Lecture: Social Business Models

I. Introduction to Social Business Models

A social business model combines profit-driven practices with a social or environmental mission. Unlike
traditional businesses that focus solely on maximizing profits for shareholders, social enterprises aim to
solve societal problems through market-based approaches while maintaining financial sustainability. These
businesses reinvest their profits into their mission rather than distributing them to shareholders.

Social business models can address various issues such as poverty, education, health, and environmental
sustainability, creating value for both the community and the organization.

II. Components of a Social Business Model

A successful social business model has several core components that enable it to achieve both social
impact and financial viability. These components are similar to traditional business models but with an
added focus on societal objectives:

1. Value Proposition:
o The value proposition of a social enterprise goes beyond financial gains. It clearly defines
how the business creates social or environmental value for its target beneficiaries.
o Examples include providing affordable healthcare in underserved communities, offering
educational services to low-income students, or producing eco-friendly products to reduce
environmental damage.
2. Target Market:
o Identifying the market segment or group of beneficiaries that the business seeks to serve.
This could be marginalized communities, disadvantaged groups, or people with specific
social needs.
o A social enterprise must balance the needs of the market with its ability to pay, often
relying on innovative approaches to reach underserved populations.
3. Revenue Streams:
o Social businesses generate revenue through sales of products or services, but their pricing
strategies often account for the affordability needs of their beneficiaries. Some rely on a
cross-subsidization model where higher-income customers pay full price, subsidizing
lower-income users.
o Additional revenue streams could come from grants, donations, or impact investments.
4. Cost Structure:
o Like traditional businesses, social enterprises incur costs related to operations, production,
distribution, and more. However, they often aim to keep costs low to serve beneficiaries
more effectively and invest in social impact projects.

5. Impact Measurement:
 o Social enterprises must have clear metrics for measuring their social or environmental
impact. This can include tracking the number of beneficiaries served, reductions in carbon
emissions, improvements in education or health outcomes, or increased job opportunities
in disadvantaged areas.
6. Sustainability:
o Financial sustainability is key. A social enterprise must be able to cover its costs and
continue operating without relying heavily on external funding over time. Its business
model should be scalable to increase both its financial and social impact.

III. The Business Model Canvas for Social Enterprises

The Business Model Canvas is a strategic tool used to visualize and develop a company’s business
model. For social enterprises, the Business Model Canvas is adapted to include a focus on social impact.
The traditional nine components remain the same but are tweaked to align with a social mission.

1. Key Partners:
o Collaborations with other organizations, including nonprofits, governments, donors, or
impact investors, who support the social enterprise in achieving its mission.
o Example: A social enterprise providing clean water may partner with NGOs or local
governments for infrastructure support.
2. Key Activities:
o The primary activities that drive both social impact and revenue generation, such as
product development, service delivery, and community engagement.
o Example: An enterprise providing micro-loans to low-income individuals may focus on both
financial management training and loan distribution.
3. Key Resources:
o The assets necessary for the social enterprise to function, including human capital,
financial resources, intellectual property, and social capital.
o Example: Skilled staff members with expertise in healthcare, educators for an education-
focused business, or access to natural resources in an environmental enterprise.
4. Value Proposition:
o As mentioned earlier, the value proposition of a social enterprise emphasizes both
financial and social value creation. It addresses the specific social or environmental
problem the business is solving.
o Example: A business that produces affordable solar-powered lighting for off-grid
communities offers both financial savings and environmental benefits.
5. Customer Relationships:
o How the social enterprise interacts with its customers or beneficiaries. It includes
strategies for engagement, support, and building trust.
o Example: A fair-trade company might build strong relationships by being transparent about
its sourcing and fair labor practices.

