Mission-Oriented Legal Structure: Policy Case Study on Inclusive Business
What is the objective and purpose of the mission-oriented legal structure?
A distinct, mission-oriented legal structure – referred to in this document as a “legal form” -- distinguishes a business with a social mission for its special character and contributions to society. Incorporating a company as a Community Interest Company in the United Kingdom or a Public Benefit Corporation in the United States – both examples of the mission-oriented legal form -- can provide legal protection to managers, attract investment, improve accountability of companies that claim to provide public benefits, and also create a basis for the provision of direct support, either financial, non-financial or both.
Definitions of a business with a social mission can take one of two forms: a legal definition or a working definition.
- Legal Definition: This creates a legal status for a company to be recognized as a business with a social mission.
- Working Definition: This is used by government to broadly recognize a business with a social mission, but does not include any legal certification or legal form. Businesses may use this definition to self-identify.
Most commonly a “business with a social mission” refers to a company operating on a for-profit basis with a core part of its operations designed to intentionally create a specific or general environmental or social benefit. A major obstacle here is determining what counts as social or environmental benefits. Can it be very broad, or can it refer to narrow targets? Common terms for this type of business include ‘social enterprise’, ‘inclusive business’, ‘social business’, ‘social cooperative’, ‘third sector company’, ‘solidarity business’, among others. These terms often have overlapping definitions, are sometimes used interchangeably, and may be associated with specific geographic regions or ideologies. In the case of legal structures, social enterprise is the term most widely used, however the G20 Inclusive Business Framework has drawn a distinction between social enterprise and inclusive business, with inclusive business seeking market rate returns and engaging with the Base of the Economic Pyramid (BoP). Social enterprise, by contrast, may be considered an approach of inclusive business, but is not necessarily profit maximizing and its social mission can encompass a wide range of social services which may or may not be relevant to the BoP.
Given that existing legal frameworks tend to focus on the broader concept of social enterprise, some of the design elements and case studies discussed in this note will not be directly applicable to a legal framework specific to inclusive business. Nevertheless, the design components are worth recognizing in order to understand the variety of tools that can and have been used. Insights gained from examining this variety of approaches will help provide a more informed assessment of potential design options of mission-oriented legal structures.