1 An Overview to the Peruvian Benefit Corporation Legal Movement

Until the late 2020, the Peruvian legal ecosystem did not have any laws that allowed businesses to declare, acknowledge, and operate within a social and environmental benefit purpose in addition to their economic activities. However, over the last decade, sustainable market trends have caught the attention of the Peruvian public sector, private sector, civil society, and academia. These stakeholders have collaborated toward several legislative endeavors such as the most recent and innovative example of the approval of the Peruvian benefit corporation statute, its regulation, and guidelines.

This article covers the most important milestones of the legislative and regulatory journey of Peruvian benefit corporations, as well as its most recent implementation efforts by the government and civil society as a legal acknowledgment by the Peruvian State to fully regulating purpose-driven companies and their business models by recognizing the change in the market force paradigm as a response to the different economic, social, and environmental problems.

Before the approval of the BIC Law, the profit maximization interpretation of the law and legal practice forced business administrators to make decisions with the sole purpose of maximizing profit for shareholders. However, many companies and their shareholders voluntarily inserted different legal clauses in their bylaws pertaining to purposeful business, different duties, and protections, as well as enhanced transparency. However, they obtained mixed responses from the Corporate Public Registry and the different sectors within public administration.

The BIC Law, apart from providing an identity to purpose-driven companies, allows Peru to be at the forefront of Commercial Law, alongside countries such as the United States, Canada, Colombia, Ecuador, Italy, and Uruguay, which already have similar laws, and Argentina, Brazil, and Chile, which are discussing their bills at different stages of the legislative process.Footnote 1

2 Corporate Responsibility and the B Corp Movement in Peru

Corporate responsibility has evolved in Peru over the last few years, generating new management models that have changed the way corporations do business. Today, even corporations that do not adopt the Peruvian benefit corporation legislation must consider the expectations and perceptions of their stakeholders and obtain a social license to operate. This is even more important for companies that work with natural resources or other fields sensitive to the society and environment.

To this end, two trends can be identified since the start of the century: (i) corporate responsibility projects that seek to solve social or environmental problems related to a corporation’s economic activity and (ii) initiatives that seek to impact their different stakeholders positively. These two trends have different objectives and are mainly embedded in corporate strategies and the decisions of medium and large sized corporations. Different organizations that aim to provide sustainable resources to corporations have thus emerged, such as Perú Sostenible, Conscious Capitalism, and Sistema B Peru.

Moreover, since 2016, the Peruvian companies listed on the stock market are also compelled to present an Annual Sustainability Report to the Securities Market Superintendence, which encourages social and environmental transparency. Additionally, more than 500 Peruvian companies use the Global Reporting Initiative (GRI) to generate evidence of their contributions.

A particular subset of corporations, known as purpose-driven companies, are interested in measuring their social and environmental impact, as well to work towards a positive goal within their corporate objectives. Sistema B Peru and the B Corp Certification are closely aligned to the first trend above by allowing corporate activity to guarantee the creation of a positive impact in three areas that will permit the sustainability of the intervention: environmental, social, and economic. Their presence in Peru since 2015 means that, to date, more than 30 companies have completed an assessment that shows the positive transformations they generated for the society and the environment.

Peru has 37 certified domestic companies that report their environmental and social impacts annually, in line with the national policies that seek to reduce gaps in this field. There are also nine certified international companies with operations in Peru that, alongside two others still in the certification process, seek to generate positive impacts on the society and environment. Despite the economic, social, and healthcare complexities brought by the COVID-19 pandemic has been a complex year in economic, until 2019, Certified B Companies have handled profits of approximately USD 92.4 million.

3 The Peruvian “Sociedad BIC”

3.1 Origin: A Legislative and Academic Partnership

The import of benefit corporations in the Peruvian legal system is the result of three years of academic and political debate. In 2016, then congressman Alberto de Belaúnde and Juan Diego Mujica Filippi (co-author of this article) begun a legislative and academic partnership that allowed that Mujica Filippi’s law school thesisFootnote 2 on benefit corporations to be used as a theoretical basis to introduce its adaptation in the Peruvian Congress: the sociedad de beneficio e interés colectivo. This academic partnership was the beginning of a multi-year legislative journey that included different business sectors, well-known corporate leaders, and civil society organizations, mainly known as Sistema B Peru, which led and supported the legislative efforts since the beginning. The active collaborations with William H. Clark, who led the drafting of the U.S. Model Benefit Corporation Legislation, and other lawyers and policymakers from Latin America and Europe were key to the final draft bill.

