It’s no secret that the world is facing innumerable daunting issues. Nonprofits and other NGOs are designed to help solve these issue and they have an extremely important role in our society. However, businesses are able to scale easier and create a surplus of profits that can be allocated to different causes. In one year, all of the charities in every developed country in the world donated around $200 billion* to developing countries. That is no small feat. Yet, businesses donated $3.7 trillion*. Still, with all of this money being donated, there are pressing issues that need to be solved.
Businesses have a great amount of control and power in the world and its communities. For a long time the primary focus of businesses has been profits and growth. But things are changing now as more and more companies and individuals are putting an emphasis on social impact. Social impact-oriented business models not only integrate social programs into their business, but actually embed social programs into their business models. With these for-profit business models, profits and social good go hand in hand. These companies exist to solve social issues while making a profit.
Some might argue that businesses have come a long way in their Corporate Social Responsibility (CSR) efforts and that is enough. However, CSR isn’t designed to scale. Integrating social responsibility into the business model allows the social impact to grow as the company grows. There are countless companies that are already doing this successfully. Take a look at some examples.
From Patagonia’s supply chain to their relentless activism, the company is rooted around protecting the environment. They have donated over $185 million to nonprofits whose missions align with theirs. In one year, the company volunteered over 1,700 hours* at environmental organizations and programs. Every part of their supply chain has been extensively thought out to ensure that they are being as socially responsible as possible. You might even remember their “Don’t Buy This Jacket” Black Friday ad that the company ran in 2011 to promote conscious consumerism. With all of this focus on environmental sustainability, Patagonia is still a $1 billion company*.
TOMS’ business model is clear — for every one pair of shoes purchased, a pair is donated to children in need of shoes. TOMS’ founder Blake Mycoskie came up with this idea in 2006*, and the company — along with it’s activism for under-resourced children — has grown since. They now offer shoes, eyewear, coffee, and bags. Each of these products helps provide a different benefit to children and communities in need around the world. In 2014 TOMS was valued at $625 million*.
Similar to TOMS, TenTree has a one-for-one business model in which they plant one tree for every item purchased. To date, they have planted over 21 million trees around the world*. The impact is clearly displayed to the customers; when you purchase an item, you get to see when and where your tree will be planted. People are drawn to the eco-friendliness of the company which helps to build their brand loyalty.
Although Solar City more or less operates like a normal business, their mission — and the entire essence of the company — is built around a good cause. The company attempts to make solar panels more attractive and accessible so that more people will start to implement solar energy into their homes.
A trend with all of these companies is that they each chose a cause from the get-go and formed their business around it. Each of them have dual value propositions: a customer value proposition and a social value proposition. What value are they adding to the cause and what value are they adding for their customers?
There isn’t any one way to grow success in a social enterprise or any “one size fits all” business model. However, there are some prevailing business models that companies are using to create social impact while generating profits. Toms and Ten Tree use a “one-for-one” business model in which they donate something for every item purchased. With this, companies sell a product at a market value that allows for donation while maintaining a profit that will sustain the company. Companies like Patagonia focus on an ethical supply chain and well-being of employees — ultimately improving the operations of the company. Solar City’s business model is similar to a typical company, but the mission of the company is impact-driven.
These companies, along with countless others, are proof that businesses can be a powerful force for driving social impact while generating profits. We are in a time where businesses can and should focus on what they can do for the world. In the end, it will help companies grow while making the world a better place.
Wendy Woods. (2017). TED. The Business Benefits of Doing Good. https://www.ted.com/talks/wendy_woods_the_business_benefits_of_doing_good. Retrieved online Aug 10, 2018.
Lyz Zurn. (2017). Chuck Joe. How Patagonia Became a Pioneer of Corporate Social Responsibility. https://www.chuckjoe.co/patagonia-corporate-social-responsibility/. Retrieved online Aug 10, 2018.
Marcela Isaza and Leanne Italie. (2016). The Seattle Times.
60 million pairs of shoes and 10 years later: Toms Shoes founder reflects. https://www.seattletimes.com/life/fashion/60-million-pairs-of-shoes-and-10-years-later-toms-shoes-founder-reflects/. Retrieved online August 20, 2018.
TenTree. https://www.tentree.com/pages/projects. Retrieved online Aug 11, 2018.