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Social Entrepreneurship 101: Business Models And Examples To Inspire You

social-entrepreneurship-101:-business-models-and-examples-to-inspire-you

The word “commerce” leaves a bad taste in a lot of people’s mouths, since it often gets lumped in with the ills of capitalism. But commerce is a natural feature of humanity, neither good nor bad.

When channeled through social entrepreneurship, commerce can become a force of good to build a business that helps create a better world.

Social entrepreneurship takes many forms, but if you’re interested in starting a business with a cause, here’s where to start.

What is social entrepreneurship?

Social entrepreneurship is the organization of a business around specific social and environmental causes, and can include both nonprofit organizations and charities and for-profit social enterprises.

Social entrepreneurs differ from traditional entrepreneurs in that their main drive is to make a difference in the world or in their communities. They often have personal experience with the causes they support, which inspires their business’s mission.

While traditional businesses might measure success in terms of market share or year-over-year revenue growth, social entrepreneurs are more likely to focus on metrics like jobs created, trees planted, or donations made to a charitable arm that solves the problem they’ve invested in.

What’s a social enterprise?

A social enterprise is a business designed around a core altruistic mission, which in turn influences how it’s managed, from product development to branding, from supply chain management to financial planning.

Instead of a single bottom line focused on earnings, many social enterprises measure success based on a triple bottom line:

  • People. The human impact of your business, and your ability to affect social change, improve lives, and develop a community in a sustainable way.
  • Planet. Your environmental impact—how you contribute to a sustainable planet or reduce the carbon footprint (CO2 emissions) of your business and customers.
  • Profit. Like traditional businesses, social enterprises need to make money in order to sustain themselves, pay workers, and grow as an enterprise.

Unlike a traditional business where profit is reinvested into the business for the sake of its own growth, a social enterprise allocates a large portion of its profits to create positive change in the world.

Social enterprises are not necessarily the same as companies with corporate social responsibility (CSR) policies. “Doing good” isn’t a value-add for social enterprises. It’s the core value prop and the mission they organize themselves around.

While social enterprises can be for profit or not for profit, there are also hybrid organizations that combine elements of both models, such as Merit Goodness, a clothing brand that helps fund scholarships for underprivileged youth in Detroit, Michigan.

ALT: A screenshot of Merit Goodness’ website showing its value prop: high-quality clothing that helps kids get to college.

The traditional retail business model also has a registered charity arm called Give Merit, which runs a cohort-based program to nurture leadership and career skills in ambitious youth.

ALT: A screenshot of the Give Merit website, Merit Goodness’ charity arm, that says Aspire, Believe, Contribute.

What are the different types of social entrepreneurship

Just as there are near-infinite expressions of entrepreneurship, there are countless forms social entrepreneurship can take. You could start a nonprofit that provides funding for underserved entrepreneurs. Or you could launch a for-profit business that manufactures eco-friendly products.

No matter what type of social entrepreneurship you choose, you’ll need to be passionate about your cause and have a strong commitment to making a difference. With hard work and dedication, you can make a real impact on the world.

The different models you can adopt as a social entrepreneur include:

  • Nonprofit. A tax-exempt, non-business entity that invests excess funds back into the mission.
  • Co-operative. A business organized by and for its members. Credit unions and community grocery stores are some examples of co-ops.
  • Social purpose business. These businesses start on the foundation of addressing a social mission.
  • Social firm. Social firms employ those in the community who need jobs, such as at-risk youth.
  • Socially responsible business. These companies support social missions as a part of their day-to-day business operations.
  • For-profit. Perhaps the vaguest category, these businesses are profit-first but donate funds, raise awareness, or otherwise support causes.

Arguably the most common social enterprise model is donating a portion of profits to a charity, but that’s not all there is to building an effective social enterprise.

“It’s not just saying, ‘Hey, we have a social mission as an organization, and X percent of our sales goes to nonprofit X, Y, and Z.’ I think it needs to be deeper and more authentic than that.”

  • Creating jobs within the communities they care about, such as hiring local ex-convicts or ethically outsourcing production to communities in need of fair work and career development opportunities
  • Reducing their carbon footprint by planting trees or offsetting carbon emissions throughout their entire supply chain and educating customers about the topic
  • Hosting workshops and people-development initiatives to teach skills and empower others to build better lives for themselves and their communities
  • Advocating for diversity and inclusion on behalf of underrepresented groups and becoming an engine of inspiration, such as GoldieBlox does by making content and toys that expose young girls to the joys of engineering

A screenshot of GoldieBlox’s website, with a tagline that says Seeing is Believing.

Do social entrepreneurs make money?

