The Six Social Enterprise Impact Models

The social enterprise world can be a confusing place for newcomers.

Through my work at StartSomeGood I meet a lot of people with a passion for using business as a force for good, but all too often they are uncertain about if what they are doing is or is not a “social enterprise”, and what exactly is meant by that term anyway?

To make matters worst how people use this phase can vary by country. In the United States social enterprise generally means a profit for purpose company, structured as a for-profit but pursuing an expressed social mission.

In the UK it more commonly means a business operated by a charity and returning profits to that charity.

In Australia different people will insist on either of these meanings.

We think all of that is unhelpful and a distraction from what matters.

What makes you a social enterprise isn’t your legal structure but how you leverage the tools of enterprise to make a social or environmental impact.

In other words, social enterprise is about a HOW — How are you making an impact — not a WHAT — as in what is your legal structure.

If you’re using business — ie. the sale of goods or services — to make your impact, you are a social enterprise, regardless of if you are a for profit, non-profit, cooperative or sole trader.

So let’s examine that HOW more closely: How do social enterprises create impact?

We think there are six primary social enterprise impact models, in two genres.

Impact Genre 1: Redistributive Impact Models

This approach is about running a business at a surplus, and redistributing that surplus towards impact, usually in the form of donations.

This comes in two flavors: Redistributing Profits or Goods.

Impact Model 1: Profit Redistribution.

This is a very simple model to explain. You give a certain percentage, usually 50% or 100%, to charity.

Examples: ThankYou, Who Gives A Crap

Impact Model 2: Goods Redistribution.

Made famous by TOMS Shoes and this model is often called “buy one give one.” For each product sold, the enterprise gives one to someone in need who would otherwise be unable to access this product.

Examples: TOMS Shoes, Hero Condoms.

In both cases, this model maintains the fundamental role of a company is being about creating surplus, which is then redistributed to charities to implement the hard work of social change.

Impact Genre 2: Embedded Impact

This approach is about embedding the impact somewhere in the core business operations, as a feature of the product, the supply chain or the employment created.

Where Redistributive Impact is a spin on philanthropy as much as it is a new approach to business, this approach fundamentally re-thinks how a business operates, looking at the core properties of a business and embedding impact into those operations.

There are four models we have seen which embed impact in a business:

Impact Model 3: Employment

Also called “Work Integration Social Enterprises” these enterprises make their impacts by creating employment opportunities for people otherwise excluded from the labor market, including those with a disability, newly arrived refugees and migrants, ex-prisoners, the long-term unemployed and more. This model often requires an ongoing philanthropic subsidy due to the expense of recruiting and training up staff of this type, then transitioning them to mainstream employment and starting again.

Examples: Vanguard Laundry, The Social Outfit, Edgar & Joe’s

Impact Model 4: Access

These enterprise re-think how to provide a product or service to give access to those otherwise excluded. This is often information services, such as Esoko providing farmers with access to prices in Ghana, M-Pesa providing banking services via mobiles across Africa and apps like Headspace providing access to mental health and meditation resources, but can be goods, such as Fitted for Success which provides low-income job-seekers access to interview-worthy clothes. At StartSomeGood we consider ourselves an Access Social Enterprise, giving diverse changemakers access to fundraising technology and coaching.

Examples: M-Pesa, Fitted for Success, HireUp, Babban Gona, Aravind Eye Care

Impact Model 5: Sustainability

Here impact is largely created at the resources and inputs level: creating goods which are more sustainable than competitors. We are seeing enterprises launch with this impact model in almost every niche and in many ways anyone can “plug-on” this impact model by offsetting the carbon impacts of their supply chain to offer a zero carbon alternative in any market. But being a leader in this space means investing in new materials, transparency and certification.

Examples: Citizen Wolf, Ocean Zen Bikinis, JUST, Tesla, Bio Lite Energy

Impact Model 6: Better For Us

Where the various models embedded impact via the employers, distribution model and inputs, this model has as the recipient of its impact us: the consumer of the product. This model claims that by using their product or service we will be better off. This often pares with Access, making us better off by supporting a mindfulness or yoga practice, but also includes many food enterprises, such as low-alcohol beer and low sugar alternatives, or foods for specific chronic conditions like Coeliacs and enterprises focused on safety, like the Shebah women-only uber alternative.

Examples: Shebah, Calm App, Sobah Beverages, Athletic Brewing.

Each of these models provides a different way to drive impact via your business. Many social enterprises, of course, utilize more than one, to create the most impact they can. But our advice is generally to start by getting one right. Once it’s working, you can look to embed other impact models into your enterprise.

Got other great examples? Put them in the comments below and give this post a clap to share it with others.

We wrote this post to inform and inspire mission-driven founders, individuals, and organizations. In conjunction with this post you can access a special offer to help you start up: a custom .ORG domain, professional email, and a logo, through BetterOn.org.