Since the entry into effect at the beginning of 2016 of a disposition included in Italy’s Stability Law (Law no. 208, 28 December 2015), Italy has become the world’s second country after the USA to enact specific legislation governing the formation of Benefit Companies: but what are Benefit Companies and why is Italy leading the way? How do Benefit Companies differ from certified B Corps, of which Italy, like other countries, now has many examples, from Olio Carli to Patagonia?
Lawyer Giulio Graziani, a partner with the Elexia law firm in Milan, an expert with a keen interest in CSR issues, who provides advice for businesses wanting to innovate in this area, unravels the question for us.
We interviewed him after a webinar organised by CSR Manager Network on B Corps and Benefit Companies: two different but related types of organisation.
Mr Graziani, what distinguishes a Benefit Company from a certified B Corp?
Benefit Companies originated in 2010 in the US State of Maryland: to date, 32 American states have introduced specific legislation on the question, and in the rest of the world Italy is the only country to have done so.
Benefit Companies are a new form of corporate entity legally recognised by Italy’s Stability Act, which regulates business corporations whose DNA is the pursuit of profit in a responsible, sustainable and transparent manner, to achieve a common benefit: in other words, the development of business activities with wide-ranging social benefits: for people, communities, the environment, and stakeholders in general.
A B Corp on the other hand is any corporate entity that voluntarily obtains certification through a Benefit Impact Assessment (or BIA), which is currently used by 40,000 companies around the world, and provided by B Lab, an American no-profit body: to obtain and maintain certification, the enterprise must achieve a minimum score on a questionnaire analysing its environmental and social performance and state its commitment to stakeholders in its articles of association.
There are 11 B Corps in Italy (more than 1,600 around the world, in 47 countries and 130 different sectors): they include Cometech, which is active in cardio-protection programs, the Mondora software house and the Fratelli Carli food producer.
Does one form exclude the other?
No, in fact there are three possible scenarios in Italy today: a traditional limited responsibility company can become a B Corp by obtaining certification; that same company may decide to change its articles of association and, thanks to the Stability Law, become a Benefit Company; or it can do both things: amend its articles of association to become a Benefit Company and apply for B Corp certification!
Is it worth it?
I advise enterprises to consider this new departure, for both newly formed companies and established businesses, because it is an extraordinary opportunity that allows them to introduce the principles of social responsibility and run their business in an innovative manner. This is an auto-incentive for companies to explore new avenues – corporate welfare, diversity, environmental sustainability, social policies – and achieve a concrete, measurable improvement, both for their own operations and for the world we live in.
The process is a complex one, but it offers advantages for competitiveness and reputation over the medium and long term: for example, it is a way to attract talents and also to find new consumers.
There is no question that business models are changing, this applies as much to multinationals as to SMEs and is a cross-industry phenomenon: enterprises have to decide whether to look forward and use the tools that Italy, to its credit, has introduced into its legislation.
Why has Italy already embraced this, second only to the USA?
We Italians are aware of our limits – red tape, a tendency to get round the rules – but we also want to improve and so are very interested in new ideas that can bring positive change.
We are sensitive to developments in corporate innovation, because we realise that we are the first to need new life blood to develop our entrepreneurial fabric: so we attract good ideas.
Benefit Corps are not an isolated example, we are also at the forefront in corporate governance or, more recently, in integrated reporting.
Do you know of any enterprises that have become benefit companies since the law took effect three months ago?
As far as I know, in February five companies changed their articles of association to become Benefit Companies. The only one I know that has communicated this is the Croqqer job-sharing platform, which announced the move on its website, with its new name “Croqqer Italia Srl SB”.
In your opinion, should a company announce that it has adopted these principles and, for example, changed its articles to become a Benefit Company?
I think good communication is important, which for me means truthful communication.
The law envisages sanctions for companies that release untruthful communication, and has introduced regulations that combat deceptive advertising and illegal trading practices.
Having said that, in my view when a company changes its articles, it should disclose this, especially if it is not a start-up. It can only have a positive effect, on the company itself and for the development of an entrepreneurial sensitivity to CSR.
In short, this is a good opportunity and we should use it.