The Easy Way to Understand Social Impact Business
Increasingly, entrepreneurs are deciding to use their businesses as a vehicle to help their community or inspire social change. Many are doing so without any expectation that it will help their business. This article answers the most important questions about social impact business. It is designed as a reference for small business owners who are learning about social entrepreneurship and social business.
One of the most rewarding things about having your own business is your ability to serve others. A primary reason people choose entrepreneurship is to make an impact through their businesses. Many entrepreneurs are operating in a social business but do not define themselves as social entrepreneur. That means they aren’t marketing themselves as a social enterprise or social business either.
Businesses that make an impact but fail to define themselves as a social business can lose on multiple fronts. Companies with values that align with their customers and employees can create stronger bonds and loyalty, leading to larger profits. The relationship between impact and profit is strong if done according to best practices.
In this post, you’ll learn how the triple bottom line is a must for any Gen Z – Gen X business. Read on for more information about how social enterprise and social business work.
Your Top Social Business Questions Answered, Finally.
This article expands on multiple sources that cover corporate social responsibility (CSR), social impact, social business, social enterprise, the triple bottom line, and social entrepreneurship.
What is a Socially Responsible Business?
A social business is a business that uses its profit to create social impact. A socially responsible business has both a mission to maximize profits and impact at the same time. Corporate social responsibility is often defined using four facets explained in detail below.
Business News Daily defines corporate social responsibility in businesses that are characterized “by whether it cares about the greater good and not only greater profit.”
That means social businesses are not only driven by profit. They also strive to benefit the greater good through a formal CSR initiative or informally through actions that benefit the greater good. If a business is solely driven by profit, it would not be considered a socially responsible business.
Businesses can choose to create an impact mission that complements their profit-driven mission. Business News Daily goes on to explain “Some ways that a company can embrace CSR include being environmentally friendly and eco-conscious; promoting equality, diversity, and inclusion in the workplace; treating employees with respect; giving back to the community; and ensuring business decisions are ethical.”
Being a socially responsible business can mean a lot of things. How do you know if you meet the criteria? Read on, this article will explain more about the ways social businesses operate.
Why Does Social Business Matter?
Creating impact through your business matters because consumers are increasingly discerning about how they spend their money. Employees are more concerned than ever about working for companies that match their values and societal vision.
With so much competition for both employees and clients, social businesses have the advantage over traditional profit-driven businesses. Business News Daily explains
“Consumers, employees, and stakeholders prioritize CSR when choosing a brand or company, and they hold corporations accountable for effecting social change with their beliefs, practices, and profits.”
Consumers create a stronger connection with brands that they feel align with their views and values. If your brand gives back to the community, there are customers who will build loyalty to your brand based on that action.
Similarly, Business News Daily states “employees that share the company’s values and can relate to its CSR initiatives are much more likely to stay.” Employee retention at a time when people are highly discerning about who they choose to work for is very important. Having a social business that engages employees in community-driven social impact efforts creates opportunities for connecting on a deeper humanistic level with the people who make your business successful.
Social business matters because making an impact creates more opportunities for profit. Increased employee satisfaction and engagement will benefit your customers and business. Customers who connect with your brand will become return customers who are loyal to you. This will help generate more revenue for your business over time.
The most important reason social business matters is because it helps community groups, nonprofits, schools, faith-based organizations, and others to get support from the business community. Helping to create social impact and social change through business is an important key part of sustainability.
Businesses offer the solution to unlocking funding streams like contracts, corporate sponsorships, corporate donations, and grants. There are a lot of reasons why society greatly benefits when business supports social impact.
Why Don’t We Expect Businesses to Do More and Do Better?
Traditionally, we’ve subscribed to basic supply and demand economics without consideration for the consequences of doing business. As more “younger” generations begin to influence business, Gen Z, millennials, and Gen X/Xennials are bringing their values to business. That includes social responsibility and ethical ways of approaching business.
One of the reasons we haven’t expected these things from businesses in the past is partly because there was a clearer divide between “nonprofit work” and “business”. However, crowdsourcing and other mechanisms of funding “causes” vs. “organizations” have blurred the lines between “doing good” and “charity work”. What I mean is there are fewer formalities about what types of organizations are doing work that is considered helpful to society.
