“Why is social impact important?” This question has been asked by many people who are trying to understand what it means for a business or organization to have a positive impact on society. The answer surprises some people, but the fact of the matter is that “social” and “profit” are not mutually exclusive. Businesses can make money, reduce costs, create jobs, and still have an effect on their communities in a way that benefits everyone involved. If you want your business to be successful long term then you should consider how investing in social projects will help achieve this goal.
Why Social Impact Is Important
Social impact is a young field that’s growing rapidly as the world needs more planned interventions. It’s important because it levels the playing field between for-profit and nonprofit organizations. It makes it easier for small social impact organizations to make a big impact.
Social impact is hard to pin down. We’re all used to thinking that impact is something that happens at a certain point in space-time, like a bullet hitting a wall. But that’s not how social impact works.
Social impact is more like light reflecting off a mirror, or ripples spreading out when you throw a rock into water.
The best way to think of social impact is as an interaction between two things: your project and the people it touches.
Social Impact Depends on Three Things
- On the people you want to help, who we call beneficiaries. These can be individuals, groups, organizations, communities, or even entire societies, but they’re real people who’re affected by your work.
- The goals and motivations of the beneficiaries. These are often no different from those of other people who’re not your direct beneficiaries, but they may be different.
- You and your goals and motivations, which are necessarily different from those of most other people because you set out specifically to make a difference for others.
Social Impact Is Important for Two Reasons:
First, it should be about helping others, like starting a business or getting a place at college.
If you don’t feel that helping people is important, why are you doing it?
Second, social impact is often the only way to justify other goals.
If your goal is just to get rich, you may not be able to achieve it without harming other people. So when you’re deciding how to use your talents, you need to ask yourself if they’ll help people more than the next best alternative.
If that seems too abstract, think of it this way: if someone else were in charge of your life, would they think that helping people is more important than having fun or making money?
The basic idea of social impact is simple: if you want to help others, first consider what’ll help the others the most.
It makes it easier for individuals to make a big impact.
Why We Should Care About Social Impact
The traditional answer is that we should care because we should care about the world and other people.
A better answer is that you want to create social impact for the same reason you want to create wealth: because you want to make a positive difference in the lives of others.
When you create something of value, you enrich the world and enable other people to live better lives. You can do this as an individual or as part of a team; either way, it’s good to create something of value.
Social impact is necessary for our sustainability. We live in a world that’s changing rapidly and unpredictably.
Climate Change and Social Impact
Climate change, a global economic collapse, and the many new technologies (e.g., social innovation for renewable energy, AI for mental health) we’re developing could have major impacts on the way we live.
We need to find balance with an economy that’s sustainable for future generations.
The world needs to act now because climate change has already begun to affect us all. There’s no longer any denying that climate change is real and is affecting the environment by increasing average global temperatures.
Many people are beginning to realize that if they don’t act now, they’ll also be affected by this problem in the future.
Some people argue that they aren’t convinced by all this evidence, but others say that we shouldn’t wait until it’s proven beyond doubt before we act. We need to act now so that our children don’t have to worry when they grow up.
These problems are already starting to affect everyone; for example, low-lying areas like Bangladesh are becoming uninhabitable due to flooding caused by climate change.
If we don’t act now, more drastic measures will have to be taken later if these problems continue to escalate.
Impact vs. Social Impact
If you want to make an impact, it’s important to understand the difference between the value of a good idea and the value of good execution. They can be very different.
The value of a good idea is the amount of wealth it creates. The value of a good implementation is how much money it brings in.
Social impact is a conventional way of talking about what’s good in the world. But if we want to make the biggest difference possible, we should distinguish between impact and social impact.
Impact is any effect you’ve on the world. It doesn’t have to be good; it can be bad, like the pollution of a river or the accidental death of a person. Social impact is impact that’s intended to benefit society as a whole, not just you or your friends or family.
The distinction between impact and social impact has two implications. First, if you want to have an impact on the world, there are many ways to do it that don’t have a direct social benefit – for example, inventing an interesting new video game or making money by trading stock in private companies.
But if you want to have a social impact, you need to work on something that benefits everyone in some way.
I think the most important thing is to have a positive social impact. I’ve been working for two decades to achieve that at World Citizen Artists, and it’s much more rewarding than financial wealth or just success.
Changing lives is the best thing I’d recommend to anyone.
We’re used to thinking about the impact of individual social needs: we assume that saving a life saves more than one life, and that going from $20,000 a year to $40,000 a year makes someone happier.
Life does not always work that way.
These problems are very difficult. And they’re especially hard to talk about because they combine the technical difficulty of comparing individual and social outcomes with moral disagreements about what we owe each other and what it means for someone to live a good life.
Impact investing is the use of investment capital to achieve both financial returns and social benefits.
Impact investors seek to impact specific social issues such as poverty, hunger, human rights, social justice, environmental impact, or lack of access to education.
Social investment has increased over the past decade. Over the past decade, social investors have become more aware of global challenges, and the next generation wants to invest in socially conscious products and companies.
Impact investing is becoming more popular because it offers investors the opportunity to bring about social change in society to help humanity overcome its social problems.
The United Nations Sustainable Development Goals are one of the reasons why impact investing is growing so fast.
Impact investors recognize this and want to support this change. There are more and more socially conscious products and companies. Companies like Adidas, Lego, and Patagonia allow consumers to feel good about their purchases while making a difference in communities around the world.
Sustainable Development Goals
World leaders have proclaimed their commitment to sustainable development. The Sustainable Development Goals are the framework for putting that commitment into action. They’re aimed at everyone in the world, every country, every industry, and every person.
There are 17 goals, each focused on an important aspect of human development.
- No poverty
- Zero hunger (No hunger)
- Good health and well-being
- Quality education
- Gender equality
- Clean water and sanitation
- Affordable and clean energy
- Decent work and economic growth
- Industry, innovation and infrastructure
- Reducing inequality
- Sustainable cities and communities
- Responsible consumption and production
- Climate action
- Life under water
- Life on land
- Peace, justice and strong institutions
- Partnership for the goals
Corporate Social Responsibility vs Social Entrepreneurship
Corporate social responsibility (CSR) is the practice of companies making contributions to society that go beyond their immediate business.
Contributions can be financial or charitable. A company may sponsor a Little League team or pay to clean a park. Or it may donate money to a charity that fights poverty, supports cancer research, or sponsor local theater groups.
The company does this not because it has a socially conscious CEO, but because it’s part of its marketing and PR efforts. It’s trying to portray itself as a good corporate citizen.
Social entrepreneurship is when social entrepreneurs use entrepreneurial skills and practices to address a social challenge.
Instead of fighting government failure, it creates solutions that circumvent government failure. The social entrepreneur doesn’t expect the government to provide clean water in poor countries; she figures out how to do it herself.
To create social value, it’s important to assess a company’s social impact strategy.
This means looking at what impact the company might have on society and what can be done about it.
Research on corporate social impact has come a long way on financial issues such as fraud, corruption, and cybercrime.