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Those Who Seek to Optimize Their Profits
Profit maximizers are organizations that, beginning with the more conventional business models, can be described as organizations that will constantly pick financial gain over impact. These organizations are known as profit maximizers. In any circumstance, the objective of the company will always be to achieve the highest possible level of profitability.
There are still organizations that adhere to this prototype, although, at the same time, existing business trends are showing how businesses that aren’t able to see past the scope of the financial statements are losing their attractiveness not only to younger generations but also to several other consumer groups who are continuously showing how they are planning to spend their “shopping votes” on companies that display a capacity to respond to pushing social causes. This is a trend that has been observed in recent years and is expected to continue shortly.
As a result of this, we should anticipate that the number of businesses that are classified as belonging to this group will gradually decrease over the upcoming years. On the other hand, several more businesses will begin to formulate projects to discuss these new client concepts and patterns. These businesses are referred to as generous contributors, and we are going to discuss them in the following paragraphs.
These organizations still have the conventional, profit-oriented outlook that is characteristic of conventional business organizations. Simultaneously, however, they are aware that change is required to keep a level of appeal that is strongly influenced by new consumer demands.
These companies, as we predicted in the introduction, are creating new initiatives for corporate responsibility to investigate social causes that can gain both their brand names and the communities they are a part of. In this regard, it can be said that the companies falling into this bracket are still primarily driven by their self-interest, but at the same time, they are making progress in the right direction.
Regardless of whether the initial step can be tied to the requirements of the market, the advantages of operating as a purpose-driven business could still cause these organizations to become impact trendsetters. This is the type of organization that will be the focus of our attention in the following sentence.
Impact innovators are the point at which businesses begin to define a boundary and realize that we simply cannot return to doing business in the same manner as before. Because of the way the world has developed, we are compelled to think about “giving something back.” In this context, businesses have realized that the objectives to make an environmental and social difference can indeed be consigned to a business division or a separate office, but rather, they must become completely widespread throughout the entire organization.
Considering the context, the balance between profit and social goals may still be tilted toward conventional business income, but simultaneously, the social goals practiced have become fundamental characteristics and defining elements of the business. In other words, the conventional business revenue may still be winning the profit versus social goals debate.
Even though this is likely where the majority of organizations would call it quits, some believe it is still essential to go the additional mile and be, as they say, impact first. This is a revolutionary model of organization, and we will proceed to discuss it in the following sentence.
The Initial Impact
These companies are built to flip the problem on its head by selecting an environmental or social objective as their primary focus. The decision to launch a company typically comes much later, when the individual realizes how conventional business structures as well as entrepreneurship can offer a set of resources that are ideally adapted to the process of resolving socially relevant issues. Now is the time when the scale truly needs to strike the right balance between running a sustainable business and having an effect on the cause that the company is working toward.
Shared Value is what Porter and Kramer mean when they talk about what happens when a business does this. Businesses that can hit an appropriate balance between this financial gain and intention can indeed obtain enduring, sustainable change and create a purposeful relationship with their clients both of which will be difficult for your contenders to overtake. As we discussed in the introduction, it is difficult finding the right balance; however, those businesses that can do so can obtain long-lasting, positive change.
If, on the other hand, you see yourself less as a conventional enterprise and more as an investor, then there is no need for you to feel excluded; the following section will focus on you.
Investors Focused on Impact
A person or organization that invests its money in businesses with a social or environmental mission is known as an impact investor. The concept behind it is straightforward: you don’t want to have to choose between financial returns and social returns; rather, you want to have both. In this manner, impact investors have deemed a new branch in finance that is taking on the obligations of investing in organizations that undertake a social cause while also being profitable.
Now that everything is laid out for you, these are the five different business models you can choose from to advance an environmental or social purpose. Let’s make an effort to bring this discussion to a close by looking at some possible conclusions.
As was previously mentioned, the first thing to take into consideration is that the utilization of private businesses in the pursuit of communal goals is gradually but progressively becoming the norm rather than the exception. Because there are now fewer barriers to entry into the world of business, an increasing number of people believe that it is not only possible but also financially viable to create social impact initiatives using a for-profit enterprise.
To a certain degree, we can say that business owners ought to look for difficulties if they intend to construct a solution through their firm. Socially conscious troubles are useful issues to address, as they require the innovative and creative attitude that smaller organizations can provide the opportunity to be solved.