The Ultimate Guide To Ethical Investing: What Are Benefit Corporations
With consumers aware of the adverse effects of company behaviors on society, changes have rapidly occurred across consumer trends and business operations. With consumers now focused on purchasing from sustainable companies, businesses are focusing on making changes that keep their customers satisfied. Although not all companies are focused on generating sustainability, many adopt these changes to maintain a positive rapport with customers.
Understanding the differences between companies that genuinely want to improve and those that greenwash consumers means decoding terminology. Learning how actions are carried out and the marketing approaches used can teach investors and consumers alike whether to trust or distrust an allegedly sustainability-focused company. Understanding how to identify the red flags and signs of sincerity toward change requires in-depth knowledge of the various approaches used to carry out such efforts.
To determine a business’s true colors, understand the concept of a benefit corporation. By understanding what benefit corporations are, you can think like an ethical investor and decide to include or exclude companies in the future. Read on to discover more about benefit corporations and how they influence ethical investing decisions.
Defining A Public Benefit Corporation
A public benefit corporation is a company that meets sustainability requirements as spelled out by legally-defined goals under the State government. While conditions for meeting sustainability requirements are part of the equation, businesses are still encouraged to maintain and maximize profit as long as they use sustainable approaches to do so. In other words, both traditional business goals of profit and newer focuses on sustainability are supported under the context of a benefit corporation.
Measuring Sustainability And Ethical Progress
A benefit corporation also requires that businesses reach specific legal goals that allow them to maintain their title as a benefit corporation. Other approaches to sustainable certification are through B Labs, which carry out routine assessments of sustainable efforts and outcomes, but to obtain accreditation, the assessments do not revolve around legally-binding business goals.
How Do Ethical Investors Make Decisions?
Ethical investors strive to make their decisions based on The Golden Rule. Companies capable of contributing the most good and the least harm to society and the environment are considered sustainable. Those unable to meet these qualifications are either excluded or placed lower on the priority list.
Note: Companies with high toxicity (think tobacco companies) are excluded from an ethical investment portfolio as they generate significant harm to humankind. Ethical investors will investigate the significance of the sustainability efforts of a benefit corporation by using quantification, a measurable process of finding the human impact value of a company’s total actions. Once this value is determined, investors can objectively decide whether investing would benefit humankind.
Ensure Real Sustainability By Understanding The Framework
Although a benefit corporation will strive to balance profit and sustainability, not every business is honest. Using accurate research and analysis methods like quantification, ethical investors can get to the bottom of what’s going on and decide if the company is carrying out the actions required to qualify as a sustainable investment.