Social entrepreneurs do indeed make money.

While most social entrepreneurs start out with modest goals to prioritize their mission first, many are eventually able to achieve financial success similar to traditional entrepreneurs. Even founders of nonprofit organizations can eventually pay themselves a salary with certain limitations.

The pursuit of profit and purpose are not mutually exclusive in business, but for the social entrepreneur, it’s important that the former never cannibalizes the latter.

Shiza Shahid is one example of a financially successful serial social entrepreneur who co-founded the Malala Fund, which works toward a world where girls can have greater access to education in communities where they might be excluded from it, as well as Our Place, an ethical kitchenware company.

A screenshot of the Malala Fund website that says Malala Fund is working for a world where every girl can learn and lead.

A screenshot of the Our Place website that says, “Welcome to Our Place. We saved you a seat” and shows three photos of people at home from different parts of the world.

The benefits of building a social enterprise

A social enterprise’s mission is a competitive advantage that can help it stand out in a crowded market—if they can communicate their motivation and impact.

Building a social enterprise comes with its own unique benefits for the entrepreneur that are worth getting excited about if you plan to start your own:

  • Alignment between your business’s mission and your personal one, fuelling you to show up every day and push through any obstacles
  • Mission-based branding with a cause at its core that makes consumers feel good about every purchase they make.
  • Access to more partnership opportunities as an altruistic business, such as other nonprofit organizations, influencers, and for-profit companies to leverage existing audiences and established reputations to create a presence in their market.
  • More press coverage—publications and journalists love to cover social innovation and change-makers and share the stories of their impact to help social enterprises evangelize their efforts.
  • “In kind” resources, sponsorships, and vendor discounts are often available to social enterprises, especially nonprofit charities, which may also be considered for tax-exempt status. NPOs can also access great rates and special features on the Shopify for nonprofits plan.
  • Certifications and support systems. Social enterprises can be eligible for grants, “impact investing” opportunities that focus on job creation and sustainability, and special certifications such as a B Corporation status that make it easier to establish credibility, commit to transparency, and attract customers, employees, volunteers, and investors.

Transparency and sustainable impact are essential for a successful social enterprise. And these things are easier to achieve if your cause is close to your heart with impact you can measure.

David Meritt, founder of Give Merit, shares annual reports about the performance of the students who enroll in the FATE program for nurturing leadership skills among the youth in his community.

Give Merit’s impact report that shows how GPA, Absent Days, SAT score, and detentions have improved for kids in the program.

Depending on your mission, you can directly implement your plans for change as a social entrepreneur and expand your contributions as you grow. But if you choose to partner with nonprofit organizations (NPOs) to help execute the “social” part of your social enterprise (as many do), be sure to do your homework before you reach out. Ask questions like:

  • What am I ultimately giving back to?
  • How will my contributions actually be used and what are the organization’s operating costs?
  • How does the organization measure its success?
  • Is its impact sustainable or will it only end up doing more harm in the long run?
  • Does this organization have an ethical history as a nonprofit?

This is all part of your founding story—the tale of why you started your business—and will likely come up again and again in your elevator pitch, About page, PR efforts, and more. So refine your story with your mission and your action plan for creating change in mind and let it become your edge.

Social entrepreneurship examples that balance purpose and profit

Let’s take a closer look at some for-profit social enterprise examples and their missions that prove creating positive change and being profitable as a business don’t have to be mutually exclusive.

Cotopaxi

A screenshot of Cotopaxi’s website that shows its outerwear products.

Cotopaxi is a social enterprise that sells durable gear for the outdoor explorer, while also contributing to initiatives to fight global poverty. Sustainability is built into its product development and carbon neutral supply chain, which has earned the business its B Corp status as a social enterprise.

Mission: “Create sustainably designed outdoor gear that fuels both adventure and global change, by dedicating a percentage of our revenues to nonprofits working to improve the human condition.”

Impact: Aided 1,255,490 people directly through poverty alleviation programs, provided 67,000 malaria treatments benefitting 403,416 families, and more in 2021.

Blueland

A screenshot of the Blueland website showcasing its cleaning products with the tagline “Going eco has never been easier.”

Blueland is a social enterprise that sells plastic-free alternatives to home essentials, such as cleaning sprays and paper towels. Sustainability is at the heart of its mission and is woven into its content marketing that educates readers about sustainability and single-use plastics.

Mission: “Make it easy to be eco with innovative products in reusable packaging that are convenient, effective and affordable.”

Impact: Its products helped eliminate one billion single-use plastic bottles from landfills and oceans since 2019.

LSTN

A screenshot of LSTN’s website showing its wooden headphones.

