Since the concept of corporate social responsibility first hit the scene in the 1960s, the idea that businesses should look beyond the balance sheet and examine their impact on society has become increasingly mainstream. While entrepreneurs and businesses are thinking differently, nonprofits and government agencies that once cornered the market for social good are adapting to the new landscape.

The status quo is changing, and that’s cause for celebration! But it’s sometimes dizzying to keep up. We’ve taken a stab at briefly defining the more popular models and approaches for organizations that operate with a purpose beyond profit.

Note: There are 11 new models and approaches in this new and improved version of the glossary RoundPeg originally published nearly two years ago. Along with our additions, we’ve included models and approaches suggested by our readers (indicated with an asterisk). Enjoy!

In true glossary form, these are organized in alphabetical order.

B Corp

Certification | For Profit
B Corps are “certified by the nonprofit B Lab to meet rigorous standards of social and environmental performance, accountability, and transparency.” To apply for B Corp status, an organization must score at least 80 out of 200 on the B Impact Assessment. The Assessment measures the positive impact a company has on key stakeholders including its workers, suppliers, local community and the environment.

Source / Further Reading:

B Corporation Website | What Are B Corps?

Benefit Corporation

Legal Structure | For Profit
Benefit corporations are companies that exist to make a profit AND make a positive environmental or social impact. This self-selected legal classification gives companies the freedom to work towards positive impact without facing lawsuits from investors interested only in monetary dividends. Benefit corporations must release an annual benefit report in which they assess their own progress toward their social and environmental goals. This structure is not nationally recognized but as of this writing 30 states and the District of Columbia have passed legislation recognizing the benefit corporation as a legal business entity.

Source / Further Reading:

Benefit Corp Information Center | FAQ

Biomimicry / Regenerative Design / Cradle to Cradle

Concept + Certification | For Profit / Government / Etc.
This is an approach to design that applies natural principles to human challenges to maximize efficiency and eliminate waste. For example, the byproducts of one process are input for another. The Cradle to Cradle system specifically decries the dated maxim “Reduce, Reuse, Recycle,” instead advocating for products to become either “technical” or “biological” nutrients at the end of their useful life.

Source / Further Reading:

Cradle to Cradle

Bottom of the Pyramid / Base of the Pyramid / BOP

Concept | For Profit
This phrase refers to the world’s poorest socioeconomic group: people who live on less than $2.50 per day. In a 1998 article, Professors C.K. Prahalad and Stuart L. Hart put forward the idea that by developing products designed and priced for the world’s poorest, companies can prosper by bring life-saving innovations to this market segment.

Source / Further Reading:

The Fortune at the Bottom of the Pyramid

Cause Marketing

Concept | For Profit + Nonprofit
A for-profit brand aligns itself with a nonprofit by promoting the nonprofit’s initiative alongside its own offering. Often, the brand will donate a certain percent of proceeds of the sale of the product to the nonprofit though there are other models for collaboration too. The first cause marketing partnership (arguably!) was between Marriott Corporation and the March of Dimes in 1976.

Source / Further Reading:

Marketing Schools | Cause Marketing

Cause Marketing Forum

*Collective Impact

Concept | For Profit / Nonprofit / Government / Etc.
Collective impact is when a group of people from across different sectors come together with a common agenda to solve a specific social problem. Collective impact collaborations are distinct in that they involve centralized infrastructure, a dedicated staff, continuous communication, shared metrics and more.

Sources / Further Reading:

Collective Impact – Stanford Social Innovation Review

*Community Interest Company

Legal Structure | For Profit
A Community Interest Company or CIC is a type of company in the UK with social objectives. Think of it as the UK version of a Benefit Corporation (see above).

Sources / Further Reading:

Community Interest Company Regulator Website + Leaflet

Conscious Business Enterprise / Conscious Capitalism

Concept | For Profit
Conscious businesses operate with the awareness that their actions can benefit or harm others, then aim to minimize the harm and maximize the benefit. They work towards a specific purpose and along the way try to foster “peace and happiness in the individual, respect and solidarity in the community, and mission accomplishment in the organization” (Fred Kofman, from Conscious Business).

Sources / Further Reading:

Harvard Business Review | Conscious Capitalism Is Not an Oxymoron

Cooperative

Legal Structure | For Profit / Non Profit
Cooperatives are owned by those who staff them or by those they serve. Members, or user-owners, distribute profits and earnings amongst themselves. Some cooperatives are incorporated while others are not. It is one of several approaches to employee ownership. The laws surrounding cooperatives vary, but all adopt the seven cooperative principles:
1. Voluntary and open membership
2. Democratic member control
3. Members’ economic participation
4. Autonomy and independence
5. Education, training and information
6. Cooperation among cooperatives
7. Concern for community

Sources / Further Reading:

National Cooperative Business Association | 7 Cooperative Principles
Small Business Chronicle | How to Be a Nonprofit Co-Op

Corporate Social Responsibility (CSR)

Concept | For Profit
An evolving concept since its emergence in the 1960s, today CSR indicates when a company voluntarily engages in “actions that appear to further some social good” beyond the financial interests of the company and beyond actions required by law (source referenced below). CSR encourages companies to take responsibility for their actions and the impact they have on employees, the environment, consumers and others. In many ways, the idea of CSR laid the foundations for many of the purposeful business approaches detailed here.

