Today Bloomberg reported that outdoor clothing company Patagonia will become one of California’s first “Benefit Corporations”, a new legal structure that gives directors legal cover to consider social and environmental missions over financial returns. This law is one of two state measures that went info effect January 1, and each are designed to embed goals beyond profitability into companies’ missions.

Current law allows shareholders to sue corporate boards for not maximizing profits, which could hinder companies from pursuring social and/or environmental initiatives. Patagonia was able to do so because they’re a private, family-owned company. The other law that went into effect establishes “Flexible Purpose Corporations”. These corporations can write one or more special missions into their articles of incorporation, and directors have to consider these special missions in their decision-making even if it means lower returns for the company. To allow leeway there is no minimum standard for what a special mission needs to be.

Benefit Corporations must commit to creating an overarching “general public benefit” and must consider an array of stakeholders beyond shareholders. Further they must measure their progress against a third-party standard. This model has passed in six other states, and was developed by B Lab.

The big question is, who will use these new laws? Patagonia is the highest-profile business to adopt one of the new structures, and it’s also a PR coup for B Lab.

Drew Markham, an attorney at Wilson Sonsini Goodrich & Rosati in Seattle, began looking into ways to encourage socially responsible business in Washington state two years ago. First she examined the B Lab proposal, but concluded it’s “very unlikely to be used by a company seeking any venture backing or by a public company.” Now she’s among the lawyers pushing for a more permissive statute for companies that want to do good.

What do you think about these new laws? Do you think companies will be eager to adopt them and use them? Or do you think they will consider it too big of a risk? Discuss!