The following is excerpted from Michael’s letter of support for the Maryland B Corp legislation (HB-1009):

First, it rewards companies that affirmatively serve the public interest in the state. The proposed legislation effectively creates and strengthens a brand for good corporate behavior.  The B-Corporation label recognizes companies that are committed to undertaking their business with high labor, environmental, and community standards, even if this commitment reduces its profitability.  HB-1009 effectively rewards a company embracing these goals by helping consumers also motivated by these values to find and selectively purchase their goods and services.  It similarly rewards socially responsible businesses by attracting like-minded investors.

Second, it increases market efficiency. Some argue that whenever companies sacrifice profits for other goals like high labor or environmental standards, efficiency is lost.  This, however, springs from an incorrect definition of efficiency, since it focuses exclusively on whether or not consumers are being offered the cheapest goods and services.  A better definition of efficiency focuses on whether consumers are getting the best value for goods and services. Value includes quality of the product and quality of the company, and decisions about value depend entirely on consumer choice.  It is an axiom of a market economy that it functions more efficiently when consumers have the best information possible to make their market choices.  The B-Corporation label does this, effectively matching consumers and investors committed to improving the state’s public interest with companies that share these values.

Third, it boosts the state economy. In addition to the benefits that flow from greater market efficiency, the legislation will tend to drive more Maryland residents to buy goods and services from local companies and drive more investors to place money in local companies.  Local purchasing and local investing boosts local jobs.

Fourth, it supports the broad objectives of economic development. There is a growing body of evidence that locally owned companies, compared to absentee owned businesses, generate for every dollar spent in them higher economic multipliers.  That means more income, wealth, jobs, tax receipts, and charitable contributions for the state.  Additionally, the evidence also suggests that these businesses are particularly good a promoting smart growth, tourism, entrepreneurship, and low-carbon footprints—all goals officially embraced by the state of Maryland.

Finally, it accomplishes all these worthy objectives at virtually no cost. All that is required by the bill is voluntary action by companies who wish to apply and comply, and minor administrative declarations and paperwork by the state.  It would be difficult to identify another proposed measure that would deliver as much “economic stimulus” at as small a cost.

The only reservation I have about this bill—a minor one—is that I would like to see it go further.  I would like the bill explicitly to embrace the carefully nuanced criteria for social performance designed by B-Lab (the architects of the B-Corporation label).  And I would like to see explicit preferences in state procurement and in disbursement of economic-development incentives for B-Corporations.

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