Whole Foods MarketIt wasn't so long ago when labeling a particular brand of coffee as "Fair Trade" or a building as "LEED certified" required an explanation. Nowadays, such terms are widely understood. Someday soon, that might be the case when you hear a company described as a "B corporation" (short for "benefit corporation").

Thanks to a recent California decision to make the B corporation mission -- to boost social good and generate profits -- legally binding, the trend, which has been building for a while, should have even more market legitimacy.

Legal Recognition for a Social Conscience

In early January, California joined Vermont, Maryland, New York, New Jersey, Virginia, and Hawaii in legally allowing companies to specify they are pursuing social good as well as shareholder value in their charters. Benefit corporation bills have been introduced in Colorado, North Carolina, Pennsylvania and Michigan.

Well-known outdoor apparel brand Patagonia was one of the first California companies to seek the B corporation status after the law went into effect.

Traditional corporate law focuses solely on maximizing shareholder value, forcing many entities to seek nonprofit status or else face the possibility of shareholder lawsuits. B corporations are defined as "a new type of corporation which uses the power of business to solve social and environmental problems," according to the nonprofit company B Lab, which certifies benefit corporations under a process similar to those used to designate Fair Trade goods or qualify LEED construction.

About 100 companies, mostly privately held, possess legal B corporation status right now, although 517 companies have been certified as B corporations by B Lab. You've probably heard of some of them, and even use their products. Method and Seventh Generation are two of the best-known B corporations.

Benefit Innovations

The currently lackluster American economy is a constant reminder that many corporations did the wrong thing in their pursuit of short-term profits over all else. We're all still experiencing the ill effects of the financial crisis fallout.

However, some B corporations can help show us the silver lining of innovation and doing business differently, not to mention the exceptional promise in more enlightened business models that make the world a better place.

For example, restaurant Busboys and Poets, a D.C.-based benefit corporation, is doing well enough to expand its locations. Not only is it a hybrid corporation that joins commerce and compassion (and pays tribute to poet Langston Hughes), but it's a hybrid concept altogether, merging a delicious menu including vegetarian and vegan options with fair trade shops, books, poetry readings, community engagement, and political activism.

According to a recent Washington Post feature, Busboys and Poets restaurants use local organic beef, cage-free eggs, biodegradable cutlery for takeout, environmentally responsible cleaning products, and wind power. In addition, its employees are treated exceptionally well in an industry that often skimps on worker benefits; the lowest wage is $10.25 per hour, and they receive paid sick leave and health care for full-time workers.

Clearly, the elements Busboys and Poets has incorporated into its business put the "benefit" in the concept of a B corporation. And guess what? It still generates a profit.

The Beneficial Spirit

Some publicly traded companies may not have B corporation status, but they share the spirit of social good that permeates benefit corporations.

Take Google (GOOG), which has a philanthropic arm called Google.org, whose projects are specifically for "addressing a social challenge and serving the public good," with a focus on climate change, clean energy, and global health.

Whole Foods Market (WFM) has always made it clear it cares about community and environment as well as near-term profits. For example, the grocer donates food to food banks and shelters, and several times every year, it holds "5% Days," when 5% of the day's total sales are donated to local nonprofits or educational organizations.

Both of these companies are very successful and highly profitable. Some of their initiatives may not sound like they're driven by "maximizing shareholder value," but over the long haul, they most certainly are.

The increasing acceptance and awareness of benefit corporations helps underline the fact that despite conventional wisdom, for-profit entities' beneficial, benevolent actions don't necessarily hamper profits, but can actually enhance them. That kind of win-win situation is a benefit to all, and offers a shot of hope for the American economy's future.

Motley Fool analyst Alyce Lomax owns shares of Whole Foods Market and manages a socially responsible portfolio for Fool.com. The Motley Fool owns shares of Whole Foods and Google. Motley Fool newsletter services have recommended buying shares of Google and Whole Foods.

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Jose Dejesus


January 30 2012 at 2:21 PM Report abuse +2 rate up rate down Reply
1 reply to Jose Dejesus's comment

Being liberal to the max, California must embrace it's illegal population...........like embracing a rattle snake.

January 30 2012 at 6:13 PM Report abuse +1 rate up rate down Reply

The US Constitutuion says to defend the borders and that hasn't been done by any President, Repub or Democrat because the corporations will get their cheap labor and will not have to pay any or very little taxes. Every state is becoming like California. The environment does need to be protected - without it we all die.

