With all of the trying things going on around us, it's so vital that we take time to reflect on what's next - even if it's just for a minute. One thing I've been reflecting on lately is the challenge of wanting to do good things in the world while owning a business that can actually sustain itself. Sometimes we're told that those two things can't be true at the same time, and I wanted to share some of what I've learned about social enterprises that can effectively make an impact.
There's more than one way to make a change and while more traditional forms of social impact, like starting a donation-based non-profit, are completely fine, the world of social impact is much broader. More specifically, I'm talking about social enterprises which are companies that have a double bottom line - focus on making/measuring impact and generating profit. In order to have a social enterprise, you have to have both a concrete social mission and earned revenue.
The social mission is pretty straightforward in that you must have a social problem that you are focused on addressing. Earned revenue can get tricky, but I'll make it simple - this is money that people must pay you in exchange for a good or service (i.e. not a donation).
Having earned revenue as opposed to a purely donation-based operation allows for more control over the funding you're using, more consistent cash flow, and more time to focus on the work of making the change over chasing money - especially if you're a small team without a whole fundraising department.
Take this example from the Girlfriend Collective - a social enterprise tackling fast fashion and body-shaming in athletic wear for women:
Now that's a mission statement! So we've checked the first box of addressing a social problem (click here to read more about their ethical and sustainable practices). Separately, we can also check the second box of earned revenue because they do actually sell the clothes that they manufacture for a profit in order to sustain the company. Ta-da, we have a social enterprise!
Now if you or your students are trying to tackle a social problem and are considering building a social enterprise, then there are 3 questions I want you to consider:
- What is the big problem being addressed by your social enterprise? How?
- Who is your customer and who is the beneficiary? (Hint: they may or may not be the same!)
- How do you plan to earn revenue?
Big Problem: Every true social enterprise must be able to identify the big problem they aim to address as a result of running their business.
For Mindset & Milestones, the big problem we address is educational and career attainment inequality for marginalized youth. How we do it is by making entrepreneurial resources accessible regardless of school income. The Girlfriend Collective addresses the issue of pollution caused by fast fashion and single-use plastics. They do so by turning those single-use plastics into clothes! So what's yours?
Customer vs Beneficiary: This one is super important and is not always obvious.
A customer is someone who pays money/time for your product or service and helps you generate revenue, but a beneficiary is someone who benefits from the social good that your company contributes. It can get fuzzy because sometimes the social good that you do is a result of simply making your product and it benefits everyone in our world, and sometimes the lines are very clear. The Girlfriend Collective is reducing pollution plastics by making their clothes so technically we're all the beneficiaries, but their customers are strictly the people who pay for their clothes. Make sense? A clearer example would be Tom's shoes! When they first started, their famous one-to-one model made it so the customer was the person who bought the shoes and the beneficiary was the person who received the shoes at one of their shoe drops around the world - very simple!
Earned Revenue Model: Last, but not least, how will we earn money to fund our change and fuel our business?
Note that this part can also go hand in hand with the big problem because sometimes you make your impact using your earned revenue. For example, Tom's Shoes has always earned its revenue the same way: by selling shoes. However, they have changed their approach to impact in the last few years (read about why), and now instead of donating pairs of shoes, they actually donate 33% of their revenue to small organizations all over the world tackling several big problems including sustainability and mental health disparities. However, there are several other models for earning revenue as a social enterprise including...
- a subscription model where you charge monthly/annually, like Little Justice Leaders
- a sliding scale where you charge a different fee based on someone's ability to pay, like Better Help
- tiered pricing, charging based on how much a customer wants to use your services or much they have access to it, like CodeAcademy
Overall, you can address a big social problem by making products that provide a social good, serving people that aren't able to be serviced by existing solutions, or incorporating social giving into your earned revenue model. But the #1 thing to remember about being a social enterprise is that you want to ensure that you are not only trying to do good in every part of your business but also reducing harm.
If you have a restaurant like No Limits Cafe that hires individuals with autism to help them access stable employment and independence, they also want to make sure that they're donating the food they don't sell or doing their best to work with ethical food suppliers. Social enterprises agree to operate at a higher standard because doing good as often as possible matters just as much as making a profit.
So get out there, find the big problems, and tackle them head-on! Mindset & Milestones will always be in your corner 🙂