LSTN Sound Co. sells premium wooden headphones and provides access to hearing aids to people in need through the Starkey Hearing Foundation. It reflects the founders’ love for music and wanting to share that experience with others, especially those with hearing loss who cannot afford hearing aids.

Mission: “After seeing a viral video of someone hearing her own voice for the first time, co-founders Bridget Hilton and Joe Huff decided to focus their efforts on creating change through the power of sound & music, and make this incredible moment a reality for others around the globe.”

Impact: The company has helped provide hearing aids to more than 50,000 people who would not have had access to them otherwise.

Finding a product to sell and a mission to lead

The mission might come first for social entrepreneurs, but that doesn’t eclipse the importance of choosing the right things to make and sell. When all is said and done, a for-profit social enterprise needs to make money to survive, just like any other business idea.

You could start a social enterprise selling physical or digital products, even services.

The one caveat is your product development process must align with your mission. The common trait among successful social enterprises is a “product-cause fit” that aligns their mission with what they sell.

Start by asking yourself:

  • What social or environmental problems do you see in the world that you’re passionate about solving? The world is no doubt filled with many problems, but pick one you truly care about.
  • Is there a way you can uplift your local community? You don’t need to change the world. You can change someone’s world in your own city.
  • Is there a specific market you can sell to authentically? Authenticity is at the heart of social enterprises and that goes beyond the cause and applies to what you sell to customers too.
  • Can you draw any connections between the causes and product categories you’re passionate about? You’ll likely be marketing the product first to your customer, not the cause, but it helps if customers can draw a clear line between the two.

From there, you can work backward to find specific product ideas you can develop.

Social enterprise ideas you can start today

If you’re looking for specific directions to go in for your own social enterprise, here are some creative ideas you can explore.

1. Upcycle a product that could easily be repurposed or repaired

One way to build sustainability into your business is taking an existing product that often goes to waste unnecessarily and upcycle it. You can intake what others may consider “garbage” and use that material in the production of your own products, such as food or clothing that would’ve gone to waste.

Learn moreThe Charitable Bike Brand That’s on Track to 7-Figure Sales

2. Find an existing product responsible for a lot of waste and create a sustainable alternative

Think about the things we use daily that create the most waste—paper towels, cotton swabs, plastic straws, coffee pods—and consider how you might not just eliminate that waste with your own product, but potentially save consumers money too.

Learn more: 18 Sustainable Stores to Inspire Your Business

3. Start a homemade goods business, and hire and train people from your community who have trouble securing employment

Homemade goods, as the name implies, whether food, accessories, or skin care products, are something you can easily teach others how to produce. That can allow you to hire people who have difficulty securing employment for whatever reason and help them develop new skills in the process.

Learn more10 Crafts to Make and Sell

Create positive change through social entrepreneurship

Our connected world has brought about a new era of awareness, where we can find problems to solve and lives to improve across the street or across the world if we choose.

People from all over are deciding to make change in whatever way they can, whether it’s by being more conscious of what they buy as consumers or building an engine for social and environmental good by becoming entrepreneurs.

With a single website, you can reach a world of consumers who want to help you make a difference. Shopify is a flexible platform to build your site, share your mission, and generate sales to fund that mission. It’s all about figuring out your cause and what to sell to support it

Social entrepreneurship FAQ

What is social entrepreneurship?

Social entrepreneurship is the development of a business around a social or environmental mission, and can include for-profit businesses as well as nonprofit organizations.

What Is a social entrepreneur?

A social entrepreneur is a person who uses their business skills to solve social, environmental, or economic problems, and adhere to their own strict code of ethics across their businesses.

What are some examples of social enterprises?

Some examples of social enterprises include LSTN, Blueland, Our Place, and Merit Goodness.

How do you become a social entrepreneur?

You can become a social entrepreneur by starting your own for-profit business or nonprofit organization. You can team up with a co-founder who has a complementary skill set or start a business in partnership with a charity of your choosing.

Is a social enterprise the same as a nonprofit?

Social enterprises are similar to nonprofits in that they both aim to make the world a better place. However, social enterprises sell products and services to sustain themselves, while nonprofits mostly rely on donations.

How do I start a social enterprise on Shopify?

You can start a social enterprise on Shopify with a 14-day free trial (no credit card required), and by setting up a website designed for processing both ecommerce transactions and donations. If you have a registered nonprofit, you can reach out to Shopify support about the Shopify for nonprofits plans.


Ready to create your first business? Start your free 14-day trial of Shopify—no credit card required.

This originally appeared on Shopify and is made available here to cast a wider net of discovery.

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