Why becoming a public benefit corporation makes both climate change and economic sense.
We’re facing a historic opportunity to rebuild our world. Emerging from the global pandemic, we have the best chance in generations to build the world we need and our children deserve –– a goal central to the COP26 negotiations in Glasgow this month and President Joe Biden’s just-signed historic $1 trillion infrastructure package. To advance these goals, we must acknowledge that the prerequisite for progress is changing our incentives.
To solve the problems of climate change, and the related challenges of food insecurity, energy poverty and water scarcity, we need wholesale system change. To stop building an unlivable future, our businesses, organizations, communities, innovation priorities and discourse must be re-oriented to address this urgent threat. That’s why today, Generate Capital is converting to a public benefit corporation (PBC).
In 2014, when my co-founders and I embarked on this entrepreneurial journey, we made a purposeful choice to design a business that would not need to make trade-offs between environmental impact and financial performance. We set out to prove that sustainability pays –– to showcase the speed and scale of markets in addressing the climate crisis beyond the capabilities of philanthropy and policy.
As a PBC, we’ll take this a step further by altering the most fundamental and essential element of our organization –– the official fiduciary duty in the charter of our company. We’ll retain our fiduciary duty to shareholders while adopting a fiduciary duty to the public benefit –– to our mission. This is the right thing to do, even if it is harder than business-as-usual. We’re holding ourselves accountable today and far into the future for the outcomes of our decisions on all of our stakeholders.
At its core, sustainability is about achieving more with less of our precious natural resources.
Leaders across the public and private spheres are waking up to the reality that sustainability is a driver of economic performance –– contributing to both the top line and bottom line. At its core, sustainability is about achieving more with less of our precious natural resources. It’s a fundamentally economic proposition –– one that speaks to the rational self-interest of decision-makers from both the private and public sectors.
We see this playing out already as companies, communities and customers demand solar, battery storage and electric vehicles not only because they are green, but because they are cost-competitive and reliable, with cascading benefits to human health, equity and inclusion, and economic development.
This stakeholder alignment imperative is perhaps more obvious in infrastructure, where we naturally take the long-term view. It takes hundreds of people — thousands, sometimes — to agree to break ground on a project that will ultimately serve generations of people over its many decades of expected use.
Our power, waste, water, food and transportation systems are the foundation of our economic competitiveness; they serve as the backbone of our communities’ prosperity, security and resiliency. Our teams are incentivized to align today’s goals with the long-term needs of our stakeholders and the planet from the start. We get paid when our assets perform reliably for decades. We say “our time horizon is forever” because it has to be.
However, we don’t have forever to rebuild our world and avoid catastrophic consequences. Scientists tell us the next ten years matter most if we want to avoid the most horrible effects of climate change, which include not just unlivable coastal communities and frequent floods and wildfires but also war, displacement and devastating impacts on human health.
Why is it that only a few thousand companies out of the millions we have globally are organized with the public benefit as part of their charter?
I see my colleagues at companies around the globe making remarkable sustainability pledges and doubling down on commitments for the next ten, twenty or thirty years. Why is it that only a few thousand companies out of the millions we have globally are organized with the public benefit as part of their charter? Companies and leaders that fail to make sustainability an inextricable part of their organizing principles will inevitably lose their license to operate.
We’ve taken this step to enhance our definitional coherence as a company because it is time to raise the bar for everyone. When a partner, customer or employee understands our commitment to our mission is completely embedded in our company, it is easier to align around the common objectives we share. As leaders, we must not be afraid to recognize that our shareholders are served best when we are performing for all of our stakeholders.
Leaders today have the power to rethink the incentives governing our decisions throughout the public and private sectors, with the understanding that today’s choices create long-term consequences. We know future generations will face even more daunting challenges if we don’t hit the targets we set. We owe it to them to plan and to act accordingly.