Balancing Impact and Profit: Innovative Business Models for Social Entrepreneurs

Social entrepreneurship is often associated with a "do good" mentality. However, the reality of running a successful social enterprise involves balancing both financial sustainability and social impact. In this article, we dive deep into various innovative business models social entrepreneurs utilise and highlight real-life examples of successful ventures that have balanced impact and profit. Please express your interest in our upcoming course on social entrepreneurship to be the first to learn about it!

Understanding the balance between impact and profit
Social entrepreneurship is the pursuit of business ventures that prioritise social or environmental impact alongside financial success. The objective is to create sustainable change and encourage ethical values while generating revenue in the process. But, balancing impact and profit can be challenging. While it may be tempting to prioritise impact over profit, it's crucial to realise that social change cannot happen without a sustainable business model.

Defining social entrepreneurship

Social entrepreneurship has gained traction in recent years as an increasing number of individuals are looking for alternative ways to challenge systemic issues. Social entrepreneurs aim to deploy innovative business models that tackle social or environmental challenges, such as poverty, climate change, and inequality. They utilise business strategies to create positive social change and promote innovation.

One example of a social entrepreneur is Muhammad Yunus, who founded the Grameen Bank in Bangladesh. The bank provides microfinance loans to people living in poverty, allowing them to start their own businesses and improve their lives. Yunus won the Nobel Peace Prize in 2006 for his work in developing this innovative business model.

The importance of balancing impact and profit
Striking the right balance between impacting society and making a profit can be challenging. Social impact and financial sustainability are both crucial elements of a successful social enterprise. Without financial viability, it is almost impossible to achieve social change that is sustainable over time. Therefore, managing cash flow and reinvesting in the business must be prioritised to ensure long-term impact.

Challenges faced by social entrepreneurs

Social entrepreneurs often face unique challenges which include limited resources, difficulty accessing finance, navigating complex regulations, and competing for market share with traditional businesses. However, social entrepreneurs often have a unique advantage in their ability to connect with stakeholders, partners, and customers on an emotional and more profound level, making them ideal candidates to develop innovative solutions.

One example of a social entrepreneur who has faced and overcome significant challenges is Wendy Kopp, who founded Teach For America. The organisation recruits recent college graduates to teach in low-income schools, with the goal of closing the achievement gap. Teach For America has faced criticism for its approach, but Kopp has persevered, and the organisation has had a significant impact on education in the United States.

Overall, social entrepreneurship is a promising field that has the potential to create significant positive change in the world. By balancing impact and profit, social entrepreneurs can create sustainable businesses that promote ethical values and make a difference in society.

nnovative business models for social entrepreneurs
Entrepreneurship has evolved from being solely focused on profit-making to encompassing a social and environmental agenda. Different social business models demonstrate the diverse approaches taken by organisations to combine profit generation with positive social impact. Each model has its own unique characteristics, allowing businesses to adapt and align with specific social and environmental challenges.

1. Entrepreneur Support Model:
The entrepreneur support model aims to provide resources, training, and support to aspiring social entrepreneurs with innovative ideas for addressing social or environmental issues. It focuses on nurturing and developing these entrepreneurs by offering them guidance, mentorship, network access, and sometimes even seed funding.

Example: One example of a company operating the entrepreneur support model is Ashoka. Ashoka is a global organisation that identifies and supports social entrepreneurs with innovative ideas for social change. They provide these entrepreneurs with financial support, professional networks, and mentoring to help them scale their ideas and create a positive impact.

2. Market Intermediary Model: The market intermediary model acts as a bridge between producers or suppliers from marginalised communities and larger markets. It aims to empower these producers by facilitating access to markets, negotiating fair prices, providing training, and ensuring sustainable and ethical practices throughout the supply chain.

Example: Fairtrade International is a prime example of a company operating the market intermediary model. Fairtrade works with small-scale farmers and producers in developing countries, connecting them with global markets. They ensure that the producers receive fair prices for their products, provide technical support, and promote sustainable production practices.

3. Employment Model: The employment model focuses on providing employment opportunities to marginalised individuals or communities, including those facing barriers to traditional employment. These businesses prioritise job creation and skill development to empower individuals and enhance their socioeconomic well-being.

Example: Greyston Bakery is a notable company operating the employment model. Located in Yonkers, New York, Greyston Bakery is known for its "Open Hiring" policy. They provide employment opportunities to individuals who face barriers to employment, such as those with a history of incarceration, homelessness, or substance abuse. They offer jobs and support services to help employees address personal challenges and build stable lives.

4. Fee-for-Service Model: The fee-for-service model involves providing products or services to individuals or communities, usually market-driven, where customers pay a fee for the services rendered. The generated revenue is then reinvested in the business to sustain its social mission.

Example: One prominent company employing the fee-for-service model is Grameen Bank. Grameen Bank provides microcredit and financial services to low-income individuals in Bangladesh. They offer small loans to borrowers who lack collateral, enabling them to start or expand businesses. The borrowers repay the loans over time, creating a sustainable revenue stream for Grameen Bank's social mission.

