Social Enterprise - The Business Model Of The Future.
Business, trade, enterprise, commerce… whatever you call it - and whatever you think of it - it’s happening right now. When I think of the dizzying amount of transactions that happen every second of every day it’s almost enough to make my head explode, more-so when I think of the millions of supply chains and the incalculable number of stages in the processes required to produce the goods we all buy.
I make no secret that I’m sceptical of big business; I don’t like the hard capitalist approach of profit-over-everything and how that profit motive has resulted in a race-to-the-bottom; of low wages, insecure work, and fast-fashion. I dislike how “ethically sourced” and “sustainably made” is seen as a cosmopolitan luxury for those who can afford it, and not the default setting. And I cannot abide the continued devastation and exploitation of our planet’s natural resources that this extractive profit-first mindset inevitably results in… not to mention the human exploitation it can lead to.
I’m equally dismayed when I see fantastic branding and design, the creative practice that I know and love, being used solely as a tool to greenwash polluting brands and make unsustainable lifestyle products so appealing that we can’t resist them.
A business model for the future?
I’ve often said that people are generally good and decent, I really believe that. However it’s the systems and structures we’ve created (AKA our “economy”) that make people behave in a damaging and dreadfully myopic way that results in such environmental and human exploitation.
Innovation and human creativity will continue to happen, and that’s obviously a great thing, but I want to see a future where maximising shareholder profits is no longer the driving force behind business. And fortunately, it appears I’m not alone - one in four people who want to start a business, want to start a social enterprise.
So, what are social enterprises?
Social enterprises are not charities, but not they’re your typical business either. A typical business has one core motive - profit. Whereas social enterprises are still legally businesses (there can be a few structural variations) who do trade and make a profit, however these profits are not going straight into shareholders pockets. Instead, these profits must be used for some good.
According to Wikipedia, a social enterprise is “an organisation that applies commercial strategies to maximise improvements in financial, social and environmental wellbeing—this may include maximising social impact alongside profits for co-owners.”
Heidi Fisher, founder of Make An Impact CIC, is an award-winning social entrepreneur, speaker and author. She’s helped over 1,600 Social Enterprises, Community Impact Companies, and Charities make more impact and showcase it to the world over the past 20 years. And Heidi has some strong words to say about the state of business and the future of social enterprises. Heidi says that those business who continue to focus on maximising shareholder value above all else should “prepare for a slow death and decline, and in some cases, a fast death and decline”.
She says that the most intelligent approach to survive and thrive in this current climate would be to “put impact at the heart of what you do – this means delivering a socially or environmentally friendly product or service, and positioning yourself as a social enterprise.”
“…those business who continue to focus on maximising shareholder value above all else should prepare for a slow death and decline, and in some cases, a fast death and decline…”
Dan Price, CEO of the US company Gravity Payments, is the founder who decided to take a $1million pay cut to ensure all his staff (himself included) earn a minimum wage of $70k a year, and he runs his business very differently to the typical US tech company. As Dan succinctly puts in a tweet; “as soon as shareholders are introduced, with the mighty power their investment has over you, your business practice inevitably becomes more focussed on serving them rather than the people working in your business, or indeed, the planet on which we all depend.”
I’ve followed Dan Price for a while now, and he is an example of a more “considerate capitalism” where they’re obviously happy to make money and be a profitable business, but they simply put the wellbeing and financial security of their staff above their profits. As such, they’ve soldiered on through the COVID pandemic without laying off a single member of staff, and they’re a much more resilient and positive team as a result.
Why I’m hopeful for the future.
There's definitely a lot be miserable and negative about in the world; whether that’s the climate emergency that’s resulting in more frequent and devastating floods and fire that are sweeping the planet, the growing income/wealth, class and racial inequality that’s resulting in the many protests and riots we see prominently in the States at the moment, the various and seemingly unending wars… and not forgetting that little global pandemic that’s causing our leaders to run around like headless chickens.
Having said there, there is still a lot to be positive about. Even hopeful.
We’re at peak climate awareness.
We are seeing boom in awareness and action on the climate; now, more than ever, people are switched on and engaging in activities to push climate policies and reduce their own contribution to the climate emergency.
The rising number of B Corps.
If you’re unfamiliar with the term, a B Corp is very similar to a social enterprise, however according to their website, a B Corp is a business “that meets the highest standards of verified social and environmental performance, public transparency, and legal accountability to balance profit and purpose. B Corps are accelerating a global culture shift to redefine success in business and build a more inclusive and sustainable economy.”
There are currently over 2,500 Certified B Corporations in more than 50 countries, and this number is increasing every year. This shows an ambition of businesses, large and small, to be a force for good in the world and reflect the growing demand for ethically-sourced products and sustainable business.
An ethical generation.
We are seeing a shift in values as the younger generation, Millennials and Generation Z, expect brands to positively contribute to society and to actually help them, as consumers, to live more sustainably. In fact, 61% of millennials will pay a premium for products with lower environmental impact. This fact is even more striking when we consider the fact that those in the Millennial generation have the least wealth and are 34% “poorer than expected”.
It’s not just the idealistic young who want change. According to Global Advisor, the vast majority of people - an impressive global average of 86%! - want the world to change significantly and become more equitable and sustainable as we emerge from the COVID-19 crisis.
Purpose can equal profit.
It’s not always easy being a social enterprise, there’s a high risk of failure as with any other business. But as we understand, putting purposes over profit and using our businesses and platforms as force for good can result in financial success, in fact, studies show that B Corp businesses grow 28 times faster than the national average.
As alluded to earlier, this could be a result of a growing desire for the general public to align themselves with ethical brands and use their money to contribute positively to society and the planet. And I believe that this shows that the social model, is the only business model that is fit for the future.
Conclusion.
Will we see a global shift towards social enterprises as a default, and a greater number of businesses that use their commercial strategies for good? I can’t say for sure, but I believe that those who do not move away from the old extractive model will have a very difficult time competing with those who do. Those who are perceived as (and genuinely are!) more human and caring.
With the general public becoming increasingly savvy to corporate greenwashing, we need to make a real honest effort to reflect and improve upon our internal practices, as well analyse our supply chains and procurement methods to ensure we’re not causing harm up or downstream.
Independent businesses obviously need money to survive, as do us workers and business owners, we live in a hyper-capitalist society after all, and I can’t see that changing any time soon. But if we align our business actions with our human values, bake these positive societal and environmental outcomes into our practices, and update our definition of business success to include these factors, we all win.
Because really, our planet and our future, depend on it.
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