Models for "Good" Business
Traditionally, the nonprofit sector has been seen as a driver of social impact and the private sector has been seen as a driver of business. However, that perception is shifting. Today only 18% of consumers believe that nonprofits are the most effective entity for addressing social and environmental issues.
Business is innately human. It can be a powerful generator of social cooperation and human progress and often creates economic opportunity, solves problems, and positively impacts the world. Over 87% of businesses understand there is an expectation to support causes within their community and already engage in activities that give back.
While there’s no right way for a business to do good, there may be a model that best suits your business objectives and impact goals.
Corporate Philanthropy or Corporate Social Responsibility
Corporate Social Responsibility (CSR) is generally understood as a strategy that has a philanthropic or charitable nature and contributes to a brand's reputation. CSR strategies must align business objectives and impact goals in order to be successful. Through CSR models, your company can support ethical policy, sustainability, investment in employee development, and community engagement
Many companies also choose to engage in corporate philanthropy through giving to charitable organizations. Oftentimes this includes a corporate foundation typically a separate entity, either a private foundation or public charity associated with a corporation.
These traditional models are a valuable addition to your core business strategy.
Beyond Nonprofit or For-Profit
There are a few different business models that break the mold when it comes to putting purpose into action.
Businesses driven by the ideas of conscious capitalism are typically for-profit entities.
The idea of conscious capitalism is that businesses should operate ethically while pursuing profits. This involves serving the interests of all stakeholders - employees, customers, in addition to their shareholders. Conscious capitalism was established by John Mackey (Whole Foods) and Raj Sisodia. While many companies with highly engaged CSR programs utilize these ideas, conscious capitalism differs in its focus on how company leadership understands how their business practices may affect all stakeholders.
The model of Conscious Capitalism might be for you if you believe that by focusing on your company’s “Higher Purpose,” your business can create more value.
Social Business & Social Enterprise
Social businesses or social enterprises can be either a nonprofit or for-profit entity.
Social businesses are aimed at solving a specific social problem. While they receive monetary returns, their purpose is for the benefit of society. The success of social businesses is based on monetary return for social benefit. Typically, these organizations do not conduct their charitable work in-house.
Similarly, social enterprises employ processes, principles and operations towards solving social issues. A social enterprise aims to make profits that can be invested in charitable actions or re-invested in companies' operations. Their success is measured in solving a particular problem which is typically tackled directly by the social enterprise.
A social business or social enterprise are good for business owners who seek to solve social issues at the core of your company’s mission.
Public Benefit Corporation
A benefit corporation is a for-profit entity incorporated with a dual purpose of profit and public good.
In addition to profit, the business strategy of benefit corporations includes a positive impact both for their stakeholders (customers and employees) and planet (social, community, and environment). Currently 36 states recognize benefit corporations as legal business forms. To qualify as a benefit corporation, you must have a public benefit purpose, maintain a board of directors, and report on your mission.
This is a great option if you want your purpose legally embedded in your core business strategy
A final thought…
Maybe you have an idea that is purely charitable in nature, and you’ve considered nonprofit status. Starting a nonprofit is a fairly simple process. However, running a nonprofit and scaling it to best serve its populations requires considerable resources and time. Before you jump into starting a nonprofit, think through what running it will entail. Consider regular accounting, IRS reporting, operations, communications, etc. There are currently over 1.5 million nonprofits in the United States. New nonprofits have the potential to increase competition for limited resources to support charitable missions and serve populations in need.
If you have a strong commitment to a particular cause, consider one of the models above or research other organizations that are already doing the work and see how you can help.
Curio412 is a consultancy for businesses and nonprofits who want to improve their bottom line, build relationships, and scale meaningful impact. We believe in creating lasting impact. Which is why we share knowledge and tell stories to keep nonprofits, business, social enterprises, and charitable organizations informed about current trends, ideas, and impact.