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Social Enterprise NL: Benefit company fundamentally different from B Corp

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Published: 26 March 2021

While B Corporations are being promoted in a global campaign this month, Social Enterprise NL can do nothing but wait for their plans for a benefit corporation in the Netherlands to wind its way through the legislative machinery.

Tony's Chocolonely next to M&Ms
Which one would you go for? Tony’s Chocolonely would probably qualify as a social enterprise by law, according to Mark Hillen of Social Enterprise NL. Paul van Riel / HH

BVm – the proposed Dutch legal registration for social enterprises

  • B Corp is a certification for sustainable businesses different from the proposed legal structure for Dutch social enterprises, BVm.
  • the acronym BVm stands for a new type of private limited company with a social objective.
  • BVm legislation is currently under consultation until the end of April.

Does the B Corp label really make companies more impactful, or is the logo and its certification process more a kind of impactwashing? Mark Hillen, director and founder of Social Enterprise NL, the trade association for social enterprises in the Netherlands, says that B Corp can be useful to make conventional companies take steps towards less harm. But from there to the impactful do good is a big leap, he argues.

“The problem with B Corp is that yes, they’ve got some impact companies on board, like Patagonia (an outdoor clothes brand, ed) and Tony’s Chocolonely (a Dutch chocolate brand, ed),” Hillen said. “These businesses have a clear social mission and they also do a lot to push back on child labour for example.

“On the other hand, companies like Danone also have a B Corp certificate. So clearly, not all of those companies have a social mission at the core of their business.”

Even so, the Danone case is an example of why the B Corp badge is better than no impact label at all, according to Hillen. “The certification process pushed Danone to think about how they can reduce their plastic waste. Companies choose to apply for this label, which means that they are willing to take measures, which also is valuable.”

A new legal structure for social enterprises

At Social Enterprise NL, Hillen and his colleagues have been lobbying for another way for social enterprises to distinguish themselves from conventional businesses. The so-called BVm would become a new type of private limited company specifically for social entreprises, requiring a social mission at the heart of the business model.

BVm is shorthand for a social limited liability company (BV in Dutch, while the ‘m’ stands for ‘maatschappelijk’, the Dutch word for ‘social’). In order to qualify as a BVm, impact has to come before profit and this needs to be enshrined in the company statutes.

BVms would also need to issue an annual impact report alongside their regular financial reporting. Similar legal set-ups for social enterprises already exist in countries like the US, UK, Belgium and France.

“We need to shift to another kind of economy. All evil in the world comes from companies that want to maximise profit”, Hillen said, when asked why this legal recognition of social enterprises is needed.

“BVm companies begin with their social mission and are first and foremost focussed on solving problems connected to that mission. That’s fundamentally different from labels such as B Corp.”

Strategic guidance

That said, Hillen is clear about why the BVm suffix would be useful for impact companies. Primarily for recognition and image building: this is a company that wants to improve the world.

Still, the new legal registration doesn’t offer any fiscal advantages; social enterprises cannot expect any tax breaks. That would create the wrong incentive for businesses to become a BVm, is the reasoning.

It is as yet unclear whether – and if possible, how – government bodies would be allowed to give BVms a preference in public procurement procedures.

How will impact investors respond to the BVm registration? Would the label attract investors or scare them off?

“It will probably be both”, Hillen said. He draws a parallel to how investors view companies that follow the code of conduct for social enterprises, the so-called Code Social Enterprises. This rulebook is set up by Hillen’s organisation and intended as a blueprint for the BVm requirements.

Impact investors who tend to emphasize profits might be scared off, as the dividend to shareholders is limited (potentially even non-existent).

On the other hand, investors favouring the impact side view the label as a due diligence service. “The fact that the social mission has to be spelled out in the BVm’s statutes makes it easier to stay on course. For example, when you have to make a decision like ‘should we invest in China?'”, says Hillen.

Public consultation

So who would be eligible to register as an BVm? Social Enterprise NL argues that basically all companies who are now on their Code Social Enterprises list would meet the requirements.

The proposal to introduce the BVm got a green light from the Dutch government in 2020. At this moment, stakeholders can share their input on the initiative in a public consultation (open until 30th of April).

The consultation exercise offers stakeholders an opportunity to weigh in on various issues, such as what exactly companies need to include in their annual impact report.

It may take a couple more years until BVm legislation is approved and signed into Dutch law. Hillen: “There is a proposal but the requirements need to be sharpened, with concrete percentages and impact targets.”

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