There are more opportunities for businesses to support worthy causes by partnering with community organizations, coalitions, schools, nonprofits, and others. There still has to be a vetting process and businesses should carefully consider how they will help by establishing a formal impact mission.
What is the Social Responsibility of a Business?
Ethical business seems like it should be the lowest common standard. However, when it comes to social responsibility, there is no requirement to be called a social business.
Most businesses do not define themselves as social business because they do not have a formalized impact mission. They might be using environmentally friendly materials or sourcing with fair trade products, but that doesn’t mean they define themselves as a social business.
In that sense, the impact world needs more examples of best practices so standards can be developed and applied. In absence of a lot of guidance on exactly how a business counts its impact, I created a framework to help social entrepreneurs determine if they are making an impact through their business- DPTD.
DPTD- Framework for Impact
I created the DPTD Framework so social entrepreneurs can tangibly give back to the community by leveraging things within their control as social businesses. This framework is how businesses can use their profit, resources, and time to give back to the community.
- Dollars: Directly supporting social causes with dollars and financial support or the equivalent in goods.
- People: Using our people resources and people power to support community efforts and create social impact. This includes gathering financial resources from employees through donation campaigns or volunteering time.
- Time: Time spent on boards or giving pro bono services can be a vehicle for creating impact.
- Donations: Businesses can connect with the community by opening their physical location to community organizations for meetings. Businesses sometimes donate physical goods sometimes or donate items to silent auctions for fundraisers.
These are just some examples of how businesses can use their existing resources to enact their impact mission. Connecting your existing business resources with your impact mission will make it more sustainable and successful over time.
Social businesses can bring a lot to their community. There are several straightforward ways that businesses can give back to the community that doesn’t involve money at all.
That means any type of business can give back to the community using the DPTD framework. Here are a few ways to put the framework into action as a business starting a social impact mission.
- Donate Items– Unused goods are often helpful to nonprofit organizations in bulk quantities.O Once I coordinated giving out 100 Christmas trees to foster youth in Orange County, CA from an awesome donor who owned a Christmas tree lot. There are many ways businesses can use their inventory to support a cause or a community group.
- Volunteer -Staff time is an important resource. Allowing staff to volunteer at an event in your space or representing your organization can help boost morale and connection with your employees. You can also set up a formal program where employees can volunteer at an organization of their choice for a certain number of work hours per year.
- Community space– Leveraging your business space to help your community can look different for every business. Hosting training events, community meet-ups, networking events, charity events, fun runs, and other events for the community is a great way to connect with potential customers.
- Scholarship spaces in service-based businesses– Coaches can donate a space or two in their programs for scholarship recipients. Designating a group of people who will benefit from your programs but who traditionally would experience barriers from accessing your help can be a mechanism to give back to your community.
One of the benefits of social business is the ability to use the profit to drive impact. By donating money to tax-deductible charities you can help build impact beyond just the tax deduction. If you are using your business to donate money or goods to a nonprofit organization you can partner with them to amplify their cause. This can help you grow your influence and reach new potential customers, which will also help you grow your profit.
What are the Social Responsibilities of a Business?
Using profit to drive impact has four pillars that are widely recognized in corporate social responsibility literature. Each of these pillars supports a social business in successfully reaching both its impact and profit missions.
Harvard Business School breaks it down on its website:
“The four main types of corporate social responsibility are environmental responsibility, ethical responsibility, philanthropic responsibility, and economic responsibility.
- Environmental responsibility refers to the belief that organizations should behave in as environmentally friendly a way as possible. It’s one of the most common forms of corporate social responsibility.
- Ethical responsibility is concerned with ensuring an organization is operating in a fair and ethical manner.
- Philanthropic responsibility refers to a business’s aim to actively make the world and society a better place.
- Economic responsibility is the practice of a firm backing all of its financial decisions in its commitment to do good in the areas listed above.”
These four categories are exactly aligned with the outcomes we want to achieve as a social business. Ethical treatment of workers and values aligned with fair treatment boosts morale and promotes employee retention. Operating in a way that supports environmental wellness connects your brand with a legacy for the future. Both of these examples show how the four types of CSR can help your business grow.
The DPTD framework breaks down how philanthropic impact can be achieved through a social business. Using the 4 types of CSR will help you both maximize profit and create an impact for the people or causes that matter most to you. You can use this information to help you plan your first CSR or expand upon the existing impact work your business is supporting.
What is a Social Impact Company?
