Shanika Gunaratna

The Best of Both Worlds? Blending For-Profit and Non-Profit Models

Though they may not look the part, social entrepreneurs are the graceful, agile acrobats of the business world. I say this because while traditional, for-profit businesses have the relative luxury of a single bottom line (making as much money as possible), social enterprises have to walk a slippery tight rope, trying to strike the perfect balance between profitability and social impact. These objectives sometimes strengthen each other, and sometimes work against each other. Regardless, a social entrepreneur must carry on -back straight, head held high, ready for the next act.

Perennial questions, however, remain. Can organizations do good and be profitable at the same time? How can we harness our resources to implement a healthy balance between profit and not-for-profit models? They’re certainly not new questions, but are receiving even more discussion as the social business sector quickly evolves. These vital issues, and many more, were on the table at a recent panel I attended called “The Best of Both Worlds: Merging For-Profit and Non-Profit Models,” at Global Engagement Summit (GES).

As all readers of NextBillion know, today’s business landscape looks fundamentally different than it did only two decades ago. These days, practically all businesses have some kind of community outreach program or corporate social responsibility initative, blurring the line between the responsibilities of the non-profit and for-profit worlds. The strict dichotomy between these modes of thinking is dissipating before our eyes.

This panel examined the new concept of the social business, a category first conceptualized by Mohammad Yunus to represent the new for-profit/non-profit hybrid business model. As the panelists, Lauri Alpern, principal of Open Door Advisors; Jamie Jones, associate director of the Social Enterprise at Kellogg (SEEK) Program; and Logan Quan, manager of business administration at Cleanslate; explained, the spectrum of organizational models now goes as follows:

Traditional Non-Profit →

Non-Profit with Income Generating Activities →

Social Business →

For-Profit Socially Responsible Business →

Traditional For-Profit

For Alpern, Jones,and Quan, the future of innovation lies in this middle stage: the social business. These are the organizations, the panelists explained, which know how to merge the best of both ends of the spectrum to achieve an extraordinary level of impact.

Incorporating for-profit activities into the structure of social good organizations can have amazing consequences. It can, for instance, free these organizations from the maddeningly inconsistent funding cycle of the non-profit world. It may also ease the expansion process (i.e. a stable business model can more smoothly scale up from a partnership with 1,000 villagers to a partnership with 10 million people across a continent).

The panel also tackled common myths of social business. Scaling to a national level, in many cases, is not only unnecessary but can sometimes be deeply detrimental to an organization’s objectives. Work within cultures and communities you can wrap your mind around, the panelists advised, rather than insisting on taking on whole nations and regions of the world. Try to continually focus on “low-hanging fruit,” or small-scale, simple ideas in which you can completely immerse yourself over the course of your careers.

In wrapping up, the panelists looked toward the future. We’ll see success,Jones said, when social responsibility “is not just a program but an integrated part of any company.” Only when CEOs start to see social responsibility as a financial opportunity – as PepsiCo. recently demonstrated in its large-scale, historic investment in Mexican sunflower farmers – will we finally see true scale and social impact throughout the business world.

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Social Enterprise
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