Social Enterprise

Make Business Better: A Practical Guide To Social Impact

April 18, 2018

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Make Business Better: A Practical Guide To Social Impact

Social impact is slowly cementing itself as the latest corporate buzzword.

But how can companies actually achieve it?

One thing’s for sure, it’s takes more than just the occasional good deed or pet project.

The more I’ve looked at social businesses, the more I’ve realised that social impact exists as a very abstract concept. It seems as though every entrepreneur wants to create it, but few understand it well enough to succeed.

In this post, I’ll highlight the three fundamental types of social impact, and discuss what businesses must do to create noticeable change.


Social Impact Definition

However, before looking at how businesses can create it, it’s worth reminding ourselves of what social impact actually is.

In the simplest terms, social impact is a significant, positive step towards addressing an important societal issue. 

For social enterprises, it’s crucial to achieve in order to survive. After all, if a social business doesn’t create any impact, then what purpose is it serving?

With this in mind, let’s look at the three key areas where businesses can create this impact.


ProductionStarbucks Social Impact | Jason Wicks

Firstly, a business can create social impact by creating their products in a responsible/beneficial way.

If you’re a social enterprise, ask yourself the following question:

“Does the world benefit from the way we produce our products?”

A prime example would be a company like Starbucks. Sure, some of their ethics have been questionable at times, but you can’t deny their stance on ethical sourcing. By Starbucks producing their coffee in a responsible way, they are helping to improve the lives of people all over the world. They are creating impact.

In many ways, this is the most common method of creating social impact. It’s often the first thing that entrepreneurs think of.

However, that doesn’t mean it’s the only one.


ProductTesla Social Impact | Jason Wicks

Chronologically, that brings us to the next way that a company can generate social impact; the products themselves.

Often overlooked, I think one of the best ways to create impact is by selling a product that actually makes the world a better place. While Starbucks might help the lives of their farmers, the coffee they sell isn’t really addressing a genuine social problem. Yes, I know that caffeine helps people get through the day, but I’m sure we can think a bit bigger than that!

A better example might be something like an electric car. Be it the Nissan Leaf or a Tesla, electric vehicles are inherently socially beneficial. Not only are they somewhat sustainable, they provide people with mobility, independence and opportunities that they perhaps wouldn’t otherwise have. I don’t think it’s too much or a stretch to say that they are socially beneficial products.


ProfitsTOMS Social Impact | Jason Wicks

That brings us to the final method of social impact creation, which looks at how companies use their profits.

Of course, social enterprises are still ‘for-profit’ organisations, so they’re perfectly entitled to financially benefit. However, a fair amount of companies adopt a post-sale impact strategy to try and address the social issue they’re passionate about. Think about a company like TOMS Shoes. TOMS pretty much invented the ‘sell one-donate one’ model, and it’s become hugely successful.

Other companies have taken a similar approach.

Leesa, the mattress company, donates a mattress to a homeless shelter for every 10 that they sell and Innocent Drinks donates at least 10% of their annual profits to charity.

It’s quite a common strategy.


What Companies Should Do

Based on the idea that impact can be created through production, products or profits, what does that mean for companies?

Well, in my experience, I would say that the vast majority of social businesses focus predominantly on just one of the three. When businesses are small, this makes sense, because creating genuine impact can take a lot of work.

However, I can’t help but think that 1/3 is just not enough.

In an ideal world of course, a company would want to create impact at all three stages, but that can be pretty tricky. After all, the vast majority of products wouldn’t count as socially beneficial, so 3/3 is pretty rare.

Instead, I’d suggest that entrepreneurs strive for 2/3. 

If a company has a responsible supply chain or donates profits to charity, they might fall short of truly creating change. However, if they have a responsible supply chain and donate some profits to charity, then they’re getting somewhere.

TOMS is a really good example. Yes, they donate products after somebody has bought them, but they also manufacture products in the countries they wish to help, providing jobs and wealth.

By creating impact in more than one way, companies can being to build a positive reputation.

Not just for impact, but for sincerity.

As social responsibility becomes more common amongst businesses, being able to develop this reputation is extremely valuable.


What Social Impact Isn’t

Just before I wrap things up, it’s worth reflecting on the common misconceptions surrounding social impact.

It can be tempting, understandably so, to believe that it’s entirely about quantity and scale. This makes sense of course. If you want to solve a social problem, it will very much be a case of ‘size matters’. A small family business selling 100 products a month won’t create anywhere near the impact of giants like Starbucks, Tesla or Innocent.

However, I strongly believe that that thinking of social impact in such a way can be an unwanted distraction.

I know it’s an old cliche, but all of the world’s biggest companies were small at some stage.

I therefore think that social impact is categorised not by it’s scale today, but by it’s scalability tomorrow.

In essence, if you create a business model that can sustainably generate impact and be scaled, then that’s all you can really ask for.

That’s why even some smaller companies are starting to genuinely create change.


Summary

  • Social impact is crucial for surviving as a social business.
  • Many entrepreneurs see it as an occasional good deed or project.
  • Social impact can be created at three stages of a business’ operations.
  • Businesses should aim to utilise 2/3 of those stages.
  • Social impact should be measured not but current scale, but scalability and sustainability.

Hi! I’m an author and blogger within the fields of social impact and responsible business. I believe that businesses can be a force for good in the world, and this website contains my thoughts on how that can work.

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