Traditional corporations are legally bound to put profit maximization ahead of other goals. If they don’t, shareholders may sue. Benefit corporations operate under a broader definition of success – one that includes material positive impact on society and the environment. Specifically, benefit corporations must: 1) have a corporate purpose to create a material positive impact on society and the environment; 2) redefine fiduciary duty to require consideration of the interests of employees, community and the environment when making decision; and 3) publicly report annually on its overall social and environmental performance using a comprehensive, credible, independent, and transparent third party standard.
Vermont and Maryland were the first states to enact benefit corporation legislation, in 2010. New Jersey, Virginia and Hawaii followed earlier this year. New York is poised to become the seventh state to join the movement, and similar legislation has been introduced in Colorado, Michigan, Pennsylvania, and North Carolina.
Entrepreneurs with a desire to advance a social or environmental mission while generating value for shareholders now have another concrete tool for doing so. It isn’t the only tool – B Corp status is another way for a for-profit corporation to signal its intention to prioritize social and environmental benefit along with the creation of shareholder value. B Lab, the nonprofit organization that certifies B Corporations, was one of the sponsors of the California’s benefit corporation legislation.
Like many, we’re still following the evolution of the L3C (low-profit limited liability company), a corporate form just a little over three years old. Over the course of those three years nine states and two federal jurisdictions have enacted L3C laws, and according to a recent tally by interSector Partners, there are now 488 L3Cs organized across the country. The L3c movement has not progressed without controversy, but much of that has focused on the usefulness (or not) of the L3C in paving the way for foundations to fund for-profit entities via program-related investments (PRIs). A 2010 research study indicated that the ability to pursue PRI’s wasn’t, in fact, the primary motivator for most early L3C founders – that the appeal lay more in the ability to create “a for profit with a nonprofit soul.”
Time will tell which corporate form – or forms – will truly take off. For now, I’m just excited that there are an increasing number of options. May the momentum continue.
I will be leading the keynote at the Ohio Grantmakers Forum Annual Conference in October on the topic of Nonprofit Strategy in the New Abnormal and check out my recent guest blog at the Stanford Social Innovation Review.
Tell me what you think. Is any of this new or normal?
It strikes me that when municipal governments start looking to local nonprofits for help with public sector financial problems the end of civilization cannot be far off. What’s next, the mayor standing in line at the soup kitchen?
This phenomenon reminds me of a story I heard from a client who worked for a tech company. He claimed he could track his company’s fortunes by the prices at the soda vending machine in the lunchroom. When he first started at the company the vending machine was left open and the sodas were free. As the economy tightened a modest charge was imposed at the vending machine, basically to cover the cost of the drinks. “But,” he told me, “when they raised the prices again and I figured out that the vending machine was now being viewed as a profit center, I knew the company was in trouble.”
Viewing nonprofits as a revenue source for local government strikes me as the “vending machine as profit center” way of thinking. The entire tax system is off, yet we look to nonprofits rather than to tax reform. The U.S. has the highest corporate tax rate in the world – yet many large companies pay nothing at all. Let’s look to close those loopholes before we start asking the local community hospital to contribute to the city’s coffers.
We looked back to the way in which our team announced the Prize in 2008 in order to plan the 2011 Prize announcement. We found that some of the print sources we used in 2008 are long gone and while others are still around, their print readership is now far surpassed by their online readership. Some blogs have also come and gone. Twitter wasn’t even on our radar in early 2008. In two short years, the Prize team has had to rethink and revamp our communications strategy. Luckily, we have great partners in the Williams Group who are helping us navigate those decisions.
More importantly – knowledge and interest in the sector regarding the use of collaboration has changed dramatically. Lois Savage and Jerry Hirsch at Lodestar were true pioneers in understanding and promoting collaboration as a strategy that could yield bigger, better outcomes. Today, they are at the forefront of a movement.
As we worked with the Foundation Center who has built an amazing new resource on collaboration, we began to surface a dozen foundations around the country who are fostering collaboration in their own communities. For example, there are nineteen funders in Cleveland who have launched a Human Services Strategic Restructuring Pilot, while in New Jersey, The Geraldine R. Dodge Foundation is nurturing collaboration among their grantees. Plus, Whitney Johnson at the Anschutz Family Foundation in Denver is playing a pivotal role in creating a Colorado Collaboration Prize, and the Foundation For The Carolinas has built the Community Catalyst Fund to support innovative partnerships, collaboration and strategic mergers.
How exciting is that?
We’ll be working with the Lodestar Foundation and AIM Alliance in reviewing and evaluating the applications for the 2011 Prize that will be accepted between June 1 and July 16. I can’t wait to see what has been happening out in the sector since the last Prize process.
Like we found while conducting La Piana Consulting’s NonprofitNext research initiative and described in our Convergence report, today’s nonprofit sector leaders are finding innovative ways to achieve their missions through collaboration. These futurists aren’t just looking at how to combine Organization A plus Organization B. They are saying, “Why do we need to take on one model or the other or a blend of the two? Let’s start with the question: how should we organize our programs and operations to have the greatest impact on our mission?” They are essentially throwing out the old and looking – with great creativity and fearlessness – at entirely new ways to work.
As we approach the 2011 Prize, we have to ask what new ideas have great nonprofits come up with that will help inform the sector and drive the next round of innovation around collaboration? I can’t wait to see the answer.
