What are Social Impact Companies and Why Do They Matter?

If you pay any attention to business news and trends, then you have probably noticed an increase in the number of companies embracing “social impact” as a core value. Consumers are taking notice, as a 2018 study found that 78% of Americans expect companies to go beyond making profits; they must also positively impact society.

While corporate social responsibility (CSR) has become a standard metric for companies and for-profit organizations in the past decade until a few years ago it was far less likely for social impact to be the primary goal of a for-profit business. Now, the number of social impact companies is increasing, and the public is taking notice. Still, what exactly are social impact companies?

Google the term “social impact company” or “social impact organizations,” and it is difficult to find an official definition. Broadly speaking, social impact companies are organizations that prioritize doing work that consciously, systemically and sustainably serves or attempts to solve a local or global community need.

Image of a large group of people putting their hands one on top of the other in solidarity

The goal of social impact companies differs from the typical corporate social responsibility approach in that making or supporting positive social change is prioritized in all of a social impact company’s work, while CSR tends to be a secondary organizational value. Think carefully selecting clients, projects, and suppliers based on the impact they have on the world, vs. mobilizing employees every few months to volunteer for a local nonprofit. The latter is still a decisive action, but it is not a sustained, systemic change.

So why do social impact companies matter? There is no denying that demonstrating positive social impact can increase the appeal of a company to consumers and job seekers. It offers people the choice to work for or do business with companies that are committing their time, their skills, and in many cases a small portion of profits to making positive social change. Still, the (positive) repercussions of social impact companies go beyond that.

“Social impact strategy is any effort to create public value that is systematic, sustainable and innovative. Effectively creating social impact is an essential challenge to all organizations regardless of geography or sector.”

– Dr. Peter Frumkin, The Center for Social Impact Strategies
Image of a group of people holding hands with their arms raised in celebration

In 2019, challenges that once felt hyperlocal are being discussed on national and global levels. Issues like financial literacy in underserved populations, access to clean water, education for women and girls, and environmental conservation are just a few of the problems that social impact companies are attempting to tackle. The increase in social impact organizations means that the people working to solve these challenges have more resources than ever before. There are custom software development companies like CauseLabs (that’s us!) who focus on creating digital tools for organizations committed to making a social change. There are also apparel companies like Bombas who, for every sock sold, donates a pair of socks to someone in need. And, there are household goods companies like Brandless who donate a meal to Feeding America® with every order. These social impact companies’ actions put money, resources, and donations in places of need.

Social impact companies are also usually committed to making sure that their supply chains are as sustainable as their work. While “sustainability” often refers to environmental sustainability, social and economic sustainability are also important. This commitment to sustainability means that social impact companies do their best to use suppliers and vendors that are conscious of their impact on the environment, pay workers a living wage, and do not support harmful social policies.

When looked at as a whole, it is clear that social impact companies matter because they are taking for-profit business models, which historically have been unsustainable in many ways, and making them sustainable. This shift creates a snowball of actions that lead to impactful social change. Are social impact companies the solution to global challenges? No. That still requires significant shifts in public awareness, policy, and economic practices. However, the increase of such organizations can be interpreted as a step toward a future where positive social impact is inherent in all business practices.

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