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This just in…with a vote of 23-7 AB 361–California legislation that would create a new corporate form called a benefit corporation– successfully passed through the California State Senate today. It is now bound for the State Assembly for a concurrence vote. With a majority vote in Assembly, it will proceed to Governor Jerry Brown for final approval and to be signed into law.There is still time to show your support for AB 361. Letters of support from your business or company can be sent to Governor Brown’s Office (see Governor Brown’s contact information), with a copy sent to the bill’s sponsor Assemblymember Jared Huffman (see Assemblymember Huffman’s Sacramento office contact information in the bottom left margin)If you are catching up on the benefit corporation legislation in California, here are a few posts that will walk you through what it’s all about and the journey thus far:The Story of AB 361 (Benefit Corporation) As Told Through Blog Posts:

Note: This post has been edited to update the final Senate Floor vote count on 8/22/11 (which was 23 Ayes, 7 Noes, 10 non-votes). The bill needed 21 votes to pass. 
Here is a recent fact Sheet prepared by Assemblymember Jared Huffman‘s office outlining AB 361—-California’s “benefit corporation” bill. Read below to learn key points about the bill.

Fact Sheet AB 361 (Benefit Corporations)
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To continue the conversation, you can contact your California state senator to support or comment on the bill.  Also, you can read more about the journey of AB 361 in this post that recaps the progress of California’s benefit corporation legislation.

California State CapitolIf you have been following the journey and progress of AB 361— California’s bill that would create a new corporate form for social entrepreneurship called a benefit corporation— from idea to law (see here for a rundown of recent posts), you may be wondering where AB 361 stands right now. And, if there is anything you can do to support this social innovation legislation.Good news, we have updates! And, there are a few simple ways to show your support and cast your ‘vote’ for policies designed for social innovation.

Nod by Senate Appropriations

As California Assemblymember Jared Huffman (the bill’s sponsor) noted in this brief interview taken in July 2011, AB 361 was awaiting final vote from the State Judiciary Committee and, on approval would  head to the State Senate Appropriations Committee.

AB 361 did pass State Judiciary and, most recently, was referred forward by the CA Senate Appropriations committee (as per CA Senate Rule 28.8) since the bill will not have a significant fiscal impact on the state budget.

Up Next: Senate Floor

As early as next week the California State Senate will review the benefit corporation bill in its second reading and will vote on it after a third reading.

Then: Back to State Assembly for Concurrence Vote

Once AB 361 passes in State Senate it will be sent over to the California State Assembly for a final vote, called a concurrence vote.

Finally: to the Governor’s Desk

Passing in the State Assembly, AB 361’s final stop will be Governor Jerry Brown’s desk for final review and signature.

Cast your “Vote” for AB 361

If you are a state resident, you can contact your California state senator and express your support for AB 361 and other legislation that reflects the changing paradigm of business—with the new emphasis on social entrepreneurship. You can mention that how entrepreneurs and consumers in California and specifically your district want options that enable corporations to incorporate not only to generate profit but to have a net positive impact on society.

You can read more about California’s benefit corporation legislation in this Fact Sheet for AB 361 released by Assemblymember Huffman’s office.

How do you get from idea to state law?

In following the journey of California’s AB 361 and the number of other bills across various states that would create (or have created) a new corporate form called a benefit corporation—learning the impetus for the legislation is often as interesting as

photo: votesmart.org

photo: votesmart.org

understanding the process.

And the story of California’s AB 361 is particularly interesting. You can watch California State Assemblymember for the 6th Assembly District Jared Huffman talk about the crowdsourcing origin of AB 361 and other key points of the bill below.

Assemblymember Huffman is the sponsor for AB 361, which was recently voted through the California State Senate Committee on Banking and Financial Institutions and also successfully passed through the State Judiciary Committee.

California Benefit Corporation Law, From a Legal Lens

How can new entrepreneurs, founders, social enterprises be ready for benefit corporation legislation? Why might new businesses opt to incorporate as a benefit corporation? What makes benefit corporation compelling—from a legal standpoint?