January 30 2012 at 12:29 PM Report abuse +4 rate up rate down Reply

This is typical TOLERANT,progressive, liberal democrat Toro Stuff.
Their over regulation is chasing business and the jobs they supply from our state.
If California was a major corporation they would be forced onto bankruptcy.
I'm 70 years old and have lived in california for most of my life.
Every year we give the schools more money and the results continue to plumit.
I have lost count of how many tyimes our UNION/environmentalist/democrat controlled legislature has RAISED taxes to cover the deficit.
EVERY time the taxes are raised the deficit increases.
Business is fleeing Clifornia in staggering numbers.
They are leaving to to escape the burdern of high taxes, over regulation and in search a better educated workforce.
Just like Obama the California democrat controlled Legislature is owned and controlled by the extreme environmentalists and the Public Employees unions.
Why do you think Obama REFUSED to approve the Keystone Pipeline and it's many near future jobs?
The Pipeline is probably the MOST researched in all OF THE THE THOUSANDS OF MILES of oil pipe lines in America.
There are enough oil pipe lines in America to circle the earth.
Just like the Califfornia Legislature the extreme environmentalist OWN OBAMA and will not allow him to approve the Keystone Pipeline.
As California goes so goes the Nation.
Is California what you want for America?

January 29 2012 at 7:15 PM Report abuse +5 rate up rate down Reply
3 replies to joper201's comment

An Illegal Alien's Guide to the Top Five Best Places to Live In America

When “relocating” to the United States, it’s best to avoid states that have selfishly put the interests of their legal residents ahead of yours with laws that hinder your access to jobs and benefits. But many attractive destinations remain, endorsed by millions of illegal aliens already living in each.

1. California

California’s state motto “Eureka” (I have found it!) aptly applies here. The state's population includes 3.2 million illegal aliens -- almost 24% of all illegal aliens in America -- have chosen the Golden State as their preferred domicile.

Despite its $26 billion budget deficit, the state spends $21.5 billion dollars annually subsidizing illegal alien health care, education, welfare, other state benefits and criminal justice. Every California native-born household chips in $2438 each year to help.

January 29 2012 at 7:03 PM Report abuse +4 rate up rate down Reply

We need more people like Marxine Waters running this country...

Speaking of gangsters and bankers, Waters has still faced no punishment for her felonious involvement in the OneUnited Bank scandal. Democrats regard the law not as the skeleton of society, but only as a tool for rewarding friends and punishing enemies. Therefore laws are applied selectively. This is why immigration laws are not enforced, and why even brazen criminals like Charles Rangel continue to sit in Congress rather than face the prison time they so richly deserve.

Not long ago we spent a fortune building up a nuclear arsenal so that we would not have to live under communists. The money was wasted. Soviet conquest could not have been more shameful, corrupt, and repressive than where liberals are taking the country.

January 29 2012 at 7:02 PM Report abuse +3 rate up rate down Reply

The leaders in California are very innovative and do everything in their power to regulate things in their state that will have any preceived negative effect to the environment. This is commendable as they are the first in many of these environmental catagories. The state is very much in debt and will probably not be able to survive on its own. I wonder where the money will come for this? Nobody seems to care,

January 29 2012 at 5:15 PM Report abuse -2 rate up rate down Reply

Are they serious... what ever happened to "Free Market".. Any business can take on any philosophy and market themselves accordingly. Let people decide where they want their money to go.. There are any number of business models (Buy America, Union Made, Elfen Magic...) and it is not for the government to pick winners and losers. It seems like a legitimate function of the department of commerce to decide what the public can expect from a particular phrase for example "free trade Coffee".

January 29 2012 at 4:00 PM Report abuse +1 rate up rate down Reply

Oh, God. I live here and it can be a beautiful state, but this is ridiculous. Creating a separate class of corporations. Absolutely ridiculous.

January 29 2012 at 2:08 PM Report abuse +5 rate up rate down Reply

Ben and Jerry's. Good icecrame and good business. makes a lot of money. both very smart men. Now Gov Moonbeam or as most know him by Gov opg CA has been elcted now three times. CA needs him and more like him and more corps that do the right thing not the right wing thing (Porfit above all else).

January 29 2012 at 1:22 PM Report abuse -4 rate up rate down Reply

This article was brought to you by Gov. Moonbeam and Ben and Jerry's....

January 29 2012 at 9:59 AM Report abuse +4 rate up rate down Reply