Business Models for Good … Do you know your B Corp from Benefit Corporation? … your CSR from your CSV?

February 28, 2020

The idea that businesses should look beyond the balance sheet and examine their impact on society has become increasingly mainstream. Everywhere we hear about companies increasingly not just accepting more social and environmental responsibility, but being structured around that as the defining purpose.

New philosophies and legal structures keep emerging. Most significantly is the fusion between making money and doing good. That’s important. Even the most conscious charities still need to make money to pay their core staff and fund their projects. But increasingly we see fully commercial brands embracing higher causes, which is great because the power of business, brands and consumerism is a potent force which can be channeled to change the world.

So what are the main types of organisation structures, or business models?

B Corp

Certification | For Profit
B Corps are “certified by the nonprofit B Lab to meet rigorous standards of social and environmental performance, accountability, and transparency.” To apply for B Corp status, an organization must score at least 80 out of 200 on the B Impact Assessment. The Assessment measures the positive impact a company has on key stakeholders including its workers, suppliers, local community and the environment.

More: B Corporation Website | What Are B Corps?

Benefit Corporation

Legal Structure | For Profit
Benefit corporations exist to make a profit AND make a positive environmental or social impact. It’s a self-selected legal classification that gives companies the freedom to work towards a positive impact without facing lawsuits from investors concerned only with monetary dividends. Benefit corporations must release an annual benefit report in which they assess their own progress toward their social and environmental goals. This structure is not nationally recognized but so far 26 states and the District of Columbia have passed legislation recognizing the benefit corporation as a legal business entity.

More: Benefit Corp Information Center | FAQ

Conscious Business Enterprises / Conscious Capitalism

Concept | For Profit
Conscious businesses operate with the awareness that their actions can either benefit or harm others, then aim to minimize the harm and maximize the benefit. They work towards a specific purpose and along the way try to foster “peace and happiness in the individual, respect and solidarity in the community, and mission accomplishment in the organization” (Fred Kofman, from Conscious Business).

More: Triple Pundit | Defining Conscious Capitalism

Cooperative

Legal Structure | For Profit / Nonprofit
Cooperatives are owned by those who staff them or by those they serve. Members, or user-owners, distribute profits and earnings amongst themselves. Some cooperatives are incorporated while others are not. The laws surrounding cooperatives vary between states, but all adopt the seven cooperative principles:
1. Voluntary and open membership
2. Democratic member control
3. Members’ economic participation
4. Autonomy and independence
5. Education, training, and information
6. Cooperation among cooperatives
7. Concern for community

More: National Cooperative Business Association | 7 Cooperative Principles
U.S. Small Business Administration | Cooperatives

Corporate Social Responsibility (CSR)

Concept | For Profit
A contemporary definition of CSR is when a company voluntarily engages in “actions that appear to further some social good” beyond the financial interests of the company and beyond actions required by law (source referenced below). The concept encourages companies to take responsibility for their actions and the impact they have on employees, the environment, consumers and others. In many ways, the idea of CSR laid the foundation for other types of socially responsible organizations to catch on and grow.

More: United Nations Industrial Development Organization | What is CSR?

Creating Shared Value (CSV)

Concept | For Profit
This business approach posits a link between the competitiveness of a company and the health of the communities around it. Companies that incorporate “doing good” into their business plans maximize value for themselves and those around them. They can accomplish good by reconceiving existing products and markets to meet social needs, consuming social goods as efficiently and productively as possible, and investing outside of their own business to resolve obstacles limiting their growth potential.

More: Harvard Business Review | Creating Shared Value

Green Business

Certification or Concept | For-profit / Nonprofit
This term can be applied in an informal sense to describe an organization operating in an environmentally conscious way OR can be used formally to mean a business with one of the many different “green” certifications.

Certifications can be sector-specific, like the Sustainable Forestry Initiative (SFI) certification for fiber sourcing or geographically specific, like the Montgomery County, Maryland, Green Business Certification Program. In the U.S. organizations like Green America and The Green Business Bureau offer widely recognized certifications and resources for green businesses.

More: Green Business Network | What’s a Green Business

Hybrid Organization

Legal Structure | For-profit/ Nonprofit
Hybrid organizations combine values and approaches from the public sector, the private sector and the voluntary sector to meet a specific objective. Often, hybrid models link a for-profit company and a nonprofit counterpart, with the idea being that the revenue generated by the company can fund the initiatives of the nonprofit. For example, the Mozilla Foundation is responsible for developing the open-source browser Firefox, while the Mozilla Corporation negotiates revenue-sharing contracts with Mozilla’s search partners. The term can also be used to refer loosely to any organization working for a profit and a purpose.

