Cooperative Development, and is on the Board of the Brown University Club of Los Angeles.
Are you a socially-minded entrepreneur seeking ways to do good while building a financially healthy organization? These goals do not have be mutually exclusive. Potential customers (and even some investors!) appreciate the willingness of a social impact company to make social issues a priority.
As a lawyer, I’m always thrilled to meet entrepreneurs that have thought carefully about their role and the impact they can have through their company. As a social enterprise leader, you have no doubt already been working hard on infusing your elevator pitch with all of the right buzz words. And spending time to craft a strong mission statement for your company can go a long way towards building an internal culture and public image rooted in your values.
Here are three great ways to infuse your social impact values into your business.
PUT SOCIAL IMPACT IN YOUR COMPANY’S DNA
Generally, all corporate boards, officers, and certain others have important legal responsibilities to protect shareholders, called fiduciary duties. Among other things, a fiduciary must place the interests of the company over her own personal interests when making certain key decisions. For California “Benefit Corporations” and “Social Purpose Corporations,” however, a social purpose can be built into the company’s formal purpose. For these entities, when the board of directors has to make a major decision, such as whether to complete a merger, the board may (and in some cases, must) consider the company’s social purpose and impact on other stakeholders in addition to whether it would be a good financial move for the company. These special corporate forms may also require certain regular reporting and transparency standards in order to ensure the company is attentive to its social goal.
Although not strictly a legal status, there are a number of great programs that can certify businesses for doing good work or meeting certain standards such as environmental sustainability. For example, LEED Certification is a well-known program run by the U.S. Green Building Council that rates building projects and provides certification to recognize environmentally friendly design.
Obtaining one of these certifications can set your business apart from the competition. A certification can also show your commitment to social impact and how you measure that impact.
Another option is B-Corp certification. Any company (including corporations, LLCs, partnerships, and more) can apply for certification as a B-Corp through B-Lab, a 501(c)(3). B-Corp certification is not a status designated by the state. B-Corp certification for your company may require similar standards as those required to become a Benefit or Social Purpose Corporation in California. It also includes certain reporting and transparency requirements.
There are plenty of other great certification programs supporting a variety of causes, so explore if there are any that might be a good fit for you.
BUILD SOCIAL ENTERPRISE INTO A NOT-FOR-PROFIT
Grants and fundraising efforts are important tools for not-for-profits, but 501(c)(3) organizations can also earn revenue through programming. Key is that the social enterprise must be in furtherance of the charitable work. Adding an earned income element to a not-for-profit can help diversify funding streams and help ensure the sustainability of the organization. And you can still maintain all of the tax benefits of being a not-for-profit! There are plenty of rules and regulations that come with being a 501(c)(3), but for many, this is a great option to combine entrepreneurship with a strong social mission.
Important: This discussion provides general information guided by California law, and is not legal advice. If you need legal advice, please contact a lawyer. Laws and regulations may change over time, and there are substantial differences in other states and jurisdictions.