Today I speak about social enterprises and benefit corporations. I am proud that the inner west is home to countless social enterprises that are redefining the notions of corporate responsibility. They are at the forefront of a movement that puts social good on an equal footing with private profit. People are rapidly losing faith in institutions, including businesses. The Edelman Trust Barometer, which measures social trust, now puts Australia's overall trust index in the bottom third of all countries globally. Stories of mismanagement, greed and fraud, salary scandals, corporate collapses and environmental sabotage have all contributed to an ever-expanding cynicism about corporate Australia. Sixty per cent of respondents to the barometer agree that chief executive officers are more driven by greed than by a desire to make a positive difference in the world, and 64 per cent believe CEOs need to take a positive lead rather than waiting for government to deliver it.
Social enterprises share a common goal built on the same premise of triple bottom line accounting, which weighs people and planet equally with private profit. The Bread and Butter Project in Marrickville, for example, is a social enterprise that emerged from the world-renowned Bourke Street Bakery. Paul and David started the Bread and Butter Project in 2011 as a public company with charitable deductible gift recipient status. One hundred per cent of their profits go towards training refugees and asylum seekers. Baker trainers work with asylum seekers from all over the world, sharing their skills and expertise and helping create vital employment opportunities for these vulnerable communities. Just down the road is Auntie Ginger's Tonic, set up by Yarrie Bangura, a refugee from Sierra Leone who made Australia home at eight years of age. Auntie Ginger's Tonic is made from a special recipe Yarrie inherited from her grandmother and is a bridge between her past and her future. Yarrie's aim is to give back to Australia by drawing on her heritage. She reinvests money into building capacity for other refugees who are looking to make a start. These are wonderful examples of social enterprises that are changing the face of business in the inner west.
While social enterprises are growing in number, their ability to thrive is determined by the legislative framework that lawmakers provide. One important framework for social enterprises is B Corporation certification—an independent tick of approval that signals to consumers the company's willingness to be valued for the good they do in the world and not just the profit they turn. B Corp certification officially designates a company as a benefit corporation. There are now more than 2,100 companies from approximately 50 countries with B Corp certification, and 193 of them are in Australia and New Zealand. They include: Patagonia, Method, Etsy, Ben and Jerry's Ice-cream and Kickstarter. B Lab Australia and New Zealand has been advocating strongly for local reform. Australian Ethical Super, Stone and Wood Brewers and Who Gives a Crap are all local B-certified companies. To quote B Lab Australia and New Zealand:
Certified B Corporations are businesses that meet the highest standards of verified social and environmental performance, public transparency, and legal accountability to balance profit and purpose.
By definition, a benefit corporation is a legal structure that enables directors of a corporation to consider the benefit of that corporation's operations to stakeholders in addition to shareholders. However, currently there are insufficient protections in the legal system to allow company directors to think beyond their fiduciary and legal responsibility to company shareholders. While companies have attained B certification and are establishing new parameters for social responsibility in Australia, they are doing so in the absence of legislative and legal oversight.
More than 34 American states have allowed for benefit corporations to be established as a classification of corporate entity. So, too, have the United Kingdom and Italy, with many other countries investigating following suit. These jurisdictions have all passed legislation that allows social enterprises to file articles of incorporation as a benefit corporation with distinct by-laws that have a general public benefit requirement, stakeholder centric business model and additional transparency requirements. The model legislation requires that a benefit corporation be able to identify a general public benefit, or material positive impact from its operation, from an established list. That benefit must then be able to be evaluated against a standard set by an independent third party such as B Lab Australia and New Zealand, which is then reported by company directors each year.
This report card on social and environmental factors adds an additional layer of transparency and fortifies public confidence and trust. Success is gauged by their ability to deliver not just for shareholders, but for all their stakeholders including employees, supply chain providers, customers, local community, and the environment on the whole. It is simply a new form of corporate classification through which social enterprise can thrive. As I have detailed, many local corporations are already seeking and obtaining B Corp certification, so we need reform to capitalise on the economic and community potential for all benefit corporations.