Understand the importance of social impact business

Rohan Mathew

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Social impact businesses have become increasingly relevant and are a good alternative for entrepreneurs who aim to make significant changes in society. Although it seems contradictory, social business can also be profitable.

However, the big difference is that the revenue generated from the sale of products or services serves to increase the capacity to benefit minorities or to improve the environment.

Do you want to better understand how the social impact business works? Next, you will see the importance of this type of enterprise, learn some examples from around the world and learn how to create a profitable business. Good reading!

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What are social impact businesses?

They are those whose goal, objective or mission is to solve (or alleviate) a certain social or environmental problem. Normally, they are financially self-sustainable, that is, they do not depend on donations to exist.

However, it is important to differentiate this business model from social organizations linked to philanthropy. Assistance institutions are supported by donations and are governed by their own legislation.

Social business, on the other hand, is economically viable and exists for the purpose of seeking solutions to a social issue. Some of its goals are:

– expand the perspectives of people marginalized by society;

– cause positive impacts in a given community;

– generate financial autonomy and shared income for low-income individuals.

How do they work?

Social impact businesses basically work like traditional models, however, their revenues are only to cover execution and planning costs – that is, all the profit obtained is automatically reinvested to expand the social impact that the company seeks to cause.

Thus, unlike traditional models, the measurement of success is not based on the profit achieved, but on the social impact caused by the activities developed. The focus is to bring about a transformation in society through the work done.For example in the fashion world. Fashion surely is one of the most fertile fields for social impact companies. In particular, many of them aim to help artisans from emerging countries, offering them online platforms where you can buy their handcrafted jewelry.

What are the characteristics of the social impact business?

Social impact businesses have the following main characteristics:

– they are managed by responsible and ethical entrepreneurs;

– objectives are defined according to the characteristics and needs of the low-income population;

– they can expand their reach by replicating elsewhere, by other authors, or by expanding their own business;

– they have a strong model that guarantees profitability, in addition to not depending on subsidies or donations;

– the product or service offered generates social impact, that is, it is not a project separate from the business, but its main activity;

-present innovation in the business model;

– products or services contribute to a better quality of life for the low-income population;

– there is a commitment by the team and the entrepreneur to improve the quality of life of these people.

What is its importance?

Firstly, the social transformation itself already carries with it enormous importance for this business model. A specific group, minority, or cause will benefit from serious work done in a professional manner, which reduces injustices and inequalities, resolves problems, and alleviates certain situations.

Another pertinent point is the incentive to entrepreneurship and innovation. Because it is a differentiated model, focused on solving a specific (and usually complex) problem, it requires that the people involved “get out of the box” and set aside some business standards – which is a great addition for the entrepreneurial market.

As we have already mentioned, this is a type of business that exists in order to seek a solution to a social, environmental issue or to increase the positive impact already produced. Such a solution is developed according to the economic viability of the intervention, based on business models and strategies.

Thus, we can say that the motivation for social impact businesses to exist is a socio-environmental cause, showing that there is no conflict between economic and social ambition.

Finally, collaboration with local communities is encouraged, as well as encouraging the promotion of fundamental values ​​and principles linked to social issues in companies.

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What are the main examples of social business?

There are many types of social impact businesses in the world. One is the Mobile Alliance for Maternal Action (MAMA). It is a company that operates in countries in Asia and Africa, providing messages through cell phones, which talk about the health care of pregnant women and their families.

Another case is African Clean Energy (ACE), which manufactures sustainable and portable stoves powered by biomass from South Africa. Thus, it seeks to solve the problem of the use of polluting fuels. In addition, it helps people who do not have access to traditional resources to cook their food.

In Brazil, an example of a social business that has had a positive impact on society is Quíron Educação. The company operates in São Luís (MA) and Curitiba (PR), aiming to encourage young people aged 14 to 24 to make a difference in society through protagonism, with classes based on the four pillars of UNESCO education.