Source / Further Reading:

United Nations Industrial Development Organization | What is CSR?

Creating Shared Value (CSV)

Concept | For Profit
This business approach posits that what is good for society is good for business (vs. the traditional maxim that hat’s good for business is good for society). Companies that incorporate “doing good” into their business plans maximize value for themselves and for others. They can accomplish good by reconceiving existing products and markets to meet social needs, consuming social goods as efficiently and productively as possible, and investing to resolve obstacles limiting their growth potential.

Source / Further Reading:

Harvard Business Review | Creating Shared Value

Fourth Sector

Concept | For Profit / Nonprofit / Government / Etc.
This is a catch-all term that unites the for-benefit activities already existing in the public, private and voluntary sectors. Activities that fall within this realm include CSR, cause marketing, venture philanthropy, social investing, creative capitalism, shared value and other purpose-driven endeavors.

Source / Further Reading:

The Harvard Business Review | The For-Benefit Enterprise

FourthSector.Net

Green Business

Certification or Concept | For-profit
This term can be applied in an informal sense to describe an organization operating in an environmentally conscious way OR can be used formally to mean a business with one of the many different “green” certifications.

Certifications can be sector-specific, like the Sustainable Forestry Initiative (SFI) certification for fiber sourcing or geographically specific, like the Montgomery County, Maryland, Green Business Certification Program. In the U.S. organizations like Green America and The Green Business Bureau offer widely recognized certifications and resources for green businesses.

Sources / Further Reading:

Green Business Network | What’s a Green Business

Hybrid Organization

Legal Structure | For-profit/ Nonprofit
Hybrid organizations combine values and approaches from the public sector, the private sector and the voluntary sector to meet a specific objective. Often, hybrid models link a for profit company and a nonprofit counterpart, with the revenue generated by the company funding the initiatives of the nonprofit. For example, the Mozilla Foundation is responsible for developing the open-source browser Firefox, while the Mozilla Corporation negotiates revenue-sharing contracts with Mozilla’s search partners. The term can also be used to refer loosely to any organization working for a profit and a purpose.

Sources / Further Reading:

Stanford Social Innovation Review | In Search of the Hybrid Ideal

The New York Times | Hybrid Model for Nonprofits Hits Snags

Impact Investing

Concept | For Profit
Impact investing is an investment in a company, fund or other organization made with the intention of creating positive social or environmental benefit alongside a monetary return. A subset of Socially Responsible Investing (SRI), impact investing goes a step further by aiming to actually create benefit rather than just avoiding supporting harmful operations.

Sources / Further Reading:

The Global Impact Investing Network | Impact Investing

L3C

Legal Structure | For Profit
An L3C is a for profit social enterprise with a primary aim of achieving a charitable mission. To attract investments from private foundations, L3Cs are designed to meet the requirements of a program related investment (PRI) from the start. L3Cs are free to distribute profits to members/owners. At the time of this writing, the model is legally recognized in only 9 states but others have written authorization legislation that has not yet been introduced.

Sources / Further Reading:

Triple Pundit | The L3C: A More Creative Capitalism

Nonprofit

Legal Structure | NonProfit
To be a nonprofit, an organization must use its surplus revenues to achieve its mission (for profit organizations distribute surplus profits to their shareholders). A nonprofit’s surplus revenues can go towards expansion, planning and administration. There are several types of nonprofit organizations including

• Public Charities — The most prevalent type of nonprofit, public charities provide free and low-cost services to those in need. They’re funded by the government, individuals, corporations and foundations.
• Foundations — Families, communities or businesses establish foundations to sponsor programs and events and distribute funding to other nonprofits.
• Social Advocacy Organizations — These membership-based organizations form to advance a specific belief or achieve specific objectives. Donations and membership dues fund their outreach and advocacy efforts.
• Professional and Trade Associations — These membership-based organizations provide professionals in a specific niche with programs and services to support their professional performance and development.

Source / Further Reading:

IndependentSector.Org | What is a Nonprofit Organization?

Houston Chronicle | Small Business | Different Types of Nonprofit Organizations

Nonprofit with Earned Income

Legal Structure | Nonprofit, but with profit
Whereas most nonprofits rely on donations, some incorporate a source of income to help diversify and bolster their income. For example, the Girl Scouts of the USA sell cookies and the profits go back into the organization to further its mission.

