Impact Business Model
What is an Impact Business Model (IBM) and do all Public Benefit Corporations automatically have an IBM?
Summary of Impact Business Models
Impact Business Models (IBMs) are the ways that a business is designed to create a specific positive benefit/outcome for one of its stakeholders. They may be based on their product, a particular process or activity, or the structure of the business. We use the definition of what makes up an Impact Business Models as set by the B-Corporation standards (here).
Below are some guidelines set by the B-Corporation standards:
- Specific - delivers a clearly defined positive outcome to a specific stakeholder group, rather than pursuing vague or generalized impact.
- Material - provides meaningful benefits to its stakeholders, not negligible or incidental ones.
- Verifiable - An Impact Business Model is verifiable and documented through a company’s marketing, research, measurement, or internal data.
- Lasting - embedded in the company’s design, making it durable and not easily altered by short-term circumstances.
- Extraordinary - sets a company apart as uncommon and extraordinary because traditional businesses do not have one.
List of Impact Business Models (IBMs)
There are four categories that make up Impact Business Models set by the B-Corporation standards:
Customer Centric IBMs
| Business Model | Description |
|---|---|
| Basic Services for the Underserved | Recognizes products/services that provide or assist in the provision of fundamental basic services to individuals without prior access |
| Economic Empowerment for the Underserved | Recognizes products/services that provide or assist in the provision of income generating activities for underserved individuals |
| Health and Wellness | Recognizes products/services that promote the health and wellness of individuals |
| Education | Recognizes products/services that enhance the skills and knowledge of individuals |
| Support for Underserved/Purpose Driven Enterprises | Recognizes products/services that enable the financial or operational success of businesses that are purpose driven or underserved |
| Impact Improvement | Recognizes products/services that drive positive changes in organizations to improve their social or environmental impact |
| Arts, Media, & Culture | Recognizes products/services that promote or preserve artistic, cultural, or civic engagement |
| Infrastructure/ Market Access Building | Recognizes products/services that provide necessary infrastructure to communities that were previously inaccessible |
| Serving In Need Populations | Recognizes social product models that are targeted to or benefits traditionally in need and underserved populations |
Community Centric IBMs
| Business Model | Description |
|---|---|
| Supply Chain Poverty Alleviation | Recognizes supply chain strategies that reduce poverty through trade terms, positive labor conditions, and support for underserved suppliers |
| Micro-Enterprise Poverty Alleviation | Recognizes micro-entrepreneurship opportunities for underserved individuals via franchising or product distribution |
| Local Economic Development (only for Developed Markets) | Recognizes strategies to strengthen local economies through procurement, ownership, banking, customers and charitable giving |
| National Economic Development (only for Emerging Markets) | Recognizes strategies to strengthen national economic development via privatization or import substitution in underdeveloped markets |
| Producer Cooperative | Recognizes supplier owned structures that empower suppliers by organizing production, decision making, and profit distribution |
| Designed to Give (Charitable Giving) | Recognizes standing commitments to provide significant portions of company profits, revenue, equity, or time to charitable causes |
Environmental Centric IBMs
| Business Model | Description |
|---|---|
| Renewable/Cleaner Burning Energy | Recognizes products/services that reduce GHG emissions through the provision of renewable or cleaner burning energy |
| Resource Conservation (Reduces Waste and Energy/Water Efficiency) | Recognizes products/services that reduce resource use and/or limit waste to landfill |
| Land/Wildlife Conservation | Recognizes products/services that preserves or restores natural environments and/or protects animals |
| Toxin Reduction/ Remediation | Recognizes products/services that reduce or remediates toxins or pollution |
| Environmental Information and Education | Recognizes products/services that promote awareness about important environmental issues and facilities conservation |
| Environmental Innovative Process (Manufacturing, Wholesale, Ag) | Recognizes comprehensive environmental practices that redesign traditional processes to conserve natural resources |
Worker Centric IBMs
| Business Model | Description |
|---|---|
| Worker Owned | Recognizes distributive ownership models that empower employees, including cooperatives and ESOPs |
| Workforce Development | Recognizes providing quality jobs and job training for chronically underemployed populations |
Example Companies & Criteria
Specific
Example: Tricyclos, a company founded in Chile and now headquartered in Brazil, focuses specifically on addressing the problem of waste. Beyond general commitments to preserving the environment and having a positive impact on stakeholders, its business model includes products and services specifically related to waste recycling and advancing a circular economy.
Material
Example: Eco2librium, a company based in Kenya, provides sustainability solutions in the energy and forestry space. Through their energy efficient cookstove products, among other beneficial products and services, the company is able to have a material positive environmental impact, including the average reduction of CO2 emissions by 64,000 tons annually (equivalent to removing 6,000 U.S. cars).
Verifiable
Example: Culture Amp, an employee feedback platform based in Melbourne Australia, has an impact improvement business model because of the ability of its service to enable improvements in the well-being of its client’s employees. Through the platform, Culture Amp is able to track data that not only identifies opportunities for their clients to improve, but can also demonstrate and verify that improvements have been made and that a positive result has followed.
Lasting
Example: Bombas, an apparel company based in New York, has a Designed to Give Impact Business Model based on their mission is to help those experiencing homelessness. For every item of clothing purchased, Bombas donates a one. Since the company launched, Bombas has donated more than 30 million items to more than 2,500 community organizations. The company’s ongoing commitment demonstrates the lasting nature of their business model and impact.
Extraordinary
Example: Fairphone, an electronics company based in Amsterdam, produces smartphones focused on four key areas of positive impact - long-lasting design, fair materials, good working conditions, and reuse and recycling. Compared to competitors in the electronics marketplace, their efforts in these areas truly differentiate the company and their products.
Difference Between a PBC & IBM
There are circumstances where a company is legally a Public Benefit Corporation (PBC) but doesn't have an Impact Business Model.
Example: A next generation AI foundational model company could have a company mission to bring AI to the world as a force of good. It is a PBE, so it is legally liable to balance profit, purpose and stakeholders, but it makes a majority of its revenue by selling its AI foundational models to B2B SaaS for-profit companies. The company donates small portions of its profits to research organizations to find ways to make AI safe for everyone. This isn't an Impact Business Model.