social purpose business

Understanding a Social Purpose Business and Its Place in a Community

Employees are changing. They no longer wish to simply earn a paycheck. They want to change the world while doing so. For this reason, many people now opt to work for a Social Purpose Enterprise or Social Purpose Business, but what exactly is this?

Definition of a Social Purpose Business

What is a Social Purpose Business? This type of business is one in which the organization puts helping others above conventional business goals, such as improving the rate of return and boosting investor value. For example, a business that takes all after-tax profits and donates this money to one or more charitable causes is a Social Purpose Enterprise. Think of Paul Newman and his famous salad dressing. He doesn’t make money off of the sale of the products, choosing to donate them instead.

A Social Purpose Business focuses on an environmental or social mission and remains strategically committed to this mission. Their social purpose is a critical element of their overall business model and, as a result, will reflect on the organization’s commercial activity as well as influencing its capital allocation. This purpose is seen in every aspect of the organization, and the Social Purpose Business emphasizes its commitment to the mission in its marketing efforts.

Pitfalls and Problems

Running a Social Purpose Business may appear simple at first glance, yet nothing is further from the truth. The organization must determine how to make a profit while also working for a good cause. Should they operate as a for-profit business that earns money for a non-profit organization or rely on a non-profit to generate their income? This is one problem that must be tackled early on.

The first type is a Social Enterprise and focuses on finding the right balance between social, environmental and economic priorities. Doing so allows them to create blended value by providing a product or service. This may also be referred to as a business with a double or triple bottom line.

In contrast, the second type of business relies on a non-profit organization for income and you would call them a social purpose enterprise in most circles. A business in this category focuses on their social objective, simply using any monies brought in to achieve the goals they have established with regards to this objective. Revenues are of importance here, but the social goals are considered to be just as important.

Examples

A Habitat for Humanity ReStore is a Social Purpose Business that falls under the first category. The purpose of these retail locations is to generate income to provide homes for those in need. But they do so while maintaining the balance between bringing in the funds to accomplish this and providing a social benefit to the local community. The same is true of Salvation Army thrift stores that you can find in many local communities. Individuals supporting these retail locations find comfort in knowing their money will be going to a good cause.

In contrast, Goodwill stores are a social purpose enterprise. These stores help create jobs for individuals with disabilities, teaching them a valuable trade while providing goods for the community. Although they sell products as other retailers do, the ultimate goal is to assist those in need within the community. The retail locations simply provide them with a way to do so.

Regardless of whether a consumer makes use of a Social Purpose Business or social enterprise when they are obtaining a product or service, doing so helps the community. For this reason, many individuals now opt to support businesses of this type whenever possible. When they do so, everyone in the community wins.