6. Channels:
o The means by which the enterprise delivers its products or services to its target
beneficiaries or customers. It can include both traditional and digital distribution channels.
 o Example: A mobile health service delivering care to remote areas might use telemedicine
or community health workers to reach its customers.
7. Customer Segments:
o The specific groups or beneficiaries served by the social enterprise. It may include both
paying customers and those who benefit from cross-subsidization models.
o Example: A social business that provides education services might have paying customers
in urban areas and offer subsidized or free services to rural communities.
8. Cost Structure:
o The major costs incurred by the business, including production, distribution, staffing, and
social program implementation.
o Example: The cost structure of a food rescue social enterprise might include logistics,
transportation, and storage of perishable goods.
9. Revenue Streams:
o How the social enterprise generates income to sustain its operations. This may include
sales, grants, donations, or hybrid financing models.
o Example: A business selling eco-friendly products may generate revenue from direct sales
while also receiving impact investment funds.

Modified Business Model Canvas for Social Enterprises:

IV. Examples of Social Business Models

1. Grameen Bank (Bangladesh):

o Model: Microfinance
o Mission: To provide micro-loans to low-income individuals, particularly women, who lack
access to traditional banking services.
o Social Impact: Empowering people in poverty to start small businesses and become
financially independent.
o Revenue Stream: Loan repayments with minimal interest rates.
2. TOMS Shoes (USA):
o Model: Buy-One-Give-One (BOGO)
o Mission: For every pair of shoes purchased, TOMS donates a pair to a child in need.
o Social Impact: Providing footwear to underprivileged communities, improving health, and
supporting education.
o Revenue Stream: Direct sales of shoes and other products.
3. d.light (Global):
o Model: Affordable Renewable Energy Products
o Mission: To improve the lives of people in developing countries by providing access to
affordable solar-powered energy solutions.
o Social Impact: Reducing reliance on harmful fuels like kerosene and promoting
environmental sustainability.
o Revenue Stream: Sales of solar products (e.g., lamps, panels) in underserved regions.
4. Patagonia (USA):
o Model: Environmental Sustainability and Corporate Responsibility
o Mission: To use business to inspire and implement solutions to environmental problems.
o Social Impact: Protecting the environment through sustainable product lines, activism,
and donating a portion of profits to environmental causes.
 o Revenue Stream: Sales of outdoor clothing and gear.
5. Warby Parker (USA):
o Model: Buy-One-Give-One (BOGO)
o Mission: For every pair of glasses sold, Warby Parker donates a pair to someone in need
through their non-profit partners.
o Social Impact: Addressing the issue of visual impairment by providing affordable glasses
to underserved communities.
o Revenue Stream: Direct sales of eyeglasses and eyewear products.

Examples of Social Business Models in the Philippines

Hapinoy

Mission: Hapinoy empowers micro-entrepreneurs, particularly women sari-sari (small neighborhood

store) owners, by providing training, access to capital, and business mentoring.

Social Impact: The organization helps improve the livelihoods of women by turning small sari-sari
stores into community hubs that offer essential products and services such as mobile money,
healthcare, and renewable energy solutions.

Business Model: Hapinoy partners with local and global organizations to provide financial literacy,
entrepreneurship training, and micro-loans, ensuring the sari-sari stores become sustainable and
more profitable.

Revenue Stream: Hapinoy earns through partnerships with product suppliers and by offering
franchise opportunities to women micro-entrepreneurs.

Rags2Riches

Mission: Rags2Riches creates eco-ethical fashion and home products by empowering

underprivileged artisans from marginalized communities. They use upcycled materials to create
stylish products that are sold locally and internationally.

Social Impact: The company provides training, a fair wage, and design collaborations with artisans,
improving their livelihoods and ensuring sustainable incomes.

Business Model: Rags2Riches upcycles waste materials, and artisans craft them into high-quality
products. The enterprise focuses on eco-friendly production while also providing artisans access to
the fashion and retail markets.

Revenue Stream: The business generates income through the sale of its products in physical and
online stores both domestically and internationally.
Conclusion

Social business models are essential for creating lasting solutions to social and environmental challenges
while remaining financially sustainable. These models balance the creation of social value with the
generation of revenue, making them a powerful tool for social change. By using frameworks like the
Business Model Canvas, social enterprises can strategically plan how to deliver both social impact and
financial stability.