A Social Impact Company is focused on maximizing profits and maximizing benefits to society/environment. Social impact companies are designed to make a social change or social impact as a means to create profit. Profits are used to fund social programs.
These businesses are designed to maximize impact by making their impact mission a key ingredient to the success of their business. The impact mission might be part of a service or product or how the company does business. A great example is businesses that support international development and work with governments to bring best practices to countries around the world. The company creates profit by helping under-resourced communities through contracts with governments that need to get resources to their communities.
How Can a Small Business Create Community and Community Impact?
Small businesses have lots of ways to connect with their community. You can invite the community into your space if you have a physical business by hosting events. You can also represent your business on community boards, coalitions, and other public-private partnerships.
Small businesses can create community impact by partnering with nonprofit organizations and any organization creating social benefit or social impact. That includes schools, faith-based organizations, and international Non-Governmental Organizations (NGOs). Creating community impact doesn’t need to be the responsibility of the social business.
Rather, social businesses are the vehicle to create more revenue to support a social cause. The work on the social cause can be done by another partnering organization that benefits from the support provided by the social business.
Businesses can monetarily support a cause using multiple mechanisms:
- Corporate sponsorships
- Event sponsorships
- Donating inventory or items worth a specific value
- Donating portions of proceeds at a specific event or time period
Businesses can support a cause “in-kind” meaning gifted without funds exchanged:
- Donating space for an event or training
- Volunteering for an organization during work hours
- Being on a board, coalition, or committee
- Sharing social capital by sharing information on your social media and website
- Serving on advisory boards or as a consultant
There are numerous ways social businesses can support community organizations and build community within their business. These are just a few examples of how you can start working on your impact mission as soon as you’ve established it.
DID YOU KNOW?
Social impact businesses help create sustainable solutions for organizations that make change happen. Learn more about how funding works.
I’m a Small Business- What do I Need to Start?
One of the most common questions is “What do I need to become a social business?” That’s a great question because the answer is simple, you need commitment to an impact mission.
Of course, to achieve that, there are steps that will help you be more successful as a social entrepreneur. Follow these tips to make a massive impact through your social business.
Tip #1: Involve Your Employees
One of the best ways to support an impact mission or CSR at your business is to start with your employees. Empowering your employees to help you set up an initiative that reflects your company’s values is a great way to give decision-making power to your employees. Set up a representative and diverse team that facilitates the creation of your CSR initiative or impact mission.
You will need to set expectations with the group about what is possible and any parameters so they can be successful at planning for known obstacles and challenges. You will also need a strong facilitator who can share power with team members and is passionate about this work.
Tip #2: Set an Impact Mission
The team can be empowered to set a formal impact mission. The first step that often gets missed is defining a mission. That’s because people are very passionate about starting to help others as soon as possible.
Taking the steps to have a team and setting a formal mission make your CSR program more sustainable over time.
Tip #3: Develop Appropriate Impact Goals
Once we know who we’re helping and how we can set targets for how much helping we can do this year. You can choose to focus by calendar year or one year from when you begin working. Either way works, as long as you stay consistent with measuring your progress.
You can use Airtable to track your progress or a simple Google Sheet saved in Google Drive and shared with your team. Setting goals and tracking progress should be a regular part of your impact mission team’s work once they begin implementing their strategy.
Tip #4: Describe Your Impact on Audiences That Matter
When you begin tracking your progress you’ll start to notice things. You might see more people asking for help than you can actually help. Or you might see that your CSR initiative is helping loads of people! Social entrepreneurs can use their amazing outcomes to drive more profit. (as we described above)
To do that, you need to share your impact with your most important stakeholders or audiences. That might mean funders, clients, customers, or other business owners. Depending on what your model is, you can share your impact information with the right people to drive more impact.
Tip #5: Share Your Impact Mission & Progress
There are loads of ways to share your impact and progress. The most important ones are the ones you already have. If you have access to an email list, social media channels, website, or other digital assets you can share your impact mission and progress regularly.
If you do not have an online presence yet, you can share your information easily by joining the social media platform of your choice where you plan to consistently share content. Existing businesses, at a minimum, should have their impact mission listed on their website.
Learn More About Social Business
This is an article in a series about social business. If you want to learn more about social business, check out other articles in the series. You can also discover more on our podcast, subscribe, and follow anywhere you listen to podcasts.