Sustainable Bus. Corp.

"B” the Change: Creating a New Kind of Corporation for Hawaii’s New Economy
Video Recording of 082913 Pau Hana
Hawaii's Sustainable Business Corporation Designation

Summary
Background
Procedure
Benefits
Consultants

Summary
Senate Bill 298 was passed into law (read a copy here) by the Hawaii State Legislature in 2011 as Act 209 of the Hawaii Revised Statutes. The purpose of the act is to allow Hawaii businesses to operate in a new type of corporate structure: the sustainable business corporation (SBC). Companies that select the designation formally declare in their articles of incorporation that they exist and operate for the benefit of both owners and other stakeholders such as the community, employees, customers, and the local and global environment. Electing businesses must measure themselves against the environmental, social, and governance standards of a third party organization and they must issue an annual report indicating the benefits the company provides to its stakeholders. The SBC designation is voluntary and there is no regulatory enforcement of the law's provisions. Hawaii is the fifth state in the union to pass such legislation.

Background
The concept of a green, socially responsible, or benefit business is not new - Green America (formerly Coop America) is an organization that has been championing it since 1982 - but it has gained increased popularity in recent years as consumer purchasing patterns have shifted towards such products and services. Not only are consumers interested in sectors of the emerging green economy, such as organic food, renewable energy and energy efficiency, green building materials, and healthy lifestyle, recycled and biodegradable products, but more and more people are opting to support companies that treat people and the planet in a respectful manner. They wish to avoid companies in any industry that exploit labor, harm the environment, or ignore customer or shareholder concerns, and prefer to shop, bank, and invest in enterprises that consider sustainability as a core value in every aspect of their operations, or at least are moving in that direction.
In 1981, US SIF: The Forum for Sustainable and Responsible Investment formed to help investors integrate their values into investment decisions. The environmental, social, and governance criteria used by domestic money managers is available for review by the public at http://ussif.org.
In 1992, the Council for Economic Priorities published "Shopping for a Better World", which was the first attempt to grade major corporations on a variety of social and environmental performance issues.
Ellis Jones book, The Better World Shopping Guide first published in 2006 and now in its third edition, is a comprehensive resource that grades well-known products in popular categories.
B Corporation has been certifying beneficial businesses that meet strict environmental, social, and governance standards since 2008.
Good Guide, in addition to its website highlighting sustainable businesses, has an application that allows iPhone users to read bar codes of major retails products and instantly see social and environmental performance data. This is consumer power in the palm of your hand!
In addition to the Sustainability Association of Hawaii, there are several green business programs in Hawaii that promote green business practices and highlight businesses that embrace them. The State Department of Business, Economic Development & Tourism (DBEDT) Green Business Program has focused primarily on water and energy conservation for large commercial users. It provides technical assistance, makes awards, and sponsors an annual "Build and Buy Green Conference" at the Hawaii Convention Center (next one is April 3, 2012).
Since 2005, The Kuleana Green Business Program at the Kona-Kohala Chamber of Commerce qualifies some of its members based on company performance in the areas of product/service quality, community relations, customer relations, employee relations, and environmental stewardship.
Malama Kauai 's Green Business Program, available to any business on Kauai, integrates…It's foldout Green Map, now in its second edition, shows residents and visitors the green establishments at which they can shop and dine.
The Sustainable Living Institute of Maui and the Office of Continuing Education and Training (OCET) at UH Maui College host seminars for the Maui business community featuring leaders in sustainability across Hawaii sharing best practices and upcoming improvements in their respective fields, emphasizing ways to decrease costs and increase resource-saving practices.
Kanu Hawaii 's Honu Guide is a sustainable business coupon book and information source for green businesses. Kanu also provides discount shopping opportunities to its members at green businesses.

Procedure
Companies do not have to register with the State of Hawaii as a Sustainable Business Corporation. Instead, Hawaii corporations electing to be SBCs indicate that status in their articles of incorporation and commit to operating in manner that creates a "general public benefit," defined as a "material positive impact on society and the environment, taken as a whole and as measured by a third-party standard." In addition, SBCs may also serve one or more of the following "specific public benefits":
(1) Provide low-income or underserved individuals or communities with beneficial products or services;
(2) Promote economic opportunity for individuals or communities beyond the creation of jobs in the normal course of business;
(3) Preserve the environment;
(4) Improve human health;
(5) Promote the arts, sciences, or advancement of knowledge;
(6) Increase the flow of capital to entities with a public benefit purpose;
(7) The accomplishment of any other particular benefit for society or the environment; and
(8) Using the right to exclude, conferred by any and all patents in which the SBC has an interest, to create good jobs, uphold fair labor standards and enhance environmental protection.
Since Act 209 does not authorize government oversight of the sustainable practices of these businesses, Hawaii 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 that includes in its final draft formal responses to all questions, concerns, comments, and suggestions raised through a required 60-day public comment period on the first draft. The Benefits Director must be independent and not have any other material relationship with the company, the intent of which should allow critiques of company operations to be freely expressed. The public benefit report must be posted on the company's website or be otherwise publicly available.
All SBCs are required to use third party certification to authenticate their policies and practices. Examples include nationally recognized entities such as B Corporation (www.bcorporation.net) or Green America (www.greenamerica.org) or one of the Hawaii-based green business programs, such as the Hawaii Department of Business, Economic Development and Tourism (http://hawaii.gov/dbedt/info/energy/resource/greenbusiness), the Sustainability Association of Hawaii, Malama Kauai (www.malamakauai.org), or the Kona-Kohala Chamber of Commerce (http://www.kona-kohala.com/Kuleana/kuleana-green-business-program.html).

Benefits
While SBC designation is voluntary, businesses choosing the designation will stand out from their peers as committed to the principles and strategies of financial, social, and environmental performance. While varying levels of experience and commitment abound, the use of an objective third party standard of social and environmental performance offers businesses an objective minimum standard as well as exposure to the higher standards already in use by green business pioneers. In addition, SBCs that join the Sustainability of Association can be listed in its statewide green business directory, receive referrals to green business consultants to further their sustainable practices, and participate in collaborative promotional opportunities, including printed maps, trade shows, seminars, and collaborative advertising.
Conscientious consumers are increasingly selective about those with whom they do business, and since there are limited numbers of sustainability-focused businesses in Hawaii, pioneer SBCs are expected to attract significant amounts of attention as well as enjoy the loyalty of customers who prefer to shop, bank, and invest with their values as much as possible.
Discussion is currently underway about financial incentives for SBCs. While special tax incentives in Hawaii don't yet exist for SBCs (Philadelphia is the first government entity to provide such benefits), negotiations are currently underway with financial institutions regarding loan rate discounts for SBCs that wish to borrow capital. Additional opportunities may arise in the areas of collective procurement, which should help to reduce costs, and import substitution endeavors that could create new businesses, industries, and jobs within the state.

Consultants
Cades Schutte: Trever Asam (tasam@cades.com, (808) 521-9274)
KYA Sustainability Studio: Amy Brinker (abrinker@thekyasttudio.com, (808) 949-7770)
Maui Venture Consulting: David Fisher (df@mauiventure.net, (808) 269-1031)
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