All social entrepreneurs are entrepreneurs first and foremost. Running a for-profit businesses means they have to find a repeatable, sustainable, and scalable business model just like any startup. But what puts the "social" into social entrepreneurship is that the business model has a double bottom line: profit and impact.

One example of this is Joyce Lim's company Sprout Collection. She founded it after struggling to find affordable and sustainable  maternity clothes in Toronto during her pregnancy. Sprout customers rent maternity clothes and return them when they no longer fit. This makes sense: A pregnant woman may wear an item only a few times over a few months and then no longer need it. But what makes more sense is incorporating social entrepreneurship into the DNA of her startup. Lim says the company has two goals: to help reduce the costs of maternity clothing, and to be more environmentally friendly.

While corporate social responsibility means companies donate strategically from profits, social entrepreneurship puts the impact right into the business model. It prioritizes impact alongside profit (which, once earned, can be reinvested to make more change).

Here are three examples of how social entrepreneurs have injected impact into their business model. You may want to consider incorporating some of these strategies into your model as well.

1. Leverage purchasing power.

Founder Barb Stegemann runs The 7 Virtues, a perfume company that buys all its ingredients from farmers in conflict regions like Rwanda, Haiti, and Afghanistan. She encourages all small-business owners to reexamine their supply chains and consider impactful alternatives.

Ask yourself: What inputs do you use, and could those be sourced more responsibly? If so, build that into the value chain. It may undermine profits at first, but could generate social impact that far exceeds the perceived loss of margin. 

2. Set up a 'buy one, gift one' program.

Toms Shoes is famous for its shoe gifting program. For each pair sold, Toms donates a pair of shoes to someone who needs them. By allowing consumers to feel good about buying the shoes, Toms created press, word of mouth, a sustainable model, and most of all an impactful business. People feel less conspicuous and more conscientious​ as they consume, thereby replacing buyer's remorse with feelings of contribution and gratitude. 

To apply this, ask yourself: Would your venture do better by giving some of its valuable solution away? Do you get economies of scale from increasing production, and can those offset the costs associated with giving away product? 

3. Focus on a 'rent, don't buy' business model.

Products often outlive their users, so it makes sense in such cases to rent. Whenever you have to pay full price for something you only use part-time, economics tells us it might be better to rent. When you vacation in Florida, you don't buy a car to use for the week--you rent one.

Over the last decade, our economy has been moving from asset ownership to temporary usage. Whereas people once aspired to own their home and car, more and more young people are choosing to rent homes and use car-sharing services like Uber and  Lyft. This shift has had many impacts on the economy, the environment, and even how we live. It has also disrupted business models.

Lim's Sprout hopes to disrupt the business of selling overpriced maternity clothes. As Lim herself told the CBC:  "Why commit to something only to throw it away? Clothing is just going to pile up and contribute to more garbage, more waste." Her business model aims to generate profit for shareholders while simultaneously offering value to stakeholders--the women who buy the clothes.

Some will tell you that doing the right thing costs more, but I think that is short-term thinking. I think the returns far outweigh the investment, both fiscally and socially.

So what's in your business's DNA? Can you create more impact by leveraging the venture's purchasing power and only buying ethically? Can you increase economies of scale by giving away a unit each time a unit is purchased? Can you rent what you need instead of buying it? And if you can, why aren't you?

Published on: Mar 21, 2019