The social business is not new. It has existed for decades in different forms with many definitions, some having been more effective than others. It has long been seen as an alternative to the NGO, a model that streamlines impact and eliminates bureaucracy. And yes, from many perspectives, social business is a model for the future. It allows quick growth and broader impact than the traditional NGO.
With a social business model, staffers do not have to fundraise, engage donors or work with government. They can focus on work without the burden of grant writing or taking donors on site tours. But with this trend, many important organizations that enable and support social change have stopped supporting non-business model organizations entirely.
The social business model is similar but also diverging from traditional business because of its mission. Unlike a traditional business, the mission and goal of a social business is to address a social or environmental problem. This is typically done through a market-based approach that uses the sale of products to generate income.
For a social business, profit is a means to achieving a mission not an overall goal.
It is also different than corporate social responsibility and business charity because all activities of the social business address the problem not simply one department of a company. There is one major requirement for a social business: a market. Without a market, a business cannot function—if a product cannot be sold or purchased, no revenue is generated.
That brings the question: can we monetize all of the problems that we face? Many leaders in social innovation think so.
The rhetoric and policy changes among thought leaders and support organizations are starting to reject any social venture that is not sustainable.
Approaches like impact investment (formally recognized by J.P Morgan Chase) are overtaking organizations that work with problems that are harder to monetize. Business for a social purpose is good. Growth is quick, startup costs are often low and efficiency is high. But the trend of only supporting social businesses will damage important work that is being done to address the issues that we cannot monetize—the issues that we cannot create markets for.
The population of children living in the street across the developing world is a good example. How do we monetize them? How do we create a financially sustainable system in which these children can access education, healthcare, and food?
Some problems are difficult to create markets for and this is where we need traditional NGOs. Yes, they rely on unsustainable and inconsistent funding but they fill an important gap that social business misses.
These organizations need support, they need the funding and backing of foundations and governments. And just as trends go, as big support organizations change their requirements for eligibility, the smaller ones will follow and important work could stop.