This article has been reviewed according to Science X's editorial process and policies. Editors have highlighted the following attributes while ensuring the content's credibility: The term "benefit corporation" is becoming increasingly familiar as a label for companies with a hybrid commitment to the social good and profit-making. Interestingly, the term itself has taken on a hybrid meaning.
"Benefit corporation" is a legal structure recognized by most U.S. states, but the term is often used synonymously with "B Corp," a certification granted by B Lab, a global NGO. The confusion is understandable, given that B Lab was the principal lobbying force behind the adoption of "benefit corporation" as an official legal entity. "The legal framework is viewed by proponents as a way to help benefit corporations 'lock in' their social commitments.
It layers on additional requirements that traditional for-profit legal forms don't have, related to nonfinancial reporting and the resolution of conflicts over these goals," says David Lucas, assistant professor of management at the Costello College of Business at George Mason University. Lucas' recently published paper in Journal of Business Research uses AI to shed light on what happens when a benefit corporation becomes a B Corp. Does the dual affiliation mean a redoubled commitment, or "greenwashing" in stereo?
The paper was co-authored by Clara Scheve of Hamburg University of Technology and Joel Gehman of George Washington University. The researchers took advantage of Minnesota's unusually robust monitoring regime for benefit corporations. "A few studies now have documented relatively low compliance across states, and seemingly few penalties," Lucas says.
"Minnesota is the only state we could find where the Secretary of State published every benefit report that it received, and if it doesn't receive one in the annual timeframe, it revokes benefit status." However, Lucas emphasizes that there is a difference between reporting regularly and reporting substantively. The disclosures were by no means equally meaningful or forthcoming. "There's huge variation," Lucas explains.
"Some of the reports are just the cover sheet that's required and a couple of sentences. Others have long, well-structured reports with a lot of detail and quantitative evidence." The researchers aimed to use report quality as a signal of sincerity and effectiveness in pursuing social or environmental impact goals. But first, they would have to construct a balanced and comprehensive barometer of quality, over and above very coarse criteria such as length.
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