The main feature of the Sociedad BIC is allowing all existing corporate models regulated by the Corporate ActFootnote 3 to have three main features: (i) a specific social and environmental purpose in their bylaws, (ii) higher duties and protections for managers and directors, and (iii) transparency and reporting requirements. Therefore, the bill was written in a simple and concise way to allow the existing legal models to organize purpose-driven companies based on their main corporate activities.

These features and framework aim to consolidate an active impact economy in Peru, under which corporations can consider and track their economic, social, and environmental impact and contribute decisively to the Sustainable Development Goals. However—and following the path of other benefit corporation statuses around the world and in Latin America—Sociedad BIC does not consider any tax incentives or complementary benefits for the corporations that choose to adopt this model.

3.2 Path of Approval and Regulation

In March 2018, Congressman Alberto de Belaúnde presented the Bill to Congress, and it was discussed one year later in the Economy, Banking, Finance, and Financial Intelligence Commission. The commission unanimously approved the ruling of the bill.

Subsequently, it was also unanimously approved in the Justice and Human Rights Commission, after reviewing the institutional opinions of the Ministry of Justice and Human Rights, Ministry of Economy and Finance, Central Reserve Bank, Ministry of Foreign Trade and Tourism, Ministry of Industry, Public Defender’s Office, and Superintendence of Banking and Insurance.

Additionally, several workshops and events were held, where the bill was analyzed by leaders from the business sector, academia, the public sector, and other strategic players, reflecting on possible improvements. Unfortunately, in the second semester of 2019, the Peruvian Congress was dissolved by the ruling of President Vizcarra due to the unsettled political context, which kept the bill from being debated in Congress. In October 2020, after the election and installment of a new legislative assembly, Congress approved the BIC Law and it was passed on November 24, 2020, thus starting the regulation process.

In January 2021, the Council of Ministers designated the Ministry of Industry to lead the implementation process of the recently approved BIC Law. Shortly afterward, the innovation department within the ministry identified key actors within academia, civil society organizations, businesses, and other public institutions to work together on a draft for the BIC law regulation. An inter institutional approach was led by the Ministry of Industry to address several pressing topics regarding the BIC Law and the different processes public institutions needed for full its implementation.

The result of this collaborative process was the publication of the Regulation of Law No. 31072, approved by Supreme Decree No. 004-2021-PRODUCE, and Ministerial Resolution No. 00127-2021-PRODUCE. These documents make possible the implementation of the BIC Law within the public sector.

3.3 Legal Framework

3.3.1 The Peruvian Constitution

The Peruvian ConstitutionFootnote 4 includes a set of principles that guide the exercise of business and entrepreneurial activities in the country. Particularly, Article 58 establishes that the economic regime is one of a “social market economy,” in which the essential component are the social implications of economic activity. While freedom in private and entrepreneurial activities is ensured, companies need to comply with a social return that contributes to the common or general welfare. In this regard, Sociedad BIC fulfills this constitutional mandate fully, as its business model directs activities both toward profitable economic activity and achieving the chosen social and environmental purpose.Footnote 5

Further, Article 58 enshrines the concepts of “minimal government” and “strong government.” The first concept refers to the fact that the government will only intervene in an economic activity in cases of proven public or national interest for the general welfare and the second describes that the government must comply with essential duties in the areas of employment promotion, health, education, security, public services, and infrastructure.

Along these lines, the implementation of the Sociedad BIC legal framework can contribute toward the concepts enshrined in Article 58, as the corporations themselves are the ones that choose their social and environmental purposes and start generating measurable social and environmental impacts.

Therefore, the approval of the BIC legal framework fulfills the state’s obligation to provide an adequate response to the various economic actors that deviate from traditional business activities by seeking to operate with a sustainable and transparent purpose that not only generates economic benefits but also social and environmental ones.

