Maryland…the California of Impact Innovation and Enterprise?

The first state to introduce and adopt Benefit Corporation and the only state so far to adopt Benefit LLC legislation, Maryland is poised to lead but may be losing its first mover status in the movement for common good enterprise. This is one of the concerns raised in a soon-to-be-released ChangeMatters report by Megan Burkhart, Adrian Sanchez, and Ana Castro, MBA students affiliated with the Center for Social Value Creation.

The first Benefit Corporation law went into effect on Nov. 1, 2010. As of mid-December 2012, 11 other states have passed and are implementing legislation. California now offers two new corporate structures—the Benefit Corporation and the Flexible Purpose Corporation. And in the background, the L3C movement, which promotes a different hybrid corporate structure, exists in 9 states and one tribal nation.

Most laws are very similar to the original Maryland law, which is based on a model bill written by William H. Clark, Jr., Drinker Biddle & Reath LLP, an attorney working with the nonprofit association B Lab. But our researchers found that some states are including modifications or are actively implementing the law. that relate to implementation of the new law, In New Jersey, if a benefit corporation hasn’t delivered a benefit report for a period of two years, the corporation forfeits its status. Virginia publishes information on the business filing agency’s website. Maryland is the only state offering a Benefit LLC option.

Two cities have developed incentives for socially-responsible companies: San Francisco, which has aligned procurement incentives with a preference for benefit corporations bidding on city contracts, and Philadelphia, which is the first city to adopt a tax incentive for sustainable businesses.

Maryland started strong and some of us advisors and interesteds have contributed informally (here and here and here, for example), but the state has not yet made it easy for companies to file or to get information or support.

There was talk early on in the Benefit Corporation legislation campaign about Maryland becoming “the Delaware of socially-reponsible business.” This idea never sat comfortably with me, as that state leads in small business filings in large part because of looser rules. In the case of Benefit entities, entrepreneurs commit to doing more—not less—for the environment or community than other companies. And to doing more—not less—reporting. As the student researchers discussed their finding with me and their advisor and professor David Kirsch, he suggested that perhaps a more apt goal would be to become more like a California of the East Coast, in terms of innovation and social responsibility in business.

The leadership Maryland showed by stepping in front to try new corporate forms can be extended and enhanced, and can make a difference in building more sustainable—and community-sustaining—local enterprise. This will happen best as more is done to fill in the gaps of responsibility, accountability, connectivity, strategy, and funding.

Maryland can become a lab for innovation in socially-responsible business, social enterprise. In the consulting work that we do with clients, ChangeMatters is trying to make more meaningful connections to economic development and impact investment, and embraces common good enterprises in diverse industries and under traditional, Benefit, and nonprofit corporate structures.

What’s next? Join us for the discussion of our report findings Jan. 24 in Annapolis, Maryland. Info and RSVP. And if you cannot be there in person, send questions, feedback to @changemtrs