A few years ago, Lori Most, the CEO and founder of Minneapolis-based Binary Bridge, found herself in a difficult position. Two investment firms had contacted her about BackpackEMR, an electronic medical record system that she built specifically for medical outposts in rural communities in Peru and Kenya. Board members agreed with the investors: “If we bring this to U.S. markets, we could be making a lot more money,” Most recalls.
BackpackEMR’s peer-to-peer technology enables users to update medical records without an internet connection—making it essential in some of the world’s poorest places. One investor asked if she had considered offering this tech to aid American hospitals, in cases of power outages or system failures.
Another investor told Most she could make a fortune by implementing the peer-to-peer feature in media and filmmaking. He said, “Oh, you’re never going to make money this way. You need to pivot.”
She wasn’t even slightly tempted. “I was like, ‘You’re completely missing my point.’”
As a public benefit corporation, Binary Bridge is accustomed to transparently and intentionally balancing the traditional profit-turning corporate mission with a desire to make a difference.
“Why someone adopts a public benefit forum is because it’s what gets them up in the morning and it’s not always because of profits,” says Jeff Ochs, CEO at Venn Foundation in St. Paul. His own nonprofit provides loans for social entrepreneurs, including Binary Bridge.
In the past four years, more than 80 public benefit corporations have formed or adopted public benefit status in Minnesota—including Finnegans Brew Co. and Can Can Wonderland—underscoring a growing entrepreneurial interest in social impact.
And the model is working. Finnegans has donated over $1 million to alleviating hunger since its founding in 2000, while Binary Bridge has served more than 60,000 people at dozens of remote medical outposts across the globe.
How does a public benefit corporation operate?
When the Minnesota Public Benefit Corporation Act was passed in 2014, it was called an overlay of the traditional corporation model. Minnesota is one of 35 states to adopt a benefit corporation statute, and it makes sense in a state where philanthropy and culture have historically gone hand in hand. (In 2018, Minnesota was named the most charitable state by WalletHub.)
Designed to expand the duties of directors, benefit corporations are identical to traditional corporations in every way except one: they have publicly committed to a broadly defined “social purpose” beyond just making money. “Your corporate mission is whatever you say it is. It could be really general. That’s fine, they just have to say it,” explains Sarah Duniway, principal at local corporate law firm Gray Plant Mooty. She has worked with benefit corporations in the past and penned an op-ed about the legal structure for Star Tribune.
Skeptics of this model point to the potential for diminished shareholder returns. (A benefit corporation filing makes it more difficult for shareholders to sue.) Marc Andreessen, Netscape founder and venture capitalist, infamously compared the dual-motivation business structure to a houseboat: “It’s not a great house and not a great boat.”
Jeff Ochs puts it a little differently. “What it means is that directors and officers of a corporation are required by the statute to consider both purposes,” he says. “Nobody should be saying that benefit corporations are good and traditional corporations are bad.”
So, how does one determine if a benefit corporation is truly doing good work? Start your research on a company’s website. For example, Twin Cities-based Sunrise Banks posts annual impact reports online. Additionally, many of the state’s public benefit corporations file annual mission and progress reports with the Office of the Minnesota Secretary of State that are available for online review (sos.state.mn.us, search “public benefit”).
“I think consumers and employees are pretty savvy,” says Duniway. “They’ll see through a mission that isn’t really a mission. Yes, benefit corporations could be another tool for greenwashing [deceptive PR], but that’s not the case for most of these businesses.”
Nationally, “benevolent businesses” like Patagonia, Seventh Generation, and Kickstarter are taking extra steps to hold themselves to high standards. For an annual fee (based upon yearly sales), public benefit corporations can complete nonprofit B Lab’s detailed assessment of “social and environmental performance, public transparency, and legal accountability” to become certified B Corporations, or “B Corps.” There are currently 16 Minnesota companies, including Peace Coffee and Sunrise Banks, listed as B Lab’s certified B Corps (learn more at bcorporation.net).
Could a company tout a flimsy social purpose to produce advantageous marketing? “The answer is, maybe so,” says Ochs. “That’s where public opinion, consumer education, and boycotting come in. The consumer will have to hold companies accountable. At this point, it’s not the government’s job.”
