Ever since I stepped into the magical world of purpose-driven businesses, a lot of new terms have crossed my path. It seems like the world has yet to come to an agreement as to what social, conscious, or impact businesses are and what distinguishes them from each other. Since I started sharing my journey, I’ve often been asked what these terms mean.
I’m going to share my views in this article. In no way do I pretend to hold the truth, if there is such a thing. It’s just what works for me when I think about the spectrum of business types with a social purpose.
The European Venture Philanthropy Association (EVPA) is a great source for getting some insight into this. My illustration below has been modified from their version for the purpose of this post.
On the far right of the spectrum, we have traditional businesses with a primary focus on profit. As we move towards the left of this group of businesses, we have companies that participate in charitable work through donations or incorporating corporate social responsibility in their activities. A majority of these companies do this from a public relations perspective. They want to be seen as being socially responsible.
A 2015 survey conducted by Harvard Business Review found that “CSR programs are often initiated and run in an uncoordinated way by a variety of internal managers, frequently without the active engagement of the CEO”. This approach is neither aligned nor integrated with the core business strategy and model.
On the far left of the spectrum, we have the charities. Obviously, we would not label them as businesses. They are only focused on creating impact and there is usually no voluntary exchange of goods for money. Even if there is, it isn’t for generating a profit. They depend on donations for the most part.
The middle of the spectrum is where it gets interesting. This is the domain where I would like to make an impact. Here, we find the social enterprises and conscious businesses, or as EVPA calls them, “revenue generating social enterprises” and “socially driven business”. To me, all four examples here are impact businesses. Where charities are impact organizations, social and conscious enterprises are both impact businesses.
The biggest difference between a social enterprise and a conscious business is that the former is more focused on impact than the latter. According to Investopedia, a social entrepreneur is “a person who pursues an innovative idea with the potential to solve a community problem. These individuals are willing to take on the risk and effort to create positive changes in society through their initiatives.”
Often, a social business is created around solving an actual social or environmental problem. For many social businesses, profit is a necessity because, without it, they won’t be able to create the impact they hope for.
A conscious business, on the other hand, can resemble a traditional business in its activities. However, it is clearly purpose-driven and integrates that culture within the entire company and all of its primary and secondary processes. It makes sure that there is value creation for all stakeholders in its ecosystem, and not just for the shareholders. It has a conscious leader, culture and management style.
I call both social and conscious enterprises impact businesses. They are both purpose-driven, with the goal to uplift the planet or humanity. Generating profit remains an important role because it enables them to attain their purpose. That’s the type of business I’d love to support and empower.
Do you agree with my definitions of these business types? Do you have anything to add? I’d love to hear it!
Big hug, Rianne