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Most of us have heard about corporate social responsibility programs, but building a whole company around social impact is a relatively new concept. It fits in with the direction that the future of work seems to be taking: Millennials and Generation Z want to make an impact through the work they do.
A social impact organization, whether run for profit or as a nonprofit, reframes the metrics around how success is measured. If a social impact organization runs as a profit-making company, profit margin is a metric, but the main metric is whether the company achieves its aim of impacting social, cultural or environmental issues.
We have seen more interest in social enterprise organizations in recent years. Besides these companies having a strong sense of mission, there is often a business case for them as well. It can make excellent business sense to build a company around social issues. As long as those issues continue to exist, you have a sustainable business model and revenue.
Think about it from a consumer perspective: You have money to spend. Wouldn’t you rather spend that money knowing you’re also benefiting a greater cause?
Here are three reasons why social impact is now a hot topic for businesses:
In a social impact business, mission motivates top talent
A strong purpose and mission are some of the biggest motivators you can have for the leaders and team of a business. In a 2018 Deloitte millennial survey, 40 percent of respondents believed the goal of businesses should be to improve society. Two years later, barely half of millennials felt business was a force for good.
This issue was highlighted by a study of 1,000 millennials’ interest in corporate social responsibility by IE University Insights. The study reached two main conclusions: Millennials are more likely to be interested in local activities, and the most effective initiatives are those related to a company’s core business.
One serial entrepreneur, Wade Eyerly, founded Degree Insurance as a way to help students manage the risk of spending money on higher education. The company’s purpose of doing good insured social impact. If social impact is woven into the company’s DNA, you have a compelling proposition to attract the workforce of the future. It’s a golden opportunity.
Related Article: 9 Social Impact Models That Entrepreneurs Can Learn From
Incorporating social impact into a company isn’t always difficult
As a company, you can incorporate social impact into the business by using existing resources to do good. Employees and consumers want to see evidence of companies caring about social causes, from those they choose to be a part of or buy from.
The nonprofit Move for Hunger is one example that capitalizes on the trend of doing good by feeding the hungry with surplus food. If a moving company can integrate food collection into its moving process and company culture, it enables its employees to help feed communities by just doing their job. Customers of such companies also end up helping their communities. It becomes a win-win without too much effort from the organization.
Related Article: 3 Reasons Why A Strong Purpose is A Good Business Idea
Investors lean towards investments that also do good
Impact investing is growing at a rapid pace. Investors want to generate environmental and social positive impact, in addition to financial returns.
This trend will only accelerate. In McKinsey’s 2018 quarterly report, the findings challenge the myth that social impact investing generates weak returns that take too long to realize. The report states that it is possible to find investments that align with both social and business aims. Green energy fund Earth Capital is one such group that is investing in sustainable technology across energy, food and water. Impact investing is the wave of the future, especially as climate change becomes a bigger concern for the prudent investor.
Business trends indicate movement towards more ethically conscious businesses and leaders, whose primary purpose is to serve, add value and create impact in the world. Even for businesses that aren’t built around this model, social impact can be a factor in how you operate. Instead of seeing purpose and profit as two mutually exclusive concepts, it’s time companies understood that doing good for society makes business sense.
Related Article: The How-To: Measuring Outcomes of Impact Investin
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