More State Policy Needed
Utah is poised to become a global center for social and sustainable enterprise (SASE). As a community service entity with a mission to advance business that generates positive social and environmental outcomes, P3 Utah presents a proposal on how the state can accomplish this distinction. A successful strategy can be developed by combining existing positive business and charitable characteristics of Utah’s social economy with several catalytic initiatives which recognize and develop the acceleration of SASE enterprises. It can also be argued that given the need to recover from the COVID-19 health and economic crisis and creating resilience to withstand future devastating challenges, the public may be more positively disposed to government SASE development efforts.
Utah has established itself as a leader in key aspects of business formation: speed and proclivity of new business registration and the availability of the widest range of dual-purpose (profit plus benefit) business entities: benefit corporations, Benefit LLCs, and low-profit limited liability companies (L3Cs). While economic development policy has promoted and celebrated the quantitative aspect of business formation, it has not actively promoted the qualitative aspect of companies—those that are committed by owner choice—to produce positive social and environmental benefits.
Utah is well poised to draw upon the speed of business formation and availability of the full range of dual purpose business forms with our state’s leadership in per capita charitable donations and community service hours. We also are a state that highly values private enterprise innovation, limited government, and economic self-reliance. Social enterprises use business principles to assist residents with significant disadvantages to access and climb the ladder of economic self-reliance. The several existing social enterprises of note are relatively small and limited in impact. The significant number of sustainable “triple bottom line companies” that generate positive social and environmental outcomes alongside financial profit and economic impact stand ready to share best practices.
There are a host of state policy actions—many requiring declaration of importance and adjustment of existing resources only—that can create a much stronger recognized SASE economic sector. This strong sector can generate more positive social and environmental benefits, capitalize on private innovation, and reduce the burden of tax-based investments to generate these benefits. This result will greatly improve the quality of life for Utahns and establish Utah as a model for other states and countries to emulate without significant impact on taxpayers. Leadership in developing this strategy can come from the Governor's Office of Economic Development and state legislature. Following are an initial set of suggested initiatives to consider.
1. Economic Development of the SASE Sector. State economic development policy has traditionally contained support for attraction of out-of-state relocation and expansion of existing targeted industries, including aerospace, information technology, life sciences, outdoor recreation, rural development, etc. The SASE sector can be added to this list as an additional commercial area to be developed. Additionally or alternatively, some or all existing firms receiving state attention could be encouraged to actively generate more positive social and environmental outcomes. This can be justified by promoting greater public benefit from public-funded investments in commercial enterprise.
2. Procurement and Permitting Guidelines. Several local government jurisdictions in Utah provide priority consideration of registered benefit companies and benefit LLCs in evaluation of competitive purchasing bids. Similarly, some jurisdictions provide priority consideration of building permit requests by benefit companies. The justification for these policies is two-fold: first, the public-generated funding should also generate the most demonstrated public benefit through awarded contracts and second, the permit waiting time of benefit companies should be more highly valued than companies not committed to generating additional benefits.
3. Improve L3C Business Form. About 10 states allow registration of these entities, which require seeking social benefit and enabling philanthropic return-generating investment alongside traditional capital investments. This form can be enhanced to become more equivalent in mandate and accountability to benefit companies: require seeking of environmental as well as social benefits and provision of annual benefit report as part of annual reporting to the Division of Corporations.
4. Expansion of State Energy Steward. In 2014, the state created a function in the Department of Administrative Services to assist state agencies in improving air quality. The portfolio of this function could be expanded to inform private companies and cover the full environmental impact envelope beyond air quality to include energy efficiency, water conservation, waste reduction, generation and sharing of clean energy, etc.
5. Repurposing Volunteerism Program. The Office of the Lieutenant Governor houses a Commission on Volunteers. As Utah already exhibits a nation-leading level of community service, the program could be shifted to focus on generation of social enterprise benefits through willing commercial firms.
6. Expand Academic Preparation. In Utah higher education, the Ballard Center for Social Impact at Brigham Young University is a leader in preparing students with opportunities to form and lead enterprises focused on generating social benefits. The University of Utah’s (U) Lassonde Entrepreneurship Institute leads the nation in stimulation of new entity formation, and the Sorenson Impact Center provides outstanding training for investing in high impact enterprises. However, there is no significant training at the U for students who want to form and manage businesses with positive social and environmental impacts. Weber State University offers a certificate in environmental sustainability management and Utah State University offers courses in sustainability management. Leading business schools in the PAC 12 and beyond devote significant curriculum to SASE management. It would benefit Utah’s competitiveness academically and economically to expand SASE education opportunities.