3.3.2 Law No. 31072, Sociedad de Beneficio e Interés Colectivo (Sociedad BIC)

Law N. 31072,Footnote 6 known as the BIC Law, approves the legal framework for the Sociedad BIC in Peru and mandates the creation of a regulatory framework to create a legal ecosystem that ensures the implementation of the norms and incorporation of purpose-driven companies in the country. The Sociedad BIC legal framework does not create a new corporate model in the Companies Act, but a legal category that can be voluntarily adopted by shareholders in corporate bylaws and registered with the Corporate Public Registry.Footnote 7

The adoption of the BIC legal category creates an enforceable duty that a corporation—besides having an economic activity and distributing dividends to shareholders—has a detailed social and environmental purpose in its bylaws. This category can be adopted in the bylaws from the time the company is incorporated or when an existing corporation shareholders meeting agrees to amend the bylaws. Additionally, along with the inclusion of purpose, the category also regulates the responsibilities and obligations of the managers and directors—to not only work diligently toward the economic success of the company but also toward the gradual achievements of the social and environmental purpose. Similarly, the Sociedad BIC legal framework demands that the company has sound organizational transparency policies, considers its stakeholders in decision making, and verifies the achievement of goals on presenting a Social and Environmental Management Report, which must be open access.

The Peruvian benefit corporation legal model is the result of the international and regional export of similar laws.Footnote 8 For example, similar to the U.S. Model Benefit Corporation Legislation, the BIC Law does not provide tax breaks to companies that adopt the legal model.Footnote 9 As previously mentioned, the goal is that, initially, the market itself will determine the benefits that can be given to these companies, as with any policy that the state deems fit to implement in the long term.

However, the Peruvian BIC law—similar to its Latin American counterparts—goes beyond the U.S. Model Benefit Corporation Legislation, as it requires the social and environmental purpose to be specific and the Social and Environmental Management Report to be approved at the same time as the company’s annual financial statements—with all the legal consequences and sanctions this entails in the event of a failure of fulfilling the duties imposed by the law.

Moreover, unlike in the United States and other jurisdictions where there is no public enforcement of such corporations’ activities, the Peruvian law follows the Italian benefit corporation statute in giving the Peruvian Competition Authority (Instituto Nacional de Defensa al Consumidor y de Propiedad Intelectual, INDECOPI) the power to apply the existing regulations on misleading advertising and business practices to sanction companies that use the BIC legal model or the name “sociedad de beneficio e interés colectivo” or the abbreviation “BIC,” but do not pursue the social and environmental purpose detailed in its bylaws.

The main goal of the BIC Law is to achieve what the Peruvian State identifies and acknowledges as purpose-driven companies, which try to solve specific social and environmental problems. Therefore, depending on their economic activity, benefit purpose, and strategic plan, the purpose-driven companies in Peru that adopt the BIC legal category can generate concrete benefits from the market and create an identifiable critical mass for the subsequent creation of public policies that acknowledge their true legal nature.

3.3.3 Regulation of Law No. 31072, Approved by Supreme Decree No. 004-2021-PRODUCE

In February 2021, the regulation of the BIC Law was approved through Supreme Decree No. 004-2021-PRODUCEFootnote 10 by the Executive Branch to create the Peruvian legal ecosystem. The Ministry of Industry, alongside the Ministry of Environment, led a participatory process that involved the academia, civil society, and corporations to draft a regulation that would complement the BIC Law and its procedures to allow the promotion and incorporation of BIC companies in Peru.

The regulation provides definitions that clarify the impacts that BIC companies must achieve through the development of their business. Similarly, the regulation specifies how the social and environmental objectives must be linked to the benefit purpose of a BIC company, prioritizes them, and indicates how activities that allow the objectives to be met in the medium and long term must be designed.

Additionally, it promotes organizational transparency and clearly defines how BIC companies must evidence their impacts by writing a Social and Environmental Management Report that allows verifying the activities included in the company’s annual planning. It should also be noted that this management report must be prepared by a third party and can be submitted to the Ministry of Industry for publication. While submitting it to the Ministry is not a legal duty, the Ministry oversees the publication of these reports to facilitate access to information and ensure that the citizens can complain if the company does not fulfill its social and environmental purpose.

The regulation also delineates the cases in which a BIC company could lose its legal status and the corrective measures that the Peruvian Competition Authority can impose if a BIC company is carrying out practices that violate to consumer defense regulations, as well as in the case of anticompetitive conduct. In both cases, the Peruvian Competition Authority is the authority responsible for analyzing the behaviors adopted by BIC companies to determine if consumer protection standards were breached, as well as any actions that limit or prevent free competition between companies.

