Since 2016, there has been a corporate legal status in Italy that has the potential to redefine the course of capitalism. More than 500 companies have already adopted it.
From the article by Paolo Di Cesare and Eric Ezechieli published on ilsole24ore.com
Fifty years ago, Milton Friedman presented his doctrine to the world, according to which socially responsible companies must focus on a single objective: maximizing the value created for their shareholders. The imperative for managers therefore becomes to focus exclusively on a single variable: profit. The monotheistic interpretation introduced by Friedman, is an expression of the paradigm that has dominated humanity and the planet over the last 50 years. However, he unwittingly violated the laws of physics: nothing can grow infinitely in a finite system and any complex system that maximizes a single variable inevitably accelerates until it self-destructs.
Two fundamental variables were missing: people and the planet. Today society, in particular future generations, and the biosphere are paying the consequence.
While academia and much of the legislative and governance structures that govern the world economy have espoused this doctrine, some entrepreneurs in different parts of the world have decided to follow untrodden paths, going beyond shareholder primacy and considering the enterprise a living, interdependent system that thrives when others thrive around it.
Today, following this example and evolving from ‘extractive’ to ‘regenerative’ economic paradigms is probably the most important challenge in human history. The former take more value than they generate and increasingly concentrate it to the detriment of society and the planet, while the latter serve human beings and life on Earth. Economic activity that takes or destroys more value than it creates should be stopped and made illegal.
In 2016, Italy became the first state after the US to introduce the legal status of Società Benefit (or Benefit Corporation) that identifies dual-purpose companies, i.e. those that intend to pursue purposes of positive impact on society and the environment in addition to profit. Today, this legal status has been introduced not only in 37 states in the USA, but also in Colombia (2018), Puerto Rico (2018), Ecuador (2019), Canada – British Columbia (2019), Peru (2020) and Rwanda (2021) and in more than 10 other countries, the legislative process for the approval of an ad hoc law is underway. In Europe, only France in 2019 introduced the so-called Société à Mission which, although characterized by significant differences from the international Benefit Corporation model, are relatively close in terms of values and basic structure.
In Italy, more than 500 companies have already chosen to change their legal status from simple SRL or SPA, acquiring the status of Società Benefit (Benefit Corporation).
Companies such as Aboca, Chiesi, Davines, Novamont, Number 1, illy, Save the Duck, Florim and Danone Italia, have decided to protect their vocation and make official the commitment of their organizations in pursuing Common Good objectives: they have officially introduced the consideration of stakeholders in their governance.
In the last year of health and social crisis, many companies are showing the best face of Italian entrepreneurship and are actively contributing with strong and concrete actions to support the communities in which they operate. But why not do it also outside the moments of crisis? Why not make it a founding and ongoing feature of their work?
BlackRock’s Larry Fink’s recent letter ‘to all CEOs’ of investee companies emphasizes, “The more your company can demonstrate its purpose in generating value for its customers and employees and for the communities it serves, the more competitive it will become and the more it will be able to generate long-term sustainable profits for shareholders.” This statement marks the end of an era and the beginning of a radical transformation of business models. Società Benefit (Benefit Corporations) are designed precisely to include stakeholders in the value creation model and therefore are by nature aligned with the new vision of major investors.
All Italian companies, both public and private, therefore have a great opportunity to take this evolutionary step and thus contribute to solving the great social and environmental challenges of our time.
Without business we will not be able to face them. With Società Benefit (Benefit Corporation) we will be able to win them.