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May 5, 2016

Ways to Embody Social Benefits Into Your Business

This week I was in a session for Start-Up Week that was about how businesses can do more than make money.  I provided some background on ways businesses can embody social benefits into their business.  Here are the highlights of my talk.

First, let’s make sure everyone understands the many ways we talk about “good” companies.

socially responsible                        ESG                                                            social enterprise                 NPO

mutual funds (negative)            positive (venture funds)                     dual bottom line                  Mission

Decades ago some investors wanted ways to stop investing in companies which they believe did harm:  gun manufacturers, tobacco companies, etc.  This led to “socially responsible investing” and mutual funds that avoided investing in such companies.

More recently, investors took a more positive approach by seeking out companies that exhibited good practices in the environment, social causes, or good governance.  Abbreviated ESG, numerous venture funds focused on these, positively oriented companies.

At the other extreme are 501(c)(3) nonprofits who focus exclusively on mission and use philanthropy to fund costs not covered paid for through sales of goods and services.

Recently, the label social enterprise and the term “double bottom line” has been applied to for-profit businesses that are not dependent on philanthropy but place a strong focus on producing a measurable social impact.

Along this continuum, there are now four ways in which a for-profit company can demonstrate its social orientation.

  • Social enterprise: an organization that applies commercial strategies to maximize improvements in human and environmental well-being, rather than maximizing profits for shareholders. A social enterprise can be structured as a for-profit or non-profit and may take a number of legal forms, including but not limited to co-operative, benefit corporation, low-profit limited liability company (L3C), LLC, or a subsidiary of an existing company.
  • Benefit corporation: a legal structure for public companies (a Delaware Benefit Corporation is all that is available for Ohio-based companies) that protects the company’s social impact from shareholder opposition or lawsuits (what Ben & Jerry and Newman’s Own would have liked); could be a social enterprise.
  • B corp certified: a “seal of approval” that the business meets a minimum number of “socially responsible” criteria (nonprofits are not eligible yet; a B-corp certified company may not be as social-impact-focused as a social enterprise);
  • Conscious capitalism: a movement with local chapters to support all types of business that treat all constituents fairly in order to maximize profits; Mark Kovacevich of Improving Columbus is working to form a Central Ohio chapter in 2016.

So these are your options if you want your business to be about more than making money:

  1. A formal legal structure – Benefit corporation
  2. A seal of good practice – B corp certified
  3. A measurable social impact in a for-profit setting: social enterprise
  4. A forum to meet socially-minded businesses: Conscious Capitalism chapter

Good employees want to work for a good company.  Consider one of these four ways to demonstrate your goodness to your customers, vendors, employees, and investors.  See what good is being done in Central Ohio by following us on Facebook and Twitter (@CSEDcentralOH).  Or get a copy of More Than Just Money.

 

 

Allen Proctor, President & CEO, Center for Social Enterprise Development