5. Low-Income Client as Market Model: The low-income client as market model focuses on creating products or services specifically designed for low-income individuals or communities. These businesses aim to meet the unique needs and preferences of this market segment while remaining financially sustainable.

Example: M-KOPA Solar is an excellent example of a company employing the low-income client as market model. M-KOPA offers affordable solar energy solutions to households in East Africa. They provide solar panels, batteries, and energy-efficient appliances through a pay-as-you-go system, making clean energy accessible and affordable to low-income families who would otherwise rely on expensive and unreliable energy sources.

6. Cooperative Model: The cooperative model involves organising a business as a cooperative, where members collectively own and operate the enterprise. The primary goal of cooperatives is to serve the interests and needs of their members while also benefiting the broader community.

Example: The Mondragon Corporation, based in the Basque region of Spain, is a well-known example of a company operating the cooperative model. It is a federation of worker cooperatives spanning various sectors, including industry, finance, education, and retail. Mondragon fosters democratic decision-making, profit-sharing, and social responsibility among its members, creating a sustainable and inclusive business ecosystem.

7. Market Linkage Model: The market linkage model directly connects marginalised producers or suppliers to markets, cutting out unnecessary intermediaries. By establishing direct relationships, these businesses aim to increase income for producers and reduce exploitation along the supply chain.

Example: Cafédirect, a pioneering coffee company, operates the market linkage model. They source coffee directly from smallholder farmers in different regions worldwide, eliminating intermediaries and ensuring farmers receive a fair price for their produce. Cafédirect also provides technical assistance and training to enhance the farmers' productivity and sustainability.

8. Service Subsidisation Model: The service subsidisation model involves providing essential services or products to disadvantaged individuals or communities at a subsidised cost. The business seeks additional funding or cross-subsidisation from other sources to cover the costs and maintain affordability.

Example: Aravind Eye Care System is a notable example of a company employing the service subsidisation model. Aravind provides high-quality eye care services, including cataract surgeries, to patients in India. They charge higher fees to patients who can afford to pay, which helps cross-subsidise the services for patients who cannot afford the full treatment cost.

9. Organisational Support Model: The organisational support model focuses on providing support services and resources to other social purpose organisations or nonprofits. These businesses aim to strengthen the capacity and effectiveness of other organisations to create a more significant collective social impact.

Example: TCC Group, a consulting firm based in the United States, operates the organisational support model. TCC Group provides strategic planning, evaluation, and capacity-building services to a wide range of social sector organisations. By assisting these organisations in improving their operations and impact, TCC Group indirectly contributes to the achievement of various social missions.

10. Complex Model: The complex model combines multiple social business models or incorporates a unique approach that cannot be easily categorised under a single model. It involves integrating diverse elements and strategies to address complex social challenges.

Example: The Grameen Danone Foods Ltd. joint venture in Bangladesh exemplifies a complex model. It combines elements of the social franchise model and the low-income client as market model. The partnership between the Grameen Group and Danone aims to combat malnutrition by producing and selling affordable, nutrient-enriched yoghurt to rural communities, leveraging Grameen's extensive microfinance network.

11. Mixed Model: The mixed model involves integrating social and commercial activities within a single organisation. These businesses generate revenue from commercial operations while simultaneously pursuing social or environmental objectives.

Example: Patagonia, a renowned outdoor apparel and equipment company, operates the mixed model. Patagonia designs, manufactures, and sells outdoor clothing and gear while strongly emphasising environmental sustainability and activism. The company commits a portion of its revenue to support grassroots environmental initiatives and works towards minimising its ecological footprint.

12. Social Franchise Model: The social franchise model involves replicating a proven social impact concept or business model across multiple locations or communities. Franchisors provide training, branding, operational systems, and ongoing support to franchisees, who then deliver the products or services while adhering to the social mission.

Example: One well-known company operating the social franchise model is VisionSpring. VisionSpring is a global social enterprise that addresses vision impairment by training local individuals as "vision entrepreneurs" in underserved communities. These entrepreneurs sell affordable eyeglasses, conduct vision screenings, and provide primary eye care services, leveraging VisionSpring's brand and support.

13. Private-Nonprofit Partnership Model: The private-nonprofit partnership model involves collaboration between a for-profit business and a nonprofit organisation to jointly pursue social or environmental objectives. The partners combine their expertise, resources, and networks to create a sustainable and impactful venture.

Example: The partnership between Unilever and the United Nations Children's Fund (UNICEF) is an illustrative example of the private-nonprofit partnership model. Together, they launched the "WASH" (Water, Sanitation, and Hygiene) programme to improve access to clean water and sanitation facilities in developing countries. Unilever contributes its business knowledge and resources, while UNICEF provides technical expertise and community reach.

