New class of Minnesota business invests in doing good

Patrons who sip a cup of java at Peace Coffee know the farmers who grew the beans didn't get burned. The Minneapolis business buys only organic coffee beans at fair prices from farmer cooperatives.

Likewise, folks who open an account at Sunrise Banks understand that the company prioritizes financial services for underserved communities. One of their mottos: "Compassion is our motivation."

Both are public-benefit corporations, a small but growing group of 85 socially conscious Minnesota businesses that actively wear their values on their sleeve.

In 2015, the Legislature joined lawmakers in other states and created the new business category, where owners commit to doing some sort of social good.

Public-benefit corporations pay taxes and can make a profit. But they let shareholders, customers and clients know that they may, at times, put social principles over profits.

They must file a report with the secretary of state each year outlining how their business serves a greater good. Some of the businesses are start-ups, while others — including Peace Coffee and St. Paul-based Sunrise Banks — are established companies that chose to become public-benefit corporations when lawmakers created the new class.

"It's an opportunity to reaffirm our core values, which is to give coffee farmers better terms of trade and better prices," said Peace Coffee CEO Lee Wallace. "It's allowed us to reaffirm our commitment to think about all kinds of stakeholders."

Public-benefit corporations range from Can Can Wonderland, an artist-designed indoor mini-golf course in St. Paul, to Ballinger Leafblad, a St. Paul headhunting firm specializing in nonprofits and education.

One of the largest such corporations is Sunrise Banks, with approximately $800 million in assets. The bank became a public-benefit corporation on Jan. 2, 2015, the day the law went into effect.

According to its annual report, Sunrise Banks provides loans and financial services to disadvantaged communities, hosts community events and offers financial products that have social and environment benefits. CEO David Reiling said many customers are interested in patronizing businesses that share their values.

"They like to see their money stay in their community," Reiling said.

Business and social enterprises attorney Kim Lowe with Minneapolis-based JUX Law Firm led the drafting of the legislation. She saw that a new generation of entrepreneurs was looking for something between a highly regulated nonprofit that doesn't financially reward its founders and a conventional business where profits are the assumed sole motive.

"It's part of their desire as entrepreneurs to be part of a social solution, not just making a profit and getting rich," Lowe said. "It also allows you to label yourself in the marketplace, hold yourself out and make the public aware of this commitment."

The designation dovetails with an uptick in socially conscious consumers who seek out locally grown and produced items, inquire about worker conditions and want to leave as small an environmental footprint as possible.

"Customers want businesses that are caring for community, caring for employees and caring where they source their products," Lowe said.

Businesses can choose to be either a general public-benefit corporation, looking at practices across the company, or specific, which focuses on one area — paying a livable wage, for example, or providing a service for an underserved population, or sourcing ingredients and goods locally.

So far, more than 60 Minnesota companies are designated as specific public-benefit companies. Lowe said she is now working with others to draft legislation that would allow limited-liability corporations and cooperatives to use the public-benefit designation.

Public-benefit corporations aren't just feel-good, she said. They protect business owners.

"Under our traditional corporate laws and statutes, the board of directors owes a fiduciary duty to the shareholders to maximize return on investment," Lowe said. But a public-benefit corporation makes clear that other factors may influence decisionmaking.

Lowe also believes that millennials want to make their motives in business more transparent than in the past.

"Everything they do in their life is for public consumption. They are used to living their lives out loud … and they want to celebrate their good works," she said.

Sonja Brown, a former Peace Corps member, decided to turn her Minnetonka-based small business Swim Possible into a public-benefit corporation.

"I always put making a difference as a top priority in my life. That is the kind of business I always wanted to work for, so why not be one?" Brown said. "You want to do good for society, but you have to make money to survive. It's neat to have both drivers."

Her focus is teaching swimming and water safety to children with autism, attention deficit disorder, Down syndrome and other conditions that make conventional lessons too noisy and overwhelming for special-needs kids.

"When it comes to joining a baseball team or softball team, they don't have the behaviors and mannerisms to participate as easily. They are missing out on fitness activities that other kids are doing in their formative years, which can cause health and weight issues," Brown said.

Katy Sullivan is one of five founders of Offeringtree.com, a start-up public-benefit corporation that creates individual webpages with biographies and schedules for yoga, meditation and fitness. It allows clients to pay online.

She teaches yoga, which inspired the start-up. The five founders agreed to be a public-benefit corporation.

"We considered all of the options. We felt like this was the most beneficial option that represented what we wanted to do," Sullivan said. "We are in business and we are looking to grow revenue to build our business, but we are committed to providing further access to wellness in communities."

Shannon Prather • 612-673-4804