The keys to an impact-driven business model

At a time when social and environmental impact is becoming a decisive criterion in the business world, Impact Lab project manager Inès Dajoud shared her expertise during a webinar dedicated to "Impact Enterprises: from idea to action", revealing the contours of the different types of commitment of companies of all sizes. In addition, she explained how to set up an impact business model, and suggested a few tools to help project leaders move towards a committed creation.

What is Impact Lab's mission?

The Impact Lab aims to support companies in their transition to business models that integrate social and environmental impact as core components. We work in coalition with impact pioneers Pulse, makesense, Corporate For Change, La Ruche and Inco. By equipping them with the right tools and offering training, we help players in the ecosystem (companies in transition, impact startups, coaches) to move beyond the traditional vision of purely economic value creation to adopt a more holistic approach that also values the social and environmental dimension. In this way, companies become "impact by design", fully aligned with their environmental and social ambitions right from the conception of their business model.‍

What is an impact company?

An impact company is one that responds to a social or ecological need, with impact objectives as high a priority as financial ones. Take Café Joyeux, for example, which opens cafés exclusively employing disabled people: their main objective is the professional inclusion of disabled people. This is not just an HR policy, but is at the heart of their business model. They generate revenue, of course, but the real indicator of success is the impact they have on the lives of their employees and on raising customer awareness of diversity.

Integrating impact right from the definition of the business model is crucial to ensure that they are not relegated to the background in the event of crisis or organizational change. Two other important conditions are the consideration of governance issues such as internal power and value sharing, and the reduction of the company's negative externalities.

How does an impact-based business model differ from a traditional business model?

The impact business model, also known as the "social business model", takes the fundamentals of a classic business model and adds a social or environmental impact dimension. Unlike a classic business model, which focuses on economic value, the impact business model seeks to optimize the balance between different forms of value. This often involves innovations in the way the business is conceived and deployed, aiming for the intersection between economic aspirations and impact ambition. This is not a side effect, but a central and deliberate component of the business model. For example, we work with an enriched business model canvas, which replaces the term "customer" with "beneficiary" and adds a precise impact measurement, as well as the definition of the targeted need.| What are the main steps in developing a business model?

What are the main steps in developing an impact business model?

The creation of an impact business model begins with the identification of a social or environmental problem to be tackled. It is crucial to define a suitable value proposition, and to ensure that this proposition effectively addresses the identified need. Entrepreneurs must then test their solution, integrate stakeholders at the heart of the project, and set up a system for measuring impact. Finally, the financial equilibrium must be found to guarantee the company's sustainability while maximizing its impact. The upstream phases of defining a project are crucial to building an impact business model, enabling the strategy to be clarified before the concrete implementation of the business plan. When you're a "classic" company, this means trying to rethink your offer to orient it towards the search for a positive impact.

What tools do you use to validate and measure the effectiveness of an impact project?

To validate and measure the effectiveness of an impact project, we recommend a methodical approach that combines several complementary tools. First and foremost, the theory of change is essential. This is a framework that helps to clearly define the expected results, the activities needed to achieve them, and the indicators of success. This helps create a coherent roadmap for the project, from initial intention to desired final impact.

We also recommend using the Impact Score, an indicator that assesses a company's internal impact practices. Using a rating grid, the Impact Score examines how the company manages its human resources, environmental footprint and community involvement, among other aspects. It helps to identify areas for improvement and to implement corrective actions to reinforce positive impact.

How can small structures reconcile profitability and impact?

The challenge for small businesses is to innovate their business model so that it is both profitable and impact-generating. Models such as hybrid businesses, the circular economy, or the economy of functionality make it possible to sell products or services while generating a positive impact. The trick lies in striking a balance between creating value for the market and for society.

For example, companies such as Phenix, which fights food waste by recycling unsold goods, or Back Market, which promotes the circular economy by selling refurbished electronic appliances, illustrate how innovative solutions can meet social and environmental challenges while remaining economically viable. Other companies, such as Les Alchimistes, which recovers waste to make compost and cooking oil to make fuel, restore value to products that no longer have any. These initiatives show how social and environmental impact can become an integral part of the value proposition, attracting a customer base keen to support these values and willing to pay for a service that makes sense.

Take Café Joyeux, for example, which employs people with disabilities. These establishments don't just serve coffee, they also offer an inclusive and rewarding space for individuals often excluded from the mainstream job market. They show how social integration can become an intrinsic part of the value proposition, attracting customers who support this mission and are prepared to pay a little more for coffee, recognizing the added value of social inclusion.

What prospects does an impact-based business model offer companies?

Impact companies have great prospects ahead of them, attracting motivated employees and conscious consumers, while gaining access to dedicated funding. Indeed, 88% of French people say they are ready to change brands if they don't share their values*, underlining the importance of aligning companies with societal concerns. Institutional investors are also increasingly involved in this dynamic, with 84% of them planning to increase their asset allocations to ESG* products. This trend is reinforced by financial performance, which can be superior: companies with a CSR strategy outperform their peers by 13%*. These figures illustrate a growing movement that is redefining the foundations of business success, by combining social or environmental impact with economic profitability.

*Sources: Harris Interactive poll for MIF, 2022 And PWC, 2022.

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This article was written in the context of an interview with Inès Djaoud, Impact Lab Project Manager for BPI France.