3.3.4 Other Legal Instruments Under the BIC Legal Framework

The approval of the abovementioned BIC Law’s regulation allows, among others, two main objectives: (i) to create a framework within the public sector that would make it possible to apply the law through complementary legal provisions within the governmental administration and (ii) to allow the business sector to use this law in practice, with a clear scope regarding the application of its mandates.Footnote 11

In this sense, to create this framework and make the application of the law possible for public administration, other legal instruments were adopted by different organizations within the public sector. The most relevant are the ones of the Peruvian Public Registry and the Peruvian Competition Authority.

On the one hand, the Peruvian Public Registry (Superintendencia Nacional de los Registros Públicos, SUNARP) approved Directive DI-003-SNR-DTR,Footnote 12 which regulates the qualification of registrable acts of BIC companies. This directive made it possible for the Corporate Public Registry to adopt all necessary measures to adapt their informatic systems and notify the public registrars on the specific application of the law for evaluating incorporation or amendment requests.

On the other hand, the Peruvian Competition Authority worked on the issuance of Directive No. 002-2021/DIR-COD-INDECOPI,Footnote 13 which regulates the application of the corrective measures of loss for the BIC corporate category referred to in Law No. 31072 and its regulations, in the case of infringements of consumer rights, being approved by Resolution No. 000056-2021-PRE/INDECOPI, dated May 21, 2021.

Correspondingly, for the business sector to have a practical example, the Ministry of Industry issued Ministerial Resolution No. 00127-2021-PRODUCE,Footnote 14 dated April 29, 2021 and approved the “Guidelines for the preparation of the Strategic Plan and the Management Report of the BIC Company,” which regulates the minimum content of the strategic plan and the management report of BIC companies within the provisions of Law No. 31072 and its regulation.

4 The BIC Ecosystem in Peru

The Ministry of Industry considered it important to lead the implementation process of the BIC Law and its regulation to promote the purpose-driven ecosystem in Peru. With that in mind, by Ministerial Resolution No. 000150-2021-PRODUCE, dated May 25, 2021, the Working Group for the Dynamization of the Ecosystem of BIC Companies in Peru was created to strengthen this ecosystem by articulating strategic opportunities for national entrepreneurship to achieve financial profitability and social and environmental impact, thus contributing to the Sustainable Development Goals. The main aim of this multi-sectoral working group is to enable the conditions to promote BIC companies and build an entire ecosystem that allows them to develop successfully financially and regarding their impact.

The working group is composed of the representatives of public and private sector entities, academia, and civil society: the Ministry of Industry (chairs the group and includes the Technical Secretariat), the Ministry of the Environment, the Peruvian Competition Authority, Universidad Nacional Mayor de San Marcos, Universidad Continental, Universidad de Lima, Sistema B Peru, Global Reporting Initiative, Peru Sostenible, and Capitalismo Consciente Peru.

As part of the activities carried out by the working group, the Joint Agenda was approved, containing the milestones of the activities proposed for each prioritized category: incentives, dissemination/communication and training, deadline for their implementation, subgroups formed for the execution of each milestone, and the persons responsible for them.

In response to this approach, important results have been achieved for the BIC ecosystem, such as the creation of a specific directory of these companies in the Peruvian Public Corporate Registry, inclusion of the BIC category in the Public Registry online database, the first BIC companies’ event organized by the Working Group with a participation of 182 attendees (of which 86 were companies), publication in the Legal Supplement of the official newspaper El Peruano on “BIC Companies—Impact of BIC Companies,” and launching the website https://sociedadesbic. produce.gob.pe.

Roughly a year after the passing of the legal framework for BIC Companies, the ecosystem only has five companies that have incorporated or amended their bylaws to adopt the BIC model. These companies are mostly small and medium sized companies with Peruvian capital. The multi-sectoral group estimates that, in the next few years, more BIC Companies will be incorporated and become part of the legal ecosystem.

Furthermore, this ecosystem was initially sought by civil society and academia for overcoming different legislative challenges during the three years of the debate. The Peruvian government, as the one in charge of implementing this ecosystem, is prioritizing participation, collaboration, and a constant strategy to foster the creation of new purpose-driven companies. The remaining question is if the Peruvian corporate sector and other stakeholders will follow this new legal trend without further incentives in the BIC Law.