Life University’s (Life U) business programs are based on the concept of promoting positive business. Loosely, this is defined as working for or creating businesses that contribute to the public good, rather than simply generating income. What does that look like on a practical scale? How can you know if your business is a positive business?

It can be helpful to imagine that every business exists on a spectrum in terms of its intention and capacity toward societal improvement. On one end, you have traditional nonprofits and/or not-for-profit businesses. Then, at the other end, you have traditional for-profit businesses. Most exist somewhere in between, and this is not necessarily a judgement against those closest to a traditional for-profit model. It’s simply good to know where a business that you seek to work for or create might fall in the midst of this and if any positive social change factors can be added or enhanced in that framework.

Hybrid spectrum

Photo Credit: 4lenses.org

The spectrum shown here is a good illustration of how business and social responsibility can look on a spectrum. Generally, a positive business as we define it at Life U would likely function somewhere between a Social Enterprise and a Socially Responsible Business, largely depending on the structure of the business and how much of the business is dedicated to profit versus social improvement. Social enterprise is a slippery and difficult-to-define term, as there is no agreed upon singular definition or qualifier. Venturesome, a social investment fund initiative of the Charities Aid Foundation, sought to better identify what a social enterprise looks like for their purposes of social capital investment and then published their findings in an article titled “The Three Models of Social Enterprises: Creating social impact through trading activities: Part 1”. Venturesome looks at social enterprises in three main categories: Profit Generators, Trade-offs and Lock-Step.

Social Enterprise Model 1- Profit Generator

This model of social enterprise revolves around a trade type that is designed primarily to seek a financial return, not necessarily a direct social impact. Positive outcomes may occur, such as job creation, but they are not the designated motivator for this business to make monetary profit. Yet, in an effort to demonstrate community goodwill and social responsibility, a business may dedicate a portion of its profits to charitable or socially impactful ends. This of course does require the business to make a profit in order to give portions of it to charitable ventures, in addition to it being effectively employed to achieve favorable outcomes. Thus, this model is considered more of a risk in terms of its likelihood of achieving measurable social impact.

Examples:

  • For-profit businesses with Corporate Social Responsibility (CSR) programs, such as Coca Cola’s sustainability initiatives or TOMS designating a third of profits to grassroots community campaigns.
  • Investment funds that give a portion of profits to a charitable group.
  • Business arms of charities, also known as for-profit subsidiaries, allow for businesses to operate as standard profit generators as well as contributing funds to its connected charity. Some examples of non-profits with for-profit subsidiaries include the Make-A-Wish Foundation and the National Geographic Society.

Social Enterprise Model 2- Trade-off

This model depicts a business with direct social impact that also has to balance generating financial gains. This business type could have a larger social impact, but at the expense of decreased financial returns. That is what makes it a tradeoff. This model differs from the profit generator model, as social impact would occur even if there isn’t a profit return.

Examples:

  • Fair trade businesses
  • Businesses that make a point to employ disenfranchised populations, such as the disabled or the formerly incarcerated
  • Microfinance institutions, for expanding small businesses

Social Enterprise Model 3- Lock-Step

This model not only has direct social impact, butthat social impact is directly related to its financial returns. When there is a positive social impact, the financial gains also increase with it. Trade-off companies and lock-step companies can sometimes get confused, especially when a Model 3 company is in the early stages and therefore cannot demonstrate full commercial capability. This was the case with much of early organic farming, which in the past few decades has progressed to a point of more widespread commercial viability.

Examples:

  • Wind farms
  • Solar farms
  • Food cooperatives

The examination of social enterprise and how to make it more effective signifies the exciting shift that is happening in the cooperate world. The past thought process was that charities are dedicated to public good while businesses serve needs, but purely for monetary purposes. However, as savvy and thoughtful consumers demand higher corporate social responsibility from the brands and the services they use, businesses are demonstrating a better understanding and dedication to serving the greater good as part of their corporate strategy.

Socially Responsible Businesses

A tad farther down on the spectrum of a for-profit business focus, socially responsible businesses seek to do right by their customers by adopting policies that promote society and/or the environment, while also limiting their negative impacts. It is more of a neutral approach, to be a positive or at least neutral force in the world while also generating income. Their overall mindset might not be entirely philanthropic, but the important thing is that business leaders are thoughtful about the impact that they can have on society, finding ways to work toward positive ends or mitigating negative consequences, such as environmental concerns.

For information on a career based on positive business, explore Life U’s Bachelor of Business Administration degree or our exciting new MBA!