We’ve found that many people associate business primarily with the pursuit of profit. And it isn’t a stretch to think that most businesses operate from this foundation. With profit centric focused business models, ‘business’ has a lot to answer for when it comes to the state of the environment, poverty & inequality.
At Further, we love the agility, ingenuity and progress that business thinking brings. We get particularly excited about the potential business has to be a vehicle for social and environmental change. But! There are too many examples of green-washing and Corporate Social Investment programmes (CSI) that do little to offset the damage done in the pursuit of just profit. That being said, there are also lots of innovative examples of businesses going to great lengths to minimise harm and maximise social and environmental benefits.
As always, we’ve tweaked our favourite tool… the Business Model Canvas (Alex Osterwalder’s original design, adapted by Further to include social and environmental costs and benefits as explicit components of a business model), to illustrate some common models and how they fit into what we perceive as a matrix of options:
The For-Profit Model (think big business)
In the most simplistic sense, this model presupposes pursuit of financial profit is the primary goal and all other aspects of the model are subordinate to this goal.
Many for-profit entities are beginning to transform as it becomes more and more apparent that pursuit of profit alone does not speak to long-term sustainability. (This raises a challenging question about whether pursuing social & environmental ‘agendas’ is actually about generating social & environmental benefits or simply securing longer term profits… This ultimately comes down to intent and the ‘tone from the top’).
The excellent work of John Elkington and many others of like mind, has brought about an increase in corporate social investment/responsibility and triple bottom line reporting. In such cases, the business model may indicate efforts to increase social and environmental benefits whilst reducing (or at very least taking stock of) social & environmental costs. In most countries, reporting on people and planet remains entirely voluntary, and it must be said that it is a challenge to measure People, Planet and Profit in the same terms – those terms being… cash. There’s little doubt that the scales are still tipped towards the profit end of this triangle.
The Not-For Profit Model (think Charity & NGO)
These models exist to deliver social and environmental benefits to the world. Woohoo! Whilst they don’t traditionally earn financial ‘revenue’, they usually rely on donor funders (key partners) to provide funds (key resources) in order to do work (key activities), that contribute towards the value proposition, and ultimately realise social and environmental benefits.
We would ask whether changing global trends in donor funding, along with often onerous funding requirements spell difficulties for the long-term sustainability of these models. Those that fare best tend to focus on diversified sources of funding…. This might be indicating a move towards our third type of model… (the social business model)
The Social Business Model (think… the future)
We have found great inspiration from these business models. They establish social and environmental (S&E) benefits at the centre of their reason for existing and they simultaneously pursue self-sufficiency by selling products and services to generate their own revenue. This often means embedding S&E benefits directly into their value proposition, and counting S&E benefits as their measure for success. Social Businesses have the potential to redefine what it means to be profitable (and about time too!).
Type 1 - the social business produces a product or service that is specifically targeting a social objective. For example, Grameen Danone manufactures and sells a yogurt to fight childhood malnutrition.
The Type 2 social business is when its shareholders are primarily under-privileged, and the profits are put into a trust to improve the quality of life for its shareholders. For example, the Grameen Bank – nearly all of its shareholders are the under-privileged. (It’s worth noting that Yunus was awarded the nobel peace prize for his work in microfinance)
In addition, Yunus, the genius that he is, lists 7 Principles that a business must follow to qualify as a social business:
- The business objective will be to overcome poverty, or one or more problems (such as education, health, technology access, and environment) which threaten people and society; not profit maximization;
- Financial and economic sustainability;
- Investors get back their money amount only. No dividend is given beyond the investment;
- When investment amount is paid back, profit stays with the company for expansion and improvement;
- Environmentally conscious;
- Workforce gets market wage with better working conditions;
- …do it with joy.
Check out Grameen here…
If one imagines for-profit and not-for-profit concerns on a spectrum, seemingly two opposite sides in tension, we believe that the transcendent third, (see Carl Jung’s work on the transcendent function) is the social business.
In our work with organisations, we always include an elicitation of the social and environmental aspects of each business model that we work with. Whilst this can be an initially uncomfortable experience (much like someone rifling through your underwear drawer), we find that most business founders genuinely do want to make the world a better place. Finding social and environmental benefits you didn’t consciously know you were creating can be a pleasant surprise and leave you having that Friday drink with your head held high.
This approach also provides an excellent start for business leaders who would like to transition their businesses to more socially and environmentally balanced models.
So… What’s your business model? …We’d love to know.
To find out more, or have a chat with us, please drop us a note to say hello.