Meet Donald Simon, Attorney and Co-Author of AB 361

These are a few of the questions we asked Donald Simon, Attorney and Partner at Wendel Rosen Black & Dean and Co-Chair of the Legal Working Group. Simon is an environmental activist-turned attorney who has remained steadfast in his passion for conservation causes —having founded two 2 environmental non-profit organizations. He has been a lead attorney in drafting and advocating for AB 361.

We caught up with him after the California State Senate Judiciary Committee hearing on California’s benefit corporation legislation, AB 361.

Watch the Interview

Now it’s the Judiciary Committee’s Turn

california state capitolAs you may recall, last week AB 361— the California bill that would create a new corporate form called a benefit corporation— was presented by sponsor Assemblymember Jared Huffman and witnesses (including certified B corporations, attorneys, and investors) at the California State Senate Committee on Banking and Financial Institutions. It marched forward from there with a resounding vote of 5-1.

The next stop was the Senate Judiciary Committee which heard arguments for AB 361 on July 5th 2011.

How did it go?

With many many more bills on the docket this time around, Senator Noreen Evans— Moderator for the Judiciary Committee– warned early on that argument and testimony for all bills would be kept brief.  When AB 361 was presented, Assemblymember Huffman once again introduced the legislation and outlined his three-prong argument for the bill.

Attorney Donald Simon testified to the legal structure and rationale behind AB 361, emphasizing the reaching effect it could have by creating a unique reason for entrepreneurs and founders to opt to incorporate in California instead of other states, in order to be able to be registered as a benefit corporation. He also provided counter-arguments to opposing concerns—emphasizing the complementary relationship that b corporations have already demonstrated to have with non-profit sector.

A number of certified B corporations and supporters (Innov8Social included!) also provided ‘me too’ testimony.

Opposition to AB 361 also voiced their concerns that California may not yet be ready for a new corporate form for socially responsible business and/or availability of other hybrid structures and potential opposition from California non-profit organizations.


How did the Judiciary Committee vote?

In a vote of 3-0 the bill was dubbed ‘on call’ — to be forwarded to Senate Committee members who were absent at the time of the vote.

By the following day, the final vote was in: 4-0 with one abstaining vote. AB 361 moves forward.

Is there video of the hearing?

Calchannel.com streams State Assembly and Committee hearing sessions online. You can find the Judiciary Committee testimony here: http://www.calchannel.com/channel/viewvideo/2810.

Keep a lookout around 1:30 for the beginning of AB 361 argument.


What’s next for AB 361?

Next is the Senate Appropriations Committee in August after the summer recess, followed by the Floor of the State Senate, then back to Assembly, and then to Governor Brown’s desk. That is the path that AB 361 will have to successfully follow to become California Law.

    How can social innovators and supporters understand the legislative process better? 

    Simple, get involved.
    That’s what Innov8Social did this past week when we joined a number of social enterprises, state legislators, and policy makers at the State Capitol in Sacramento to observe and testify in support of AB 361 in a Senate Committee hearing.  AB 361 is the California bill that would establish a new corporate form in California. Businesses that elect to incorporate in this new form (i.e. as benefit corporations) would do so with the purpose of creating a general public benefit with their business.
    What is a general public benefit?
    The legislation outlines a general public benefit as a “material positive impact on society and the environment“—taken as a whole and assessed under a 3rd party standard.

    AB 361 at CA Senate Committee on Banking and Financial Institutions

    The June 29, 2011 hearing for AB 361.AB 361’s sponsor, Assemblyman Jared Huffman delivered the first remarks to the California State Senate Committee on Banking and Financial Institutions, chaired by Juan Vargas.

    He outlined key points of the legislation, which was submitted by a number of his constituents.  A few key points he noted:

