What are Impact Business Models?

Modified on Mon, 6 Jul, 2020 at 2:30 PM

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. Impact Business Models are one of the three underlying aspects of a company’s social and environmental performance that are assessed in the B Impact Assessment, along with “Operations” and the “Disclosure Questionnaire.”

Determining whether your business qualifies for an Impact Business Model is one of the more challenging and nuanced parts of completing the B Impact Assessment.Most companies completing the B Impact Assessment have 0-2 IBMs. It is difficult to earn credit in an IBM, and extremely rare that a company has 3 or more IBMs that are applicable. If you have unlocked 3+ IBM topics in your assessment, it is recommended that you revisit the introductory impact topics and adjust your responses to focus on one or two IBMs that best describe your business model.  

When considering whether your company has an impact business model, it is helpful to consider the underlying principles of an Impact Business Model—they are specific, material, verifiable, lasting, and extraordinary.  

Specific– An Impact Business Model is focused on benefiting a specific stakeholder group with a specific positive benefit / outcome, rather than a “general” overall positive impact that is not specific to a particular beneficiary or not linked to a specific benefit that the stakeholder receives.  

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 – An Impact Business Model is focused on providing significant benefits to their specified stakeholder beneficiary, not benefits that are negligible.

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– An Impact Business Model is documentable and able to be verified, normally through a company’s own marketing materials, research / measurement, and internal data.  

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– An Impact Business Model, because it is part of the design of the company, is not something that is traditionally alterable.  While a company could transition its business to add or remove Impact Business Models over time, it is frequently not something that can be done in the near term.  Furthermore, having an Impact Business Model is not a part of the business merely as a result of current circumstances, but is built into the nature of the business itself.  

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 - By definition, an Impact Business Model is something that traditional businesses do not have.  As such, any company that has an Impact Business Model is uncommon and 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.

To see a complete summary of all Impact Business Models featured in the BIA, see the document linked at the bottom of the article. To learn more about how Impact Business Models are scored, see here.

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