EXPRESS: Gain by Letting Go: Environmental Investments and Profitability of Benefit Corporations

Benefit corporation is a new legal status of for-profit companies, which requires statutory commitment to public benefit purposes. The adoption of benefit corporation rather than a traditional C corporation is generally regarded as a tradeoff: a benefit corporation is believed to invest more in responsible business practices at the expense of profit compared to a profit-maximizing C corporation counterpart. In this paper, we examine the validity of this perspective from a supply chain perspective, focusing on a consumer goods brand that pledges to reduce total emissions as its public benefit purpose. We develop parsimonious models of the brand's emission reduction investment and product distribution decisions when it sells to consumers directly, indirectly via a retailer, or both. Through a comparison of the optimal decisions when the brand is incorporated as a benefit corporation versus a profit-maximizing C corporation, we show that converting to a benefit corporation intensifies the rebound effect associated with carbon footprint reduction, and thereby may reduce the brand's investment in such reductions when it strongly emphasizes total emission abatement in its objective. A moderate focus on profit can mitigate this problem and enhance a benefit corporation's investment in carbon footprint reduction especially under dual distribution channels. Furthermore, the brand can be more profitable as a benefit corporation than as a profit-maximizing C corporation under dual distribution channels, as the benefit corporation status increases channel differentiation and softens competition. Our study indicates that profit and public benefit objectives may reinforce each other. A well-balanced corporate goal can lay plausible grounds for mitigating profit concerns and shareholder pushback to the benefit corporation status, as well as for increasing environmental investment incentives derived from that status. In addition, policies that help benefit corporations access market through differentiated dual channels can be pathways to improve their financial viability and public benefit impacts.

• 저널Production and Operations Management
• 토픽Sustainable Supply Chain Management · Strategy and Management
• DOI10.1177/10591478261494376
• 저자Baozhuang Niu, Yiyuan Ruan, Luyi Gui, Nan Zhang