In conclusion, social entrepreneurship is an increasingly important field that seeks to create positive social and environmental impact while also generating profit. These innovative business models showcase the diversity of approaches that social entrepreneurs can take to achieve their goals. By adopting these models, social entrepreneurs can create sustainable businesses that not only benefit themselves but also their local communities and the wider society.

International real-life examples of successful social enterprises and socially responsible enterprises

Social enterprises are businesses that prioritise social and environmental impact alongside profit. They are a growing trend in the business world, with more and more companies adopting innovative business models that address social and environmental issues. Here are five real-life examples of social entrepreneurs that are thriving using these innovative business models:

TOMS Shoes:

One-for-One model Since 2006, TOMS Shoes has focused on addressing the global problem of inequality in access to shoes. The company created a "one-for-one" business model that donates a pair of shoes to those in need for every pair of shoes purchased. This model has been incredibly successful, with TOMS donating over 100 million pairs of shoes to people in need. But TOMS hasn't stopped there. The company has also expanded its product line to include eyewear, coffee, and bags, each with a targeted impact on social causes. For example, for every pair of eyewear purchased, TOMS helps restore sight to someone in need through medical treatment, prescription glasses, or surgery. TOMS is a great example of a company that has successfully integrated social impact into its business model.

Grameen Bank:
Microfinance pioneer Grameen Bank, led by Nobel Peace Prize winner Muhammad Yunus, has become a pioneer in microfinance. Since its inception in 1983, Grameen has provided access to capital to impoverished communities around the world, with the aim of empowering individuals to become self-sufficient. The bank's innovative approach to lending, which includes group-based lending and no collateral requirements, has helped lift millions of people out of poverty. Grameen Bank is a great example of a social enterprise that has successfully used finance as a tool for social change.


Environmental stewardship and profit Since 1973, Patagonia has been a leader in ethical business practices, with a focus on environmental protection. While the company has created a reputation for the quality of its outdoor clothing, Patagonia has also been able to successfully balance social and environmental impact. The company has implemented a number of innovative programmes to reduce its environmental footprint, such as using recycled materials in its products and offering a repair service to extend the life of its clothing. Patagonia has also been a vocal advocate for environmental protection, using its platform to raise awareness about issues such as climate change and public lands protection. Patagonia is a great example of a company that has successfully integrated environmental stewardship into its business model.

Warby Parker:

Eyewear with a purpose Warby Parker is a pioneer in ethical eyewear. Established in 2010, the company leverages a hybrid model that blends the traditional e-commerce model with physical stores. For every pair of glasses sold, the company donates another to a person in need. This model has been incredibly successful, with Warby Parker donating over 7 million pairs of glasses to people in need. Warby Parker has disrupted the eyewear industry while constantly reinvesting to scale and maintain positive impact. The company has also implemented a number of innovative programmes to reduce its environmental footprint, such as using sustainable materials in its products and implementing a carbon offset programme. Warby Parker is a great example of a company that has successfully integrated social and environmental impact into its business model.

The Body Shop:

Ethical beauty products The Body Shop is a leading beauty product company with a focus on ethical supply chains. Founded in 1976, The Body Shop prides itself on its use of only natural and sustainable ingredients, with a focus on community trade and ethical sourcing. The company's business model has proven profitable, which has allowed it to expand its impact across the globe. The Body Shop has implemented a number of innovative programmes to reduce its environmental footprint, such as using recycled materials in its packaging and offering refills for its products. The company has also been a vocal advocate for animal rights, using its platform to raise awareness about issues such as animal testing and cruelty-free products. The Body Shop is a great example of a company that has successfully integrated social and environmental impact into its business model.

Incentives and Innovations Advancing Social Entrepreneurship

The B Corp model is a certification that recognises businesses that meet high standards of social and environmental performance. Certified B Corporations must balance their mission to create a public benefit with their desire to generate profit. By becoming a B Corp, social entrepreneurs signal to their stakeholders, including customers and investors, their commitment to social and environmental ethics. This model not only helps the business to stand out in a crowded market but also ensures that the business is held accountable for its social and environmental impact.

Impact investing
 has gained popularity in recent years, with an increasing number of investors looking for ways to align their investments with their values. It involves investors seeking out social enterprises and investing in them for both financial returns and social impact. Impact investing aims to create a sustainable business model that generates both financial sustainability and social returns. This type of investment not only provides social entrepreneurs with the necessary capital to start or scale their businesses but also ensures that the investors' money is being used to create a positive social impact. 

In conclusion, social entrepreneurship is not just about creating a positive social impact, but it's also about a viable business model that is scalable. Striking the right balance between societal impact and financial growth is crucial to the success of social entrepreneurs, and this can be achieved through innovative business models. These models often aim to incorporate both profit and social good in their approach, providing a win-win for everyone involved. By learning from the successes and challenges of real-life social enterprises, we can understand the power of business to generate positive change and the importance of balancing impact and profit. Express your interest in our upcoming course on social entrepreneurship to be the first to learn about it!
Write your awesome label here.

Never miss our news!

Thank you!
Get updates on live streams, news and more right in your mailbox.