From coffee to designer crockery: an increasing number of companies are focusing on sustainability, amidst much light and some shade

Business newspapers and financial magazines are increasingly reporting on companies including in their articles of association one or more charitable purposes in favor of the company’s stakeholders. These benefits are developed for the most various purposes, such as the pursuit of one or more positive effects (or the reduction of negative ones) on people, communities, territories and the environment, cultural and social assets and activities, institution and associations involved directly or indirectly in the company’s economic activity. The product sectors in which these companies operate in Italy are very varied and range. To give a few examples: from energy to food, via broadband and designer tableware. The purpose is to meet the needs of ecology and corporate sustainability in both environmental and social terms. Since the worldwide resonance of the Friday4future movement (quite apart from the considerations that can be made about the movement itself), the ecological question has become public knowledge and it is clear to everyone how the business world has accelerated towards a path hitherto only covered by a small group of pioneers.

So, what do Danone s.p.a., Alessi s.p.a. and Illy s.p.a., among others, have in common?

All of them are companies that have recently become “benefit societies” (SB).

Since January 2016 Italy has introduced, first in Europe and second in the world after the USA, the figure of the ‘benefit company’ both to allow entrepreneurs, managers, shareholders and investors to protect the company’s mission and at the same time distinguishing itself on the market from all other forms of the company through a virtuous and innovative legal form.

With the benefit companies law, the legislator has not created a new company model, but rather laid down specific rules that the company must follow to display its title on the market as if it were a ‘quality brand’. This model of the company has no economic or fiscal incentives, so the only benefit is to present itself on the market as credible and virtuous. To date, even in the Italian economic context, which is well known to all, there are more than five hundred Italian companies that have already chosen this format. This shows that even this single reason is more than relevant.

Italian benefit societies, to obtain this status, must pursue, through an express provision in their articles of association, the aforementioned ‘purposes of common benefit’ in a responsible, sustainable and transparent manner, and their management requires managers to balance the interests of shareholders – to generate profit – and the interests of the community. Benefit companies also must appoint a manager to be responsible for the company’s impact; they also undertake to report transparently and comprehensively on their activities through an annual impact report describing both the actions carried out and the plans and commitments for the future.

In the intentions of the legislator, benefit societies represent an evolution of the concept of enterprise. While traditional companies have the sole aim of distributing dividends to shareholders, benefit companies are the expression of a more evolved paradigm, presenting themselves as the legal instrument able to create a solid basis for the alignment of the company mission in the long term and the simultaneous creation of shared value for the benefit of all. This is not a matter of ‘social enterprises’ in the strict sense of the word, or of an evolution of the non-profit world, but of a positive transformation of the dominant models of profit-making enterprise, to make them more appropriate to the challenges and opportunities of 21st-century markets .

What is more relevant for the present purposes, however, is to highlight a structural shortcoming of the Italian model,

to shed light on some of the criticisms that have been raised from several quarters, monitor the trend of the phenomenon and possibly remedy it. The gap in question, in particular, lies in the difference between the Italian model of benefit societies and the American model of benefit corporations (B-Corp), from which the former has drawn inspiration: While in the case of domestic companies it is sufficient to formally comply with the legal model to be awarded a trademark that can be used in the market, overseas the title is instead awarded by a third and independent company downstream of the activities carried out, as if it were a sort of certificate of the work done, which, as well as being difficult to obtain (only about 3% of applicants are granted it), can also be revoked if the announced standards are not met.

The Italian model, therefore, is less transparent to the market than the American one and lends itself to instrumental usewhere there is a desire to create a simple make-up for marketing purposes without pursuing the desired effects.

Illy Caffè s.p.a., after adopting the necessary provisions in its articles of association that make it a benefit company under Italian law,was the first Italian company to obtain B-Corp certification in the American market, demonstrating its serious and structured commitment to improve the quality of life of its stakeholders. In particular, Illy caffè’s sustainable supply chain is based on a system of direct relations with its suppliers that rests on four pillars: (1) selecting and working directly with the best Arabica producers; (2) transferring knowledge to the producers, training them in quality production while respecting the environment through the University of Coffee and daily work in the field with specialized agronomists; (3) rewarding them for the quality produced, paying them prices that are higher than market prices, continuously stimulating improvement and sustainable production; (4) creating a community of producers who meet each other virtually in the platform dedicated to them.

These are some of the main values that motivated the recognition of the American certificate: the supply chain, the attention to environmental impacts and the valorization of resources.

On the other hand, the risk of a change in the articles of the association being a mere façade is always just around the corner, often due to the aforementioned vagueness of certain clauses that can be read among companies that have recently jumped on the sustainability bandwagon.

Certainly, in the end, the difference will be made by the administrators who will be called upon to carry out the programmatic aims consecrated by the shareholders in the company’s fundamental charter; so it is not granted that even in the face of a vague and insubstantial declaration, the concrete action that it generates may not become highly praiseworthy.

However, reading in the articles of association of an Italian company known throughout the world for its production of beautifully designed tableware (so much so that some of its products are exhibited in the Permanent Design Collection of the MoMA in New York) that the “common benefit” in terms of sustainability would be to “bring art and poetry into industrial production”, raises some suspicions, related to the risk of a company’s core business dress up, which in this case is precisely what justifies a higher price of its products compared to the competition, in charitable activity. The operation, if it were limited to this, would comment itself.

In any case, the road is marked out and the path seems to lead towards a more equitable and sustainable future. There are two paths to follow in the future in order to prevent Italian benefit company law from losing its efficiency: on the one hand, the legislator should continue to draw up rules able to incentivize charitable purposes and preclude those that certainly have a negative impact; on the other hand, consumers (therefore all of us) should start or keep going to develop a better critical conscience, and should award the producers who improved the most of transparency.

Mattia Facci

Insights

Aa. Vv., Benefit societies, in Orizzonti del Diritto commerciale, 2/2017 (contribution of C. Angelici, F. Denozza – A. Stabilini, G. Marasà, S. Rossi, M. Stella Richter jr, A. Zoppini).

1. Stella Richter jr., Corporate social responisibility, social enterprise, benefit corporation: magic of words?, in Vita notartile, 2017, 953 ss.

Website: https://www.societabenefit.net/