Italian good news: Boom of benefit companies in Italy
- WTI Magazine #156 Oct 22, 2022
Boom of benefit companies in Italy: this is the outcome of the report that annually tracks the number of businesses that are born and die in our country. Monitoring this data is not only useful to understand how our economic fabric is progressing, but it is also essential to understand the trends and behavior that entrepreneurs adopt from year to year. In fact, from this year's report we can clearly see the trend of Italian businesses toward high social impact issues.
By social impact, we mean all those activities aimed at improving people's lives. A company that recycles leftover food has social impact, but an individual who spends his weekends picking up trash in the woods or on the beach also has social impact. Therefore, this definition is not the prerogative of corporations: anyone in their own small way can do something to improve the world.
But companies that are usually labeled as nothing more than for-profit corporations have been able to add this label to their business for the past few years in order to show their interest in social issues such as sustainability, recycling, gender-based violence, and many other issues important to society.
The benefit corporation is among the for-profit social assets, but unlike its sisters who have the interests of their members and shareholders primarily at heart, this one also places its attention toward the interests of the community and the environment. An enterprise, therefore, can call itself a benefit if it possesses a high social impact and if in the business model itself, it presents capacity for remuneration, putting the good of society first. Unlike a nonprofit, it cannot operate at a loss, so it is up to the directors and managers to find the right balance between the interests of the members and the goals of the common good. Certainly an extra effort, but one that will pay off in the long run, given the footprint on which the world is diverging. Nowadays having a society purely interested in its own profit is no longer a sustainable option.
Following the trend of environmental sustainability is that of benefit companies, which is growing significantly in Italy compared to previous years. In fact, the number of companies belonging to this category, during 2021 increased by 80.5 percent compared to 2020, ending the year with a number of 1,451 active and operational companies with the aim of pursuing sustainable and transparent purposes.
In the trend, we also note that the interest in management more oriented toward social benefit is predominantly found in startups. These are precisely the protagonists of the substantial increase that, in addition to having to develop replicable and scalable business models, aim to create a common benefit for society and the environment.
Startups with significant social and environmental impact constitute a category of innovative startups, for which the introduction of social innovation is certified and whose goal is to improve society as a whole. In fact, a prerogative of being a benefit company is precisely the public demonstration of its social commitment by publishing its financial statements, making them accessible to anyone.
Social innovation, as experts point out, means a new solution to a social problem that is more effective and sustainable than pre-existing solutions and for which the value generated accrues primarily to society as a whole, rather than to individual individuals. As the report points out, there are several startups that certify themselves as socially oriented innovative startups, benefit companies or benefit corporations, each of which sets different goals.
In fact, this type of company is not only valid for initial incorporation, but companies that hold this title are required to maintain it over time and can lose it at the conclusion of each year if the requirements are not met as properly. So if we find a company that defines itself as a benefit, we can be sure that it really is one, at least for this year.
In the increase of benefit companies then, innovative startups are also included. The number of startups with significant social and environmental impact in 2021 grew by 28.2 percent, ending the year with 486 active companies, compared to 349 companies in 2020. Other innovative startups, on the other hand, grew by 12.2 percent, compared to 10,867 noted at the end of 2020.
A differentiating fact noted in startups with significant social impact is the number of employees, which is slightly higher than the others. This can be traced to both the startups' actual need for more professionals to deal with sensitive issues and the need to create more jobs.
The reading also shows that more than half of these startups are mainly located in northern Italy, or 67.3 percent, while 15.3 and 17.4 percent are located in central, southern Italy and the islands, respectively.