A new way to do business in the US

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As you may know, I am involved with a number of businesses, but my passion lies particularly for two, Enterprise Made Simple (a profit-making traditional limited company) and Enterprise Revolution (A not for profit registered CIC, where we use the profits to make a difference), but recently have been reading about a new wave of businesses in the US, which looks to be an exciting new way to do business.

A new clutch of businesses loosely called “for-benefit” is bridging the gap between for-profit corporations and non-profits that promote social welfare. They pursue a blend of financial, social and environmental goals. Together, they comprise a new and emerging sector called the “Impact Economy.”

For-benefit businesses have the potential to change the world – if they can grow and scale up quickly enough.

For-Benefit Strategies

There are strategic principles that allow many companies to do well while doing good. First, these companies develop an innovative supply chain or product that has a positive social impact. In the majority of cases, it centres on the local community. This same innovation that provides social impact also leads to higher and more consistent quality in the company’s core product or service.

Second, these companies have learned how to market their values to their customers just as they market the product or service itself. This translates into greater customer loyalty, greater differentiation in the market, and often the ability to capture and maintain a premium price.

For successful for-benefit companies, doing good has a positive economic return rather than a negative one. It is not charity. Done right, it need not dilute returns to shareholders – although it may delay returns during the early stages of the business. For-benefit companies challenge conventional business wisdom, which holds that anything done to benefit workers or suppliers just drives up costs and reduces competitive advantage.

Scaling up the Impact Economy

For-benefit businesses use the power of business to solve important social problems while making a profit: They create jobs, reduce environmental damage, and bring needed goods and services to underserved populations. If they can grow more quickly, the benefits to the economy and society can be substantial.

How does it work?

Now for me, of all the research I undertook about this change in the way of doing business these were the factors I found most interesting.

In many cases, a hybrid structure with both a for-profit and a non-profit entity is necessary to keep both parts of the business on track.

Different sources of capital are needed, because the different parts of a for-benefit business may attract different kinds of capital with different time horizons and tax considerations.

Different marketing methods are needed because it’s just as important to market the company’s mission as it is to market the company’s goods and services

Different approaches to community and stakeholder engagement are needed because many for-benefit businesses require close and ongoing community involvement in order to cultivate customers and other stakeholders.

What I found interesting was that large corporations have seen this change and are looking to see how they may contribute to its growth.

In May 2013 Harvard University convened an invitation-only summit to explore what it takes to support the formation and growth of for-benefit businesses and magnify their impact on the economy.

Participants came from leading corporations, that hope to profit from being at the forefront of this trend. Also prominent at the conference were associations that facilitate the Impact Economy, notably the Business Alliance for Local Living Economies and Fourth Sector Network. The summit explored the power of regional economic development based on creating clusters of for-benefit businesses.

How amazing if we could adopt this new approach, the line between For Profit businesses and Social Enterprise in the UK. It seems to me this is an area of business underutilised and may be happening now, but just not publicised.

What do you think about this? Is this something you would consider for your business?