In the past year, San Francisco and Philadelphia have taken an exciting lead in encouraging socially responsible businesses by offering them financial incentives.

In April 2012, San Francisco passed an ordinance granting California Benefit Corporations a bidding preference on city contracts. During each stage of the proposal selection process the “Benefit Corporation Discount” provides a 4% advantage when determining the highest ranked or apparent lowest bid.

To get this added value, the business: (1) must have been incorporated for at least 6 months as a Benefit Corporation in California, and (2) cannot be a subsidiary of a non-Benefit Corporation.

Even if a Benefit Corporation qualifies, it won’t get the discount if it displaces other preferential bidders, such as designated local business entities, nonprofits, or San Francisco and regional businesses. (A regional business has its principal places of business in: Alameda, Contra Costa, Marin, Napa, San Mateo, Santa Clara, Solano, Sonoma and Sacramento.) If the Benefit Corporation is also a San Francisco or regional business, the preference will apply, arguably providing a double benefit to the community.

Another city spearheading this movement is Philadelphia, which recently implemented its 2009 decision to grant tax incentives for sustainable businesses. The “Sustainable Business Tax Credit” provides a tax credit of up to $4,000 against the gross receipts portion of the Business Income and Receipt Tax, for the tax years 2012 through 2017.

This tax credit applies to certified B Corporations and city-defined sustainable businesses. (A sustainable business is a “business that gives substantial consideration to employee, community and environmental interests in its practices, products, and services.”)

It remains to be seen whether these financial incentives will prompt the formation of new Benefit Corporations, or the certification of existing corporations as B corporations. By passing these ordinances, San Francisco and Philadelphia have acknowledged that there are additional costs for operating Benefit Corporations, and seek to reward them for their social responsibility. Let’s hope that other cities follow their lead.

For more information on the San Francisco Benefit Corporation Discount, please see
http://www.sfbos.org/Modules/ShowDocument.aspx?documentid=41408.

For more information on the Philadelphia Sustainable Business Tax Credit, please see http://www.phila.gov/green/index.html.

For more information on B Corporation certification, please see http://www.bcorporation.net.

 

Michelle Baker is a San Francisco-based attorney interested in social enterprises.