How social businesses generate social impact

22.04.2021 Blog

by Kirsten Tangemann

People who start or run a social business pursue a mission. Their main goal is to achieve a positive social or environmental impact. They work on new approaches to solving social challenges, develop social innovations and market them as products or services. Whether a problem is being recognized as such by society and considered to be important determines how the impact of solving the problem is perceived. The United Nations Sustainable Development Goals highlight critical challenges of our world. Mission and activities of the social enterprises presented in this report can be assigned to these goals.

A social business is a hybrid organization that pursues its mission of establishing a social or environmental goal and at the same time generates profits. It has to operate in a profitable way to be financially sustainable in the long run. Matching these goals is an extremely demanding task. In general, generating social value requires additional efforts on top of running an economically sustainable business. Both dimensions are important: non-profitable tasks, or keeping the focus on specific target groups that cannot be integrated into a business model as well as commercial activities that secure a living. Social entrepreneurs are therefore often confronted with complex management tasks, organizational forms and hybrid financing structures.

There are different ways in which a social business can combine impact with an economic business model (see Vandor et al, 2015¹). In an integrated approach impact is directly generated through commercial activities. Target groups are part of the model either as employees of the company, as users of services or as customers. When customers and beneficiaries differ the situation is more complex and a differentiated impact business model applies. “Sustainable” businesses generate impact by using environmentally sustainable processes, products or services. In many cases, operation of a social enterprise does not only involve one type of business model. Mixed forms are implemented either by way of entering new markets or reaching new target groups.

1. Integrated Social Business – company employees as target group

The company has a certain vulnerable segment of the population as its target group and wants to (re) integrate this group into social life through employment and thus improve their living conditions (cf. Vandor et al. 2015¹). In contrast to non-profit organizations and socio-economic companies, which provide jobs for people furthest from the labor market and long-term unemployed, social enterprises also strive for market income or the generation of profits (which are reinvested in the spirit of the mission).

Figure 1: Integrated Social Business with employees as target group (adapted from Vandor et al., 2015)

Atempo employs people with learning difficulties who assess how well digital products and services are designed for people with disabilities and if they meet their needs.
Heidenspass runs an upcycling design workshop as a social work project for young people who are not integrated into the labor market. At the same time, Heidenspass creates awareness of (re) use of resources through workshops in schools and companies.
Klarwasser OG offers a digital operating system which supports the members of water cooperatives.

2. Integrated Social Business – customers as target group

In this impact model, the beneficiaries or customers are part of the commercial model and are directly integrated into the business model. The products directly benefit customers, this might be a (disadvantaged) population group or the population in a low-income country.

Figure 2 : Integrated Social Business with customers as target group (adapted from Vandor et al., 2015)

The property management and consulting company Dahir combines property management with active, personal relationship management. The socio-economic real estate management pursues the goal of reconciling the needs of tenants, owners and stakeholders, thus creating an advantage for all involved parties.
Instahelp offers individual and flexible psychological online-consulting services which are available on short notice and are provided by experienced psychologists via the “digital platform for mental health”.
Dignisense provides innovative care solutions to support aging with dignity. An innovative technological solution detects incontinence episodes and offers motion monitoring of people in need of care. This supports caregivers to better meet the needs of persons in their care.
Stadtlabor is an innovation lab for livable and sustainable cities and communities. Urban transformation processes are initiated with partnerships between urban actors and co-creation of spaces fostering creativity, inspiration and joint learning. Thus, districts, quarters and locations are further developed.
In the tailoring shop Unperfekt fashion is tailored for people with physical disabilities.
Schau aufs Land inspires travelers with a digital camping guide to discover new places in Austria and get to know sustainable farms, wineries and manufacturers.
Vom Land provides farmers with an app to market their regional products online.
Factinsect uses an automated “fact checker” system to check Internet sources and supports users in assessing how trustworthy information on the Internet is.

3. Differentiated Social Business

If customers and the target group differ, as the target group might have limited income to pay for the service, a social enterprise can still address the target group by developing cross-financing models. The success of the commercial activity is crucial for sustainable impact, so that resources can be transferred from the commercial to the social activity. A particular challenge of this model is to keep the balance between economic and social activities. Regular contact with beneficiaries and a good understanding of their needs is required as these might change over time.

Figure 3: Differentiated Social Business (vgl. Vandor et al. 2015)

The platform Sindbad connects companies with young people with disadvantages in education. The objective is to develop new perspectives for young people leaving school. They are offered mentoring programs and personal development courses and match-making between companies and apprentices is supported.
Migrabilis supports people with refugee or migrant backgrounds and offers self-competence and mental health training to support them in developing their potential.

4. Sustainable Business with ecological impact

Many social enterprises do not address a specific target group, but rather pursue ecological sustainability goals. Around three quarters of the Styrian social enterprises fall into this category. A positive impact on the environment is achieved with sustainable, resource-effective production, the use of ecological, biological and environmentally friendly materials and with sustainable energy generation and mobility concepts. The social goal is to raise awareness of consumers and to change their behavior.

Figure 4: Sustainable Business (adapted from Vandor et al., 2015)

As a professional IT refurbisher Compuritas creates ecological and social added value especially for the educational sector by providing inexpensive access to high quality IT infrastructure.
Tres Hombres transports fair trade products from the Caribbean to Europe by sailing ship, the transported goods are then processed into rum and chocolate.
As an organic wholesaler das Gramm and das Dekagramm offer packaging-free, sustainably produced regional food as well as hygiene and household items. The social goal is to make customers aware how important it is to avoid packaging waste.

[1]Vandor, P., Millner, R., Moder, C., Schneider, H., Meyer, M. (2015): Das Potential von Social Business in Österreich. Wien: Wirtschaftsuniversität Wien, NPO & SE Kompetenzzentrum.