Source / Further Reading:

Inc. | The Social Entrepreneurship Spectrum: Nonprofits With Earned Income

Plural Sector

Concept | Other
The plural sector is a more expansive conception of the voluntary sector – one that includes organizations owned by neither the state nor private investors. Examples of component entities include cooperatives, activist and service NGOs, foundations, clubs and certain associations.

So all social businesses are social enterprises, but not all social enterprises are social businesses. Weird.

Source / Further Reading:

Stanford Social Innovation Review – Time for the Plural Sector

Quadruple Bottom Line

Concept | For Profit
Unlike the elements of the triple bottom line (people, planet + profit) there isn’t clear agreement on what the fourth dimension of the bottom line should be, or whether there should be one at all. Some quadruple bottom line advocates say it should relate to governance, some say morals and ethics, while others argue that it is a spiritual dimension and others still argue it relates to social purpose.

Source / Further Reading:

RoundPeg Benefit LLC | Beyond the Triple Bottom Line: The Importance of Measuring Purpose

Forbes |The Quadruple Bottom Line: Its Time Has Come

Social Business

Concept | For Profit
As defined by the first to coin the concept “Social Business,” Muhammad Yunus, a social business is a cause-driven business whose owners operate it to achieve social objectives rather than to realize profit. In its strictest sense, Yunus states that “the investors/owners can gradually recoup the money invested, but cannot take any dividend beyond that point.” Its profits should sustain and grow the business’ positive impact on people or the environment.

So all social businesses are social enterprises, but not all social enterprises are social businesses. Weird.

Source / Further Reading:

Yunus Centre | Social Business

*Social Capital/ism

Concept | For Profit
Social capital refers to the value that is created through social interactions. Generally, this value manifests in outcomes like trust, sympathy, social cohesion and personal investment in a community’s well being. Social capitalism, then, is an economic and social system in which business is conducted to build social capital as well as financial capital to realize widespread prosperity. Different theorists in different fields of inquiry have defined social capital and social capitalism differently over time, so this definition is very basic. To get into the weeds, check out our suggested further reading.

Source / Further Reading:

Social Capital

Social Enterprise

Concept | For Profit / Nonprofit
Social enterprises are organizations that apply commercial strategies to create positive outcomes for people and the environment. Many different kinds of organizations fall into this category including for-profits, nonprofits, cooperatives, social businesses and charities.

Source / Further Reading:

Social Enterprise Alliance | What’s A Social Enterprise?

Social Entrepreneurship

Concept | For Profit / Nonprofit
Social entrepreneurship is an attempt to use business techniques to “act as the change agents for society, seizing opportunities others miss to improve systems, invent new approaches, and create solutions to change social for the better.” A social venture is an undertaking by a social entrepreneur that attempts to provide systemic solutions to achieve a social objective.

Source / Further Reading:

Ashoka | Social Entrepreneur
Schwab Foundation for Social Entrepreneurship | What is a social entrepreneur?

Sustainable Business

Concept | For Profit
Although “sustainable business” literally means a business that can sustain itself, the term is used to describe businesses that work to minimize their negative impact on the environment, community, society and economy. Businesses of this kind serve the triple bottom line. By definition, they consider their impact on the environment in their business decisions and have integrated the environment’s well-being into their business operations. It used to be that sustainable business meant “green business” but the definition of sustainable business and what it’s meant to sustain has expanded rapidly over the past decade to include social and economic concerns as well as environmental.

Source / Further Reading:

Financial Times | Definition of Business Sustainability

*Teal Organization

Concept | For Profit / Nonprofit / Government / Etc.

Put forward by Frederic Laloux in his book Reinventing Organizations, “Teal” describes an organization operating a specific stage of Laloux’s evolutionary spectrum. At its core, the spectrum goes from totalitarian, supremely hierarchical paradigms to more “soulful” workplaces that function via self-management where “our talents are nurtured and our deepest aspirations honored.” Teal organizations are likened to a single living organism, while paradigms at the other end of the spectrum are compared to a wolf pack or an army.

Sources / Further Reading:

Strategy + Business – The Future of Management Is Teal

Triple Bottom Line Model

Concept | For Profit

Practitioners of the triple bottom line model aim to use their busihttps://roundpegcomm.com/wp-admin/post.php?post=9477&action=editness operations to create positive value in the domains of people, planet and profit. For example, a clothing company might use sustainable materials like bamboo and pay those who manufacture its clothing fair wages so that it does right by the planet and its people while making a profit.

Sources / Further Reading:

Indiana Business Review | The Triple Bottom Line: What Is It and How Does it Work?

Many thanks to Beth Busenhard and Charlie Kuhn for their previous work on this topic. If you’re interested in learning more, we highly recommend their Defining a Conscious Economy: A Glossary of Sustainability Acronyms and Terms. Idealist Careers also provides this helpful list of Different Organizations Working for Social Change.  

Please share how your business identifies — and why you’ve made that choice — in the comments below. And if you know of any models and approaches we’ve missed, please add them!