The shoes are ubiquitous nowadays – originally only offered in a signature boat shoe style made with thin fabric, they now are made in multiple styles, fabrics and colors, and are easily identified even without the small blue rectangle on the heel. Tom’s Shoes has become a $250 million company by originally making shoes no one particularly loved, but that consumers could feel good about when buying. For each pair of shoes purchased, the company donates a pair of shoes to someone who needs them. The potential purchaser’s warm feelings of do-gooder-ness help create a sale for Tom’s Shoes and a person in need to receives a pair of shoes they can’t afford. Whether business strategy or an ingenious way to fund shoe donations, or a little bit of both, it has undeniably been successful on both counts, and Tom’s Shoes is now the poster child for for-profit companies with a social venture component. As consumers, we have become aware of voting with our dollars. Reflecting the shift in consumer consciousness about our buying power, entrepreneurs who want to do good for the world while making a profit have started making a social purpose the cornerstone of their ventures.

Many companies with a social purpose have branded themselves social ventures either legally or with a nonprofit certification. Yet, Tom’s Shoes, this poster child of social venture companies, is not designated a “Certified B Corporation” or “B Corp” by the nonprofit organization B Lab, nor was it legally formed as a special social venture entity (an L3C, a Social Purpose Corporation, a Flexible Purchase Corporation or a benefit corporation, depending on the state). Tom’s Shoes has become a social venture powerhouse as a corporation – just like companies without a social component to their mission. If Tom’s can do good things for the world as a corporation without any outside desigantions or oversight, why have 1,020 companies become certified B Corps and many been legally formed as a social venture entity?

Signaling and control. Such companies have determined that providing an easily-identifiable signal of their social consciousness to socially conscious consumers and investors is worth choosing a new legal entity or being certified by B Lab. The growing ubiquity of the “B Corp” brand on consumer products sold at Whole Foods shows that companies believe they need they need the signal. Whether consumers and investors are receiving the message is yet to be determined. Tom’s Shoes hasn’t needed the PR boost, but other companies might. B Lab’s certification does not provide control over the social venture, which may be wanted in varying degrees by the company’s management or shareholders, but legal benefit corporation entities do offer some rights and benefits different from their standard corporation brethren. In future posts, I will go into the pros and cons of the signal and control companies receive by creating a company as a legal benefit corporation in Delaware or obtaining certified B Corp status.

By Danielle Town

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