Utah creates new business type for companies that want to pursue social good alongside profit

Mark Miller Subaru has donated more than $7.4 million and 28,000 volunteer hours over the past eight years, from rescuing animals to planting a tree for every car sold, and operates its buildings on more than 60 percent solar power.

Now it’s among the first Utah companies to take advantage of a new state legal status that alerts consumers it’s pursuing social and environmental good alongside profits.

But buyers who want to target their spending to companies making an impact as significant as Mark Miller Subaru can’t count on the new designation.

To maintain what’s called Benefit LLC status, a limited liability company is only required to file an annual report outlining any social benefits it generated. Doing the paperwork is enough — companies can disclose they didn’t implement any social good and remain in good standing.

And consumers must know — or wonder — whether a company has the status, then look it up individually through a Utah business search on the website of the Utah Division of Corporations. Downloading a Benefit LLC annual report costs $2.

Though it may not be particularly taxing to maintain Benefit LLC status, Steve Klass, the executive director of the nonprofit organization P3 Utah, thinks the new business type will spur change.

“It could happen that somebody says, ‘I didn’t really do much,’” Klass said. “… But I think if somebody’s been in business a full year and has nothing to report, they can be challenged in the court of public opinion about whether what they’re doing is justified.”

Claims of social good can be powerful marketing. More than 80 percent of Americans say they would purchase a product from a company that advocated for an issue they care about, according to Cone Communications, a public relations and marketing agency.

But Abe Bakhsheshy, a business professor at the University of Utah, said it’s important for consumers to rely on fact rather than feeling when it comes to an organization’s claims.

“We are all responsible to check out these claims that these [businesses] make,” Bakhsheshy said. “Because I hate to say this — [the] overwhelming majority of companies, what they promise, they do not deliver. Or if they deliver, they deliver, let’s say, two points of the 30 commitments that they have made.”

At a celebration of the new designation on May 9, Melissa Sevy, who is the co-founder of two new Benefit LLCs, called Utah an “ideal place” for the model to thrive — combining the state’s culture of entrepreneurship with its focus on volunteerism.

“We are at the forefront of this social movement, this global movement … from this old perception that good is done through nonprofits and government,” said Sevy, who is also the president of the Social Enterprise Alliance for Utah.

“And we’re moving that to this dynamic perception that we can do good in a sustainable, in a scalable and a market-driven way through business,” she said.

Businesses are required to register with the state in order to operate and can choose from a number of designations — including a corporation, a limited liability company or LLC, and sole proprietorship. Each offers different tax structures and legal protections.

For corporations, pursuing social good above or at the cost of profit can create legal problems — since their shareholders can challenge such decisions, Klass said.

But most new Utah businesses choose to organize as LLCs. LLCs don’t have shareholders and don’t face the same legal limitations on how they set priorities, Klass said.

Still, because there can be conflict among members of an LLC, “it’s going to be very helpful if the partners all agree: ‘We’re a BLLC or we’re not; we’re going to try to do good or not,’” said Klass, who helped lobby the Legislature to pass the Benefit LLC initiative.

Utah is only the fourth in the country to create Benefit LLCs through HB186, which took effect May 9. More than 30 other states have passed laws establishing such a designation for corporations.

A look at the annual reports filed by Utah’s benefit corporations in 2017 showed that Interwest Paper Inc., for example, further invested in its recycling programs, while Fibonacci Media Co. volunteered more than 500 hours to a nonprofit that mentors female entrepreneurs.

The nonprofit B-Lab offers a certification called B-Corps, which requires companies to meet “rigorous standards of social and environmental performance, accountability and transparency” and offers them a score for their impact on the environment, governance, workers and the community.

Four Utah companies have made the cut, according to B-Corps’ website: Cotopaxi, Creative Energies, Mother E and Barebones Living. Cotopaxi works toward alleviating poverty, Creative Energies provides renewable energy, Mother E plants a tree for each bottle of oil it sells, and Barebones conducts local and global humanitarian projects.

The kinds of clear criteria that B-Corps offers provide consumers a better opportunity to verify a company’s claims, Bakhsheshy said.

Mark Miller Subaru began giving its dollars and time to the community long before becoming a Benefit LLC. The company has contributed an estimated $120,000 and 2,000 service hours to Nuzzles & Co., one of its main partners over the past three years, said Jeff Miller, the general manager of the company’s South Towne location and part owner of both of its dealerships.

“Making money is a byproduct of doing the right thing and doing business the right way,” he said. “And so we’ve always looked at it that taking care of our customers the right way and everything that way, the money part will take care of itself.”

Kathleen Weron, president and CEO of Nuzzles & Co., said some companies donate money to a nonprofit just to use its logo in their marketing materials. But Mark Miller Subaru has gone “deep and broad” in its partnership with Nuzzles & Co, she said.

“I’ve flown on a plane with Mark Miller; I’ve seen him put on … plastic protective gloves and pull an animal out of a kennel that’s probably covered with fleas, mites, mange, ticks,” she said. “Mark and Jeff are right there on the ground with their sleeves rolled up doing the hard work. They’re not standing back and seeing it or just getting a report at the end of the month.”

Jeff Miller noted that the company hasn’t had a down year in profits for 15 years. And its example has rippled further into the community, he said.

“We’ve really noticed all of our competitors around us doing the same thing,” Jeff Miller said. “A lot of their advertising switched to nonprofits and their advertising has pushed to this idea of doing good and helping the community. … So I look at the Benefit Corporation [and LLC] the same way — that if we can show how successful we’re being doing that, hopefully other people will follow and do the same thing.”

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