Importance of Social Impact
What is a social impact business? And why should you consider being a social good company?
By Lenka Davis
In this article
Variety of Terms
What is Social Impact Business
Benefits of a Social Good Startup
Three (3) Types of Social Impact Businesses
17 United Nations Sustainable Development Goals
How to Pick a Purpose
What is a B Corp
References
Definitions
Fun Fact!
Variety of Terms
There are many terms used to describe ways that companies can give back to society and show that they are socially responsible. Terms such as social impact, social good, social responsibility, common good, purpose driven, and mission driven, are just some examples that can all be used to describe a business that has some focus on giving back to the community and improving our world. You can also build a sustainable business or green business that fits within having a social impact. No matter what term you decide to use to describe your business’s social impact, it’s a good idea to have one in your business plan.
Why? Because today’s customers want to trust the businesses they support and this is one way to build trust. Trust is the number one factor in choosing a brand for consumers.
For customers to stay loyal to a brand, they are influenced by the brand’s commitment to the following (data from PwC survey): 19% to giving back to society, 15% to sustainable practices (e.g. commitment to net zero) and 20% to ethical practices (e.g. fairtrade, cruelty-free testing, workforce equity, best in practice production, etc.)
What is a Social Impact Business?
A social impact business is one where your product or business model supports an organization or a cause that improves our society or world. This can include your business donating time, money or a product, creating a product that improves a local or worldwide community, or fulfilling one or more of the UN’s Sustainable Development Goals. Based on a Porter Novelli survey, 78% of Americans expect companies to go beyond making profits.
Benefits of a Social Good Startup
The benefits of social good being an integral part of your startup are many. First, it gives a customer a deeper understanding of what values the startup has based on what organization or purpose your startup supports. Second, it gives that customer more of a reason to buy your product. And, it also makes the founders feel good about what they are doing and improves their reputation in the community.
No longer can a startup be set apart from the rest of the pack by only being socially responsible, a few years ago this was true and possible. Due to the global pandemic so many problems, issues and gaps were exposed and startups are being built to fix these issues in a variety of industries. Startups now will need to consider having a clear purpose on a multiple of social and environmental fronts.
Three Types of Social Impact Businesses
For-profit models.* Your business may include one or more of the following:
Donation - The product or profit is donated to people that otherwise would have difficulty getting the product or service.
Product - The product itself is created as “tech for good”
Sustainable Development Goals - The business model of the business fulfill one or more of the 17 UN sustainable development goals
*For a full list of social enterprises types see the Reference list below
You can have social impact and still be a for profit business. Your business does not have to be nonprofit. Nor does it have to be the primary focus of the business.
Donation
A prominent brand is Bombas. Bombas, is the sock company that donates a pair of socks to the homeless each time a pair is sold. Bombas founder’s philosophy was to not sound too sales-y. Be respectful of people’s inbox, and to interrupt them for a good reason. He wanted to communicate the mission without it seeming too sappy or feeling sorry for somebody, taking the wrong tone or having violins playing in the background.
Product
There is also the approach where the actual tech product is primarily created for social good. ‘Tech for good’ startups, startups that have social good as their primary part of their business model. Social entrepreneurs are beating large corporations in finding undiscovered opportunities. Harvard Business Review article, Creating Shared Value, How to reinvent capitalism-- and unleash a wave of innovation and growth, writes “a whole generation of social entrepreneurs is pioneering new product concepts that meet social needs using viable business models.”
Founder Institute has recently selected 10 impact startups. The products range from blind spot sensors to transform any regular wheelchair into a "smart" wheelchair, low-cost and eco-friendly housing solution for Africans living in poverty, peer-to-peer lending at affordable rates for users who have been locked out of affordable credit from traditional lenders , to name just a few.
UN Sustainable Development Goals (SDG)
Creating a business model that includes one or more of the UN Sustainable Development Goals will go a long way to getting your business funded and noticed by your customers.
There are 17 interlinked global goals designed to be a "blueprint to achieve a better and more sustainable future for all".
For example, the Founder Institute encourages their startups to find impact they can have on the UN SFGs so much so that they have set up a goal to do so. Take a look a this list and see how many goals your startup can address.
17 United Nations Sustainable Development Goals
The 17 SDGs are:
(1) No Poverty
(2) Zero Hunger
(3) Good Health and Well-being
(5) Gender Equality
(6) Clean Water and Sanitation
(7) Affordable and Clean Energy
(8) Decent Work and Economic Growth
(9) Industry, Innovation and Infrastructure
(10) Reducing Inequality
(11) Sustainable Cities and Communities
(12) Responsible Consumption and Production
(13) Climate Action
(14) Life Below Water
(15) Life On Land
(16) Peace, Justice, and Strong Institutions
(17) Partnerships for the Goals
Many organizations are adding in goals to their mission statements that focus on social good. The Womentech Network, for example, has as their statement:
How to Pick a Purpose
Customers need to feel emotionally connected to your purpose. Employees need to feel emotionally in sync with who they work for. Find opportunities that align with your product or the market you are serving. Companies have done this by thinking about the “why” they are here to service their customers, and then found organizations they can volunteer for or donate time or funds to. Or, look at how you can change internal processes or production so that they reduce impact on people or the environment. For example, AirBnB has a OpenHomes Campaign that provides temporary housing to people who have been displaced. Patagonia pledges 1% to the planet by giving to organizations that support positive environmental change. In both cases, where they choose to focus their giving aligns with their market and their customers values. Also, according to findings published in HBR by Robert E. Quinn and Anjan V. Thakor “purpose is not just a lofty ideal; it has practical implications for your company’s financial health and competitiveness.”
What is a B Corp
In the long term, if your values align with the Benefit Corp (B Corp) mission, you can work towards getting a B Corp status.
What is a B Corp? A ‘B’ Corp certification is awarded to companies that achieve higher standards of social and environmental performance, transparency, and accountability. It's what Fair Trade certification is to a coffee producer, or what USDA Organic certification is to milk. B Corps are committed to using business as a force for good in the world.
Fun Fact
The founder of TOMS shoes, Blake Mycoskie, competed in the second season of The Amazing Race in 2002. TOMS shoes founder started the one-for-one business model in 2006 after he returned to Argentina to vacation and again decided to volunteer to distribute shoes to shoeless children. It’s a for profit company.
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Definitions
Social Impact: “Defined as the net effect of an activity on a community and the well-being of individuals and families.”
Social Responsibility: Defined as “businesses, in addition to maximizing shareholder value, must act in a manner that benefits society.”
Social Good or Common Good: Defined as “something that benefits the largest number of people in the largest possible way, such as clean air, clean water, healthcare, and literacy.”
Social entrepreneurs: Defined as entrepreneurs who “meet social needs using viable business models.”
Purpose-Driven: When we build or join purpose-driven companies that inspire, the potential to improve the world is limitless.
Mission-Driven: Mission-driven companies believe that it is possible to have a positive impact on a social or environmental issue while considering all stakeholders and staying committed to product development, profit, social responsibility, and sustainability.
Sustainable or Green Business: Defined as an enterprise that has minimal negative impact or potentially a positive effect on the global or local environment, community, society, or economy”.
Reference
UN SDG Website
Harvard Business Review, ‘Creating Shared Value’
What does a Purpose-Driven Company Look Like?
A Look Inside the 6 Types of Social Enterprises
How Purpose and Social Responsibility Can Set a Startup Apart
4 Reasons Why Startups Committed to Social Responsibility Succeed