Profit vs. Social Impact
Beneath all the talk of values and benefitting society, benefit corporations are hinged upon the belief that making money and making an impact are aligned, not contradictory. It’s believing that making a profit will directly benefit their social mission in the long run, while inspiring employees and activating consumers along the way.
One of the best examples of social impact through financial success is Finnegans Brew Co., the longtime beer maker that opened its downtown Minneapolis megabrewery in 2018. Jacquie Berglund, Finnegans’ CEO and co-founder, was one of the first locally to evangelize this business model. Finnegans donates 100 percent of its profits, as well as financial and food donations, to food bank partners, to supply food shelves with fresh produce and feed families across the Upper Midwest.
“There’s authenticity with what we do,” says Berglund, “I think people see that. We’ve been going on 18 years and there have been some very lean times, and now people seem happy to support us because they know what we’ve done.”
Lori Most echoes Berglund’s beliefs that a good business will lead to larger social impact. And both believe they do more for their core missions as for-profit companies than as nonprofits. “Nonprofits are really difficult,” says Most. “They’re all applying for grants from the same places, and it’s just not always the best approach.”
It’s an especially convincing argument coming from Most. Binary Bridge was formed initially as a 501(c)3 back in 2015 but reformed as an LLC in 2016, then as a benefit corporation in 2018. She explains how much of her time during those initial years was spent chasing money: “We had had to go look for funding. All of that time we could have spent developing software we spent instead finding and writing grants.”
For workers who want to do good and pay their bills, a benefit corporation job is an increasingly attractive career move. If throwing the money you have left at the end of the month at a charity feels like putting a Band-Aid on a gaping wound, why not add “working to solve your community’s systemic problems” to your job description?
Casey Helbling, the CEO and founder of Software for Good, jokes that they want their business to “disrupt” the normal flow of money. In other words: to not just make rich white men richer.
“I believe people are altruistic and care about each other, but they’ve compartmentalized their altruism,” he says. “That’s been the M.O. for ages, and the younger generations are really seeing that you can have both a good job and a meaningful role in the community.”
In practice, Software for Good’s social impact is in web-based apps. One app called HousingLink is designed to help people locate and apply for affordable housing in their city. “We’re doing what TurboTax did for taxes and Airbnb did for hospitality, but we’re doing it for Section 8 housing,” explains Liz Tupper, director of product strategy. Software for Good also designed the app for Minneapolis’ Pride Month. “We’re making it easier to navigate complex systems so [people] can better plan for their future.”
So, why are benefit corporations gaining momentum now? Helbling’s theory has to do with growing awareness. “A lot of people say it’s good enough to make my money here and then I’ll donate there, but that idea is beginning to fade.”
One need only read today’s headlines to find examples of for-profit businesses detrimentally impacting culture, the environment, and employees. “There’s no way we can use charitable assets to undo the things businesses have done,” says Ochs. “We need to find a different solution.”
A purpose-oriented work environment makes employees 54 percent more likely to stay at a company for 5-plus years, and they’re 30 percent more likely to be high achieving employees, according to research by Imperative (a certified B Corp in Seattle). When employees believe in their company’s cause, they can do great things, says Helbling. Almost nine in 10 millennials said they would work for less pay if it meant their company’s values aligned with their own, according to a 2018 LinkedIn report. Tupper recalls how she once worked for a company that was purchased by Samsung. She had liked the work, but wasn’t intrinsically motivated to generate high returns for shareholders.
“When Samsung happened, I knew I didn’t want to change who we were or what we did,” she says. “You can totally change the model. We live in an innovative place, and you can always change how you do business.”
3 Things Minnesota Public Benefit Corporations Must Do
- Develop a mission
- Consider this mission when making decisions (note, this doesn’t mean they need to prioritize the mission)
- Publicly report the mission’s progress
3 Public Benefit Corporation Models for Giving Back
Social by Sharing are businesses that give money or resources away. These companies prioritize donating money and volunteerism.
Minnesota examples: Finnegans Brew Co., Sunrise Banks
Social by Selling are corporations that sell services or products that benefit specific underserved communities. They make a product or service that is designed specifically for a particular need.
Minnesota examples: Software for Good, Binary Bridge, the Data Bank
Social by Sourcing are companies making an impact by sourcing responsibly—employing members of marginalized communities or even paying a responsible living (higher than market rate) wage to their employees.
Minnesota examples: Peace Coffee, Fair Anita