    • incorporating as a benefit corporation would be completely voluntary
    • benefit corporations would be required to show material positive impact
    • benefit corporations would be required to meet higher standards of accountability and transparency
    • benefit corporations would create a way for consumers to contribute to social impact through their patronage
    • the concept of stakeholders (including the environment, community) would expand on the fiduciary relationship that exists currently between corporations and shareholders to maximize profit.
    • a version of the benefit corporation bill has already been passed in 6 states
    Several witnesses then delivered testimony on the basis of their support of AB 361. These supporters included:
    • Ryan Williams of Method — a scientist at Method–a company that aims to do more than business as usual spoke about Method’s aim to improve the world we work in through supporting infrastructure changes such as AB 361.
    • Don Shaffer — an investor and President & CEO of RSF Social Finance attested to the hundreds of millions of dollars that have been invested in B corporations and underlined the interest of investors in funding social enterprises.
    • Donald Simon — an attorney and partner at Wendel Rosen Black & Dean and Co-Chair of the Legal Working Group & Founder of 2 environmental non-profit organizations pointed out the social entrepreneurial roots already tied to California and the need to update the arcane view of fiduciary duty in the state.
    • John Montgomery — an attorney and Co-Founder of Montgomery & Hansen and Co-Chair of the Legal Working Group behind the bill noted that AB 361 would make California a leader in social enterprise.
    • William Clark — attorney and partner in Drinker Giddle and Reath LLP who has been integral in formulating the model benefit corporation legislation that has been passed in 6 states.  He mentioned that he and B Lab (the organization co-sponsoring the bill) have been working on California’s legislation for the past 2 years.
    A number of other witnesses provided brief testimonial support for AB 361 including leaders from: svt group, green age 360, One World Futbol, inNative, Worklore, Innov8Social, and others.
    Was there opposition?

    There were speakers who voiced opposition to AB 361. This included members from the California Association of Non-profits who were concerned about the impact AB 361 could have on state non-profit organizations seeking funding, noting a potential competition for resources.Attorney Steven Hazen also voiced concerns about the impact of any modification to fiduciary duty standards and the impact on shareholders. He also noted his support of AB 201, a bill proposing the creation of a blended corporate form called a flexible purpose corporation.

    Did AB 361 pass?

    After about an hour of testimony and answering of questions from Committee members, AB 361 went to vote. It was passed by the Senate Committee on Banking and Financial Institutions 5 (in favor) – 1 (against) – 1 (abstained).

    It passed through the Committee.

    What’s next for AB 361?

    It is due in the California State Judiciary Committee next week where it will face a similar process of presentation, witness testimony, and questioning from Committee members.

    While in social innovation exploration mode, last month I reported back from an interesting conference on sustainable enterprise, in which we learned a few key buzzwords in the field.  One was the “Green MBA“—with special focus on triple bottom line accounting.

    Which makes me wonder, is there a parallel “social innovation” LL.M course of study?
    An LL.M is a postgraduate law degree (a Masters in Law) that is typically a one-year, full-time program. It is often pursued to specialize in an area of law. For example there are LL.M programs in taxation, environmental law, international law, and intellectual property.
    With legislative innovations such as the benefit corporation and B corporation gaining traction, it seems that it would be useful and helpful to have attorneys who specialize in this emerging field.  Four pioneering states have already passed benefit corporation legislation. In California, the benefit corporation bill (AB 361) passed a vote in the state assembly 58 to 17, and New York’s benefit corporation legislation (A4692-A/Silver) is heading to the governor’s desk…With the connection between social innovation and law becoming a little more foreseeable than Mrs. Helen Palsgraf and harm caused by an ill-fated newspaper-wrapped package, it is food for thought to consider what tools and methods law students and attorneys have to study this subject further.

    It would be great to hear feedback on any programs you know of, you can also find Innov8Social on Facebook and connect on this topic there.

     

    When delving into any field there is often special field-specific terminology that helps define and explain core concepts and ideas. Sustainable enterprise is no different. While attending the Sustainable Enterprise Conference I came across a few industry-specific buzzwords related to social enterprise, social entrepreneurship, and social innovation that were mentioned throughout the day. Here’s a rundown:

    1. Triple Bottom Line

    The “bottom line” for a company generally refers to profits. Triple bottom line results encompass people, planet, and profits (it is also called TBL or 3BL). It is the key performance indicator (KPI) for assessing a company’s success in the social enterprise context. The term, in fact, has been adopted by the United Nations as well as other organized bodies focused on sustainability. It calls for companies and organizations to focus on various affected stakeholders (social, environmental, financial) rather than solely the shareholders. Learn more about the Triple Bottom Line on Wikipedia, including supporting arguments and criticisms of the term.


