There are lots of ways you can have a positive impact, from how you treat your employees, to where you source your materials, to how you support with your local community. If creating a positive social and/or environmental impact is a priority for your business, it is likely that your business activities will be designed to create a positive impact, not just achieve financial sustainability.
In the long-term, a business will aim to make the majority of its income through profits generated by selling a product or service. They can then spend these profits to deliver social or environmental impact, or distribute them to shareholders. Some charities sell products or services but they are limited by charity law and should typically advance or complement the charity’s primary purpose e.g. a theatre selling tickets, delivering commissioned counselling services.
Grants and donations are sums of money you don't have to pay back. Charities usually rely on grants and donations to fund their work. Different types of businesses may apply for grants (e.g. from local or national government funds) or ask for donations (e.g. crowdfunding through JustGiving) but this typically accounts for the minority of their income in the long term.
An 'asset lock' ensures that all the profits and property of a business (its assets) aren't cashed in by or transferred to private individuals or other companies for their own advantage. It is a legally binding obligation stating that the company's assets will only be used for its social or environmental objectives, now and in the future. A partial asset lock is also possible (CIC Limited by Shares).
Selling shares of ownership (equity) to private investors is a common way to raise funding (capital) for a business to achieve its goals. Investors become shareholders in the company and will receive a share of future profits. Investors typically have a say in the strategic direction of the company. Some care about delivering impact, while others are focused on growth.
Sole founders, or a small group of co-founders, have greater freedom and control to make decisions about the business. In contrast, in community or employee-owned businesses, decisions are made democratically. This engagement can help to align the interests of the management and employees, increase motivation and job satisfaction, and can be a means to raise new capital without going public.
A community could be local people living in an area or a particular group, like the people you support. Being accountable to them means they can influence and have a say in key decisions the business makes but they don't ultimately have the vote. This could be achieved by having a community representative on your board, for example.
Co-operatives are businesses owned and controlled by their members, who come together for a shared purpose. Decisions are democratic as every member has an equal say in how the business is run and how its profits are used. Members can be its customers, employees, residents or suppliers.
To embed purpose in the DNA of your business, it is possible to legally commit to considering the social or environmental impact of your decisions. This is normally achieved by including it in your Company’s governing documents, known as a 'mission-lock'. This sends a clear sign to shareholders and investors of your intention to balance profit and purpose.