More:  Stanford Social Innovation Review | In Search of the Hybrid Ideal
The New York Times | Hybrid Model for Nonprofits Hits Snags

Low-profit Limited Liability Company (L3C)

Legal Structure | For Profit
An Low-profit Limited Liability Company is a for-profit social enterprise with a primary aim of achieving a charitable mission. To attract investments from private foundations, L3Cs are designed to meet the requirements of a program related investment (PRI) from the start. L3Cs are free to distribute profits to members/owners. Currently, the model is legally recognized in only 10 states but 26 others have written authorization legislation that has not yet been introduced.

More: Triple Pundit | The L3C: A More Creative Capitalism

Triple Bottom Line Model

Concept | For Profit
Practitioners of the triple bottom line model aim to use their business operations to create positive value in the domains of people, planet and profit. For example, a clothing company might use sustainable materials like bamboo and pay those who manufacture its clothing fair wages so that it does right by the planet and its people while making a profit.

More: Indiana Business Review | The Triple Bottom Line: What Is It and How Does it Work?

Nonprofit

Legal Structure | Nonprofit
To be a nonprofit, an organization must use its surplus revenues to achieve its mission (for-profit organizations distribute surplus profits to their shareholders). A nonprofit’s surplus revenues can go towards expansion, planning, and administration. There are several types of nonprofit organizations including:

  1. Public Charities – The most prevalent type of nonprofit, public charities provide free and low-cost services to those in need. They’re funded by the government, individuals, corporations and foundations.
  2. Foundations – Families, communities or businesses establish foundations to sponsor programs and events and distribute funding to other nonprofits.
  3. Social Advocacy Organizations – These membership-based organizations form to advance a specific belief or achieve specific objectives. Donations and membership dues fund their outreach and advocacy efforts.
  4. Professional and Trade Associations – These membership-based organizations provide professionals in a specific niche with programs and services to support their professional performance and development.

More: Houston Chronicle | Small Business | Different Types of Nonprofit Organizations

Nonprofit with Earned Income

Legal Structure | Nonprofit With Profit
Whereas most nonprofits rely on donations, some incorporate a source of income to help diversify and bolster their income. For example, the Girl Scouts of the USA sell cookies and the profits go back into the organization to further its mission.

More: Inc. | The Social Entrepreneurship Spectrum: Nonprofits With Earned Income

Social Business

Concept | For Profit
As defined by the first to coin the concept “Social Business,” Muhammad Yunus, a social business is a cause-driven business whose owners operate it to achieve social objectives rather than to realize profit. In its strictest sense, Yunus states that “the investors/owners can gradually recoup the money invested, but cannot take any dividend beyond that point.” Its profits should sustain and grow the business’ positive impact on people or the environment.

So all social businesses are social enterprises, but not all social enterprises are social businesses. Weird.

More: Yunus Centre | Social Business

Social Enterprise

Concept | For Profit / Nonprofit
Social enterprises are organizations that apply commercial strategies to create positive outcomes for people and the environment. Many different kinds of organizations fall into this category including for-profits, nonprofits, cooperatives, social businesses and charities.

More: Social Enterprise Alliance | What’s A Social Enterprise?

Social Entrepreneurship

Concept | For Profit
Social entrepreneurship is an attempt to use business techniques to “act as the change agents for society, seizing opportunities others miss to improve systems, invent new approaches, and create solutions to change social for the better.” A social venture is an undertaking by a social entrepreneur that attempts to provide systemic solutions to achieve a social objective.

More: Ashoka | Social Entrepreneur
Schwab Foundation for Social Entrepreneurship | What is a social entrepreneur?

Sustainable Business

Concept | For Profit
Although “sustainable business” literally means a business that can sustain its own existence, the term is used to describe businesses that work to minimize their negative impact on the environment, community, society and economy. Businesses of this kind serve the triple bottom line. By definition, they consider their impact on the environment in their business decisions and have integrated the environment’s well-being into their business operations. It used to be that sustainable business meant “green business” but the definition of sustainable business and what it’s meant to sustain has expanded rapidly over the past decade to include social and economic concerns as well as environmental.

More: The University of Vermont | What is the definition of Sustainability?
Financial Times | Definition of Business Sustainability