    2. Greenwashing

    Greenwashing refers to the misleading or deceptive advertising or spin on products and services that make them appear to be environmentally-responsible when they may not be, or more environmentally-friendly than they actually are. Though there do not seem to be universal guidelines to determine the true “green” factor for a business, the Federal Trade Commission (FTC) has identified voluntary guidelines for environmental marketing claims. Greenpeace also outlines criteria for spotting “greenwash”.

     

    3. Carbon Off-Setting

    Carbon offsets refer to investments/donations to environmental projects and initiatives for the purpose of offsetting unavoidable carbon emissions. Products or services that label themselves as “carbon neutral” often take a two-step approach: 1) reduce their own carbon emissions (reducing waste, recycling, reusing, conserving); and 2) offset unavoidable emissions by funding initiatives that reduce greenhouse gases. The CORE Initiative website offers insight on identifying the “most influential” carbon offset programs.

     

    4. AB 361

    AB 361 is the title of the legislation being proposed in California to create an official “benefit corporation” corporate structure. The proposed benefit corporation would be a voluntary structure that would enable CA corporations to pursue triple bottom line goals. AB 361 was introduced by CA Assemblymember Jared Huffman.

     

    5. Green MBA

    Green MBA refers to graduate business management programs that examine in-depth the triple bottom line reporting and the complex interconnectivities between issues of business, environment, sustainability, management, conservation, and social justice. Two premier schools offering Green MBA’s represented at the Sustainable Enterprise Conference were Presidio Graduate School and Dominican University of California.

    Read More:

    I had the chance to attend the Sustainable Enterprise Conference in Sonoma this past Friday. It was an opportunity to get plugged in on local efforts, campaigns, and ventures in the realm of sustainability.It was a great experience—I was struck by the sense of community within the sustainable enterprise movement. Like a tuned ecosystem–many of these companies collaborate, pool resources, and both support and are supported by a growing infrastructure of conservation and social responsibility  Here’s a high-level overview of the event and sessions I attended (note: there were a number of other workshop options)…with links so you can continue your research into the various orgs, speakers, and concepts mentioned.sustainable enterprise conference
    Welcome by Genevieve Taylor (Partner, CircadiaOne), Brad Baker (President/CEO, Codding Investments), and Robert Girling Ph.D. (Author).Keynote address “California Legislation for a Sustainable Future” by California State Assemblymember for the 6th Assembly District Jared Huffman, JD

    Keynote address “Ecological Sustainability and Economic Drivers” by Maggie Winslow, Ph.D. (Academic Dean, Presidio Green MBA)

    Keynote address “Green Energy in the Golden State Under a Brown Administration” by Panama Bartholomy (Deputy Dir., Effiency and Renewables Division, CA Energy Commission)


    Workshop: “Straus Family Creamery Strategic Planning” panel including Edward L. Quevedo (Sr. Counsel & Chair of Sustainability Practice, Paladin Law Group, LLP), Sarah Isabel Parriott (Sustainability Strategy PM, Paladin Law Group), and Deborah Parrish (CFO, Straus Family Creamery), with special guest Albert Straus (Founder of Straus)

    Keynote address “Pulp Non-Fiction: Changing the Paper Industry” by Jeff Mendelsohn (President/Founder, New Leaf Paper)

    Workshop: “Behind the Scenes with B2B B Corporations: Building the Vision and Infrastructure to Shape, Support, and Scale the Sustainable Business Economy” panel including Matt Reynolds (CEO of Indigenous Designs), Jonathan Storper (Partner & Chair of Sustainable Business, Hanson Bridgett LLP), and Carolyn McMaster (Principal, ThinkShift Communications)

    Workshop: “Localization and Sustainability: Tales of Success” with panel including Mike McGuire (4th Dist. Sonoma, County Supervisor), Tom Scott (VP and GM, Oliver’s Market), Nancy Bailey, (GM, Quivira Wineyards & Winery), and Evelina Molina (Co-Founder, North Bay Institute of Green Technology)

    Lessons Learned, Call to Action and Closing Statements by Oren Wool (Executive Director, Sustainable Enterprise Conference)

    Read More: