Growing a company is a top priority for entrepreneurs. A company that is not growing is not sustainable in the long run. So entrepreneurs actively seek out avenues for growth, by raising funds and acquiring resources with the sole purpose of increasing revenue. Although it is common to consider growth from a financial perspective, there’s another way to look at it and that is via impact.

Increasing revenue may appeal to investors, but leaving a lasting impact is how you earn loyal customers. What is social impact? How can entrepreneurs build impact? And what are the challenges involved? These are key points discussed in this article.

What is Social Impact?

Social impact is simply the effect that an organization has on society. By this definition, an organization can have either a positive or negative impact. Henry Ford, founder of Ford Motor Company is credited with implementing the assembly line in large-scale manufacturing of automobiles. The impact of Ford’s revolutionary idea changed the way cars were manufactured making it affordable to the average consumer.

This was a big shift that illustrates the impact a company can have on society. Startups are known for their revolutionary ideas, despite this, not every startup goes on to make any significant impact. This could be because entrepreneurs have to thread a thin line between profitability and impact.

Challenges of building a positive social impact

Building a positive impact can be challenging. Let’s revisit the story of Henry Ford. His revolutionary idea no doubt had a positive impact on the manufacturing industry and society as a whole, but it also triggered an Industrial Revolution and threatened the collapse of his factory. Ford lost his workers who became bored and couldn’t keep up with the strict timing of the early assembly line. To stop further employee turnover, he introduced the 5-dollar workday, where employees were paid twice the usual salary for an 8-hour shift.

So Ford had to pay his workers way more than the market rate to keep his innovative system from crumbling. The alternative was reverting to the old manufacturing system that was slower, more expensive, and required many more men. Henry Ford’s challenge of balancing innovation with profitability was not an isolated case. Even now, companies have to find a balance between building impact (through innovation) and keeping their investors happy. This can lead to compromises and in some cases lawsuits as is the case with OpenAi.

On 8th May 2024, Musk filed a complaint at a Federal Court against OpenAI alleging that the company behind the world's most advanced artificial intelligence had committed fraud by switching the company from a non-profit organization to a for-profit organization. (The case is Musk v. Altman, N.D. Cal., No. 3:24-cv-04722, complaint filed 8/5/24.)

Benefits of Social Impact on Businesses

Despite the challenges, there are upsides to building a positive social impact. One major advantage is customer loyalty. With the attention to climate change, it’s become quite common to see companies embrace environmentally friendly practices not only for the hope of saving the environment but also to earn the loyalty of consumers who value sustainability and patronize companies that are intentional about improving the environment. As a result, many companies now embrace the green initiative as a way of building social impact. Other benefits of social impact are;

• It gives employees a sense of accomplishment as they contribute to something meaningful and impactful
• It builds brand reputation, and
• It builds trust and loyalty with the customers

How Companies Can Build Social Impact

Branding -

Aligning brand values with sustainable practices is the one way a company can easily build impact. This is why branding is very important in defining the success or failure of any business. A positive brand image can promote customer loyalty, while a negative brand image could damage a company’s reputation. This is why information like a company’s vision and mission statement are important and should reflect what cause the company supports. Tesla is one company that has enjoyed a positive reputation due to its branding. Very early in the company’s development, it was clear that environmental sustainability was a big part of its mission - “to accelerate the world’s transition to sustainable energy”.

Strategic Partnership -

One of the ways to build impact is through networking. Unlike regular business networking, impact networking is aimed at developing a strategic partnership with organizations that sponsor or support humanitarian or sustainable causes. Through these partnerships, businesses can create impact by providing resources usually in the form of financial support, sponsoring knowledge events, and providing job opportunities or skill development training. Or by simply following certain operational standards that support a specific cause. A typical example is the Green Initiative which assists businesses to reduce carbon footprint. In essence, they help businesses go Green. Businesses that comply are often seen as responsible and ethical and earn a better reputation.

Community Impact -

Organizing community events and sponsoring activities can create an impact within the local community where a business is located. While it’s important to focus on creating impact on a global scale, entrepreneurs should remember that charity begins at home. Neglecting the local community that the company is located in while aiming for global impact will boomerang eventually and the outcome may not be pleasant. So how can businesses create an impact within their immediate community? By engaging its employees in voluntary activities within the community, organizing events such as an awareness campaign focused on a sustainability initiative, or contributing to community development efforts.

Advocacy -

Advocating for policies that promote sustainable practices is another way to build impact locally and globally. Policies are strong agents of change and companies are in a good position to champion this change and make lasting impacts.

Conclusion

Of course, there are many ways to build impact, however, the majority will likely fall under the five approaches mentioned above. Also, a company can adopt one or more approaches, there’s no limit, as long as it fulfills the goal of creating a positive impact in society.

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