To learn more about Sustainability and how nonprofits are participating in this growing movement, we spoke with Holly Brunk, Membership and Services Coordinator at The Natural Step Network in Portland, Oregon. She remarked on how in many ways the Sustainability field illustrates emerging trends called out in Convergence, such as sector blurring and the use of networks. By its very nature, this work must engage all sectors in developing solutions to complex problems. Brunk described how the evolution of what began as a primarily ecology-based framework into a more comprehensive vision including economic and social components has helped broaden the dialogue and even bring together those who may have traditionally seen one another as adversaries. “Adding financial and social sustainability frameworks to what has traditionally been just environmental creates more spaces for bridging that gap and finding common values,” she added.
Such cross-sector bridging is the topic of an upcoming webinar presented by the Healthy Eating Active Living Convergence Partnership, a funder collaborative seeking policy change to realize the vision of “healthy people living in healthy places.” The May 25 webinar, Strategies for Multi-Field and Cross-Sector Collaborations, will focus on partnering across fields (from health to urban planning, transportation, food and sustainable agriculture, and community/economic development) to build thriving communities. Is your organization prepared to work with others toward a more Sustainable future?
]]>As described in the New York Times, Ushahidi is being used by the Louisiana Bucket Brigade, an advocacy group dedicated to reducing accidents at Louisiana refineries, to collect and log reports of the effects of the massive oil spill in the Gulf of Mexico. It relies on witnesses to self-report via tweets, texts, e-mails and online submissions spill-related damage.
In addition to logging the reports, Ushahidi provides organizations with a platform to create community and organize. For instance, Snowmageddon: The Clean Up not only tracked snow-related problems (cars stuck, individuals in need of assistance, potholes, etc.) it encouraged individuals to report Solutions (snowblower available, shovel to share, cleanup party).
Some of the projects that are using Ushahidi:
- Sudan Vote Monitor is a Sudanese civil society initiative that used SMS to monitor the elections in the Sudan.
- Chile Crisis Map is tracking the post-earthquake crisis response and recovery efforts in Chile.
- Haiti Crisis Map is tracking the post-earthquake crisis response and recovery efforts in Haiti.
- Wildlife Trackers is a citizen science project to track wildlife in Kenya.
- Connection GeoMap, managed by Survivors Connect seeks to create a space to share critical information about trafficking and anti-trafficking activity globally, promote transparency in our efforts, engage communities and learn best practices, current challenges and needs in our global effort.
- Atlanta Crime Maps tracks crime in the Atlanta metro area.
- Stop Stockouts is an initiative to track near real-time stockouts of medical supplies at pharmacies (in a medical store or health facility) in Kenya, Uganda, Malawi and Zambia.
- The Computer Professionals’ Union in the Philippines created the initiative called TXTpower, an effort to keep an eye on the mobile phone companies by ordinary citizens.
- The Cuidemos el Voto mashup was an independent platform that helped to monitor the federal elections of 5 July 2009 in Mexico.
- Swineflu.Ushahidi.com is a site to track the Swine Flu reports coming in from official and unofficial sources.
- Vote Report India was a collaborative citizen-driven election monitoring platform for the 2009 Indian general elections.
- Peace Heroes: Unsung Peace Heroes is a campaign developed by Butterfly Works and Media Focus on Africa Foundation. The goal is to nominate people who helped do positive things during and after the post-election violence in Kenya. Kenyan heroes are ordinary people who did extraordinary things for their fellow citizens or their country.
- Congo (DRC): Deployment to the DRC Congo
- Kenya: The initial mashup, used to track reports of incidents of violence around Kenya.
- South Africa: Used to map xenophobic attacks perpetrated against non-South Africans.
(excerpted from http://www.ushahidi.com/platform)
For more information on the platform and how to get involved, visit http://www.ushahidi.com/.
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Mergers and other forms of strategic restructuring have gotten tremendous attention recently as both a sustainability and opportunity strategy in the midst of an economic downturn and the resulting decline in charitable giving.
One barrier we frequently observe in assisting organizations that are considering strategic restructuring options is the fear of losing your identity. This is an especially significant consideration in the arts sector, where artistic and organizational identity often go hand in hand. But loss of identity is not an inevitable outcome of a merger. An example of this is the pending merger of the Oakland East Bay Symphony, the Oakland Youth Orchestra, and the Oakland Symphony Chorus, who have recently decided to combine into a single corporation while maintaining their existing individual identities. This will allow them to consolidate administrative functions – thereby saving money and increasing efficiencies – while maintaining the specific programming and artistic visions that are so important to them. The merger also provides an opportunity to introduce each of their existing audiences to the programming of the other two.
When a merger does transform your identity, it can do so in ways that enable you to meet your mission in in new and more powerful ways.
Consider the example of two organizations currently in merger negotiations. Serving the same geographic area, one has worked on domestic violence issues while the other has worked on child abuse and neglect. These organizations recognized that they serve many of the same families – given the frequent co-occurrence of these issues – and that combining the organizations could enable them to serve these families in a more coordinated and streamlined way. In addition, they recognized a unique opportunity to lead their entire community in better understanding and addressing the interconnectedness of violence that occurs within the family setting, thereby increasing their capacity to address the root causes.
While strategic restructuring is not always the answer, nonprofits facing unprecedented challenges to their business models would do well to consider it not just as a survival strategy, but as a vehicle for meeting – and even transforming – their mission in ways that open up new pathways to achieving social impact.
]]>Are all nonprofits equally deserving of the full exemption, for example the symphony and the soup kitchen?
Should tax-related benefits be limited to 501(c)(3)s, or is there merit in extending these – even if at a lesser level – to other organizational forms?
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