Understanding Impact Business Models: Local Economic Development

What is the intent of the Impact Business Model?    

How do I assess my company’s eligibility for this Impact Business Model?    

What are some examples of companies that have this impact?    

My company may be eligible for this IBM. How do I open this IBM in the B Impact Assessment?    

My company may be eligible for this IBM. What supporting information do we need to provide?

Concepts in the B Impact Assessment    

What is the intent of the Impact Business Model?

Local businesses play a vital role in fostering local economic development and generating positive value for their communities, including increasing economic opportunities, promoting entrepreneurship, attracting investments, and strengthening the local business environment. By hiring local residents, businesses can impact the local unemployment rate and bolster the standard of living for local residents. Other benefits to keeping business local include a smaller environmental footprint in transporting goods, support of local culture, and more resilient and interconnected communities. 

The Local Economic Development Impact Business Model (IBM) recognizes companies whose core purpose is to strengthen and serve their local economies and societies. Key drivers of the lasting positive impact on local economies include local hiring, local procurement, and the provision of services to local customers/clients. This IBM is often applied to smaller companies who source and serve a small geographic area and that intentionally operate within local communities, and not to companies that happen to operate locally due to their size and/or stage.

The Local Economic Development IBM is found in the Community Impact Area of the B Impact Assessment and is only available on the assessment track where the Market is indicated as ‘Developed'. Companies in the Emerging Market track will have the National Economic Development IBM available instead. This difference in scope is intended to acknowledge that economic development may differ depending on the type of market in which the company operates.

How do I assess my company’s eligibility for this Impact Business Model?  

Companies that have the following characteristics can consider opting into the Local Economic Development Impact Business Model:

• Be locally and independently owned;

• Be intentionally community-based and focused on serving the local economy; 

• Have a formal written quantitative commitment to purchase locally or serve local customers (see exact thresholds below). Typically, this is a public-facing statement (i.e., on the website), but it may alternatively be captured in a formal document available to all company workers, such as internal purchasing policies, the Operating Agreement, or Articles of Incorporation. The thresholds to be eligible for the model are: 

  • A commitment to purchase core products (at least 50% of non-labor expenses) from independent suppliers local to where the product will be used or where the company operates or; 

  • A commitment to serve at least 75% local and independent clients or customers

• Have a formal definition of local that aligns with B Lab’s definition embedded in the commitment; 

• Have the intention to preserve the local commitment regardless of company growth or scale (e.g., franchising, opening additional locations, launching e-commerce); 

• Provide evidence that the company has met its commitment in the last fiscal year for newly certifying companies or the last three years for recertifying companies.

If your business meets only some of the requirements, answering the questions in the section titled “Economic Impact” in the BIA may be more appropriate. This section recognizes the impact of companies that may have some of these practices but do not have a formal commitment to local economic development as part of their business design. 

What are some examples of companies that have this impact?

• A brewery that is committed to both local purchasing and maintaining a local clientele. Their local commitments and reporting are made public on their website.

• A food distribution company located in Toronto, Canada, that connects local farmers with urban markets. They offer home grocery delivery and wholesale purchasing. 

• Local grocery stores or local gift shops selling locally grown produce and other locally made products. 

• A CSA (community-supported agriculture) company which has a core mission to connect local agricultural producers to local consumers. 

• Companies intended to create a local supply chain, such as wheat growers and processors for local bakeries.

My company may be eligible for this IBM. How do I open this IBM in the B Impact Assessment? 

If you are considering opting into this IBM, you will have to answer specific questions about the impact of your product/service that will determine which Impact Business Models you see in your BIA. These questions, called gating questions, ensure that you see the content that is most relevant to your company in your assessment. 

There are three questions that require affirmation so that the Local Economic Development Impact Business Model is visible in the assessment. 

The first question, “Community Oriented Impact Business Model” requires a “Yes” response (not pictured). The second question, featured in a screenshot below, requires the fifth selection: “A community-focused business model that supports and builds the economic vitality of local communities”. The following questions (not pictured) require a “Yes” response as well:

• “Local Community-Based Business”

• “Local and Independently Owned”

• “Formal Local Community Business Model”

To ensure that the Local Economic Development Impact Business Model shows up, answer the following gating questions as shown in the images above. Any deviation from this will prevent the IBM from becoming visible in your BIA. 

My company may be eligible for this IBM. What supporting information do we need to provide? 

These are some examples of evidence that your company can provide during the Verification stage to confirm the applicability of the Local Economic Development IBM. These examples are not exhaustive – depending on your company’s specific business model or context, your analyst may require additional or different documentation. 

• Provide a formal written commitment that meets the criteria outlined in the section titled “How do I assess my company’s eligibility for this Impact Business Model?”

• Provide the list of suppliers and an indication of their address, website, independent ownership details, and expenses from that supplier for the fiscal year reported in the B Impact Assessment. 

• Provide evidence with a list of customer identifiers (for preserving customer anonymity) with residence location and the respective revenue from the customer in the last fiscal year.
  
  

Concepts in the B Impact Assessment

Local - For the purposes of the B Impact Assessment, "local" is defined as being part of the same community. While the size and distance of a community may vary by context, they should generally be based on a small-scale, economically and culturally connected area like a metropolitan area, or in rural settings, the county, as well as its surrounding vicinities (usually within 50 miles / 80 km).

For example, a company operating in a city should consider its local customers as the individuals and businesses based in that metropolitan area. However, the local context for its supplier farms may extend to a broader geographic scope, including surrounding areas, to account for the dynamics of a local food economy.

Generally speaking, companies located in more densely populated areas will have a smaller geographic scope that is considered “local” compared to companies in sparsely populated areas.

Independently owned business - a business that is free from outside control, meaning that it is a privately held company and is not a subsidiary of a larger entity.

Non-labor expenses are calculated by subtracting your wages/salaries on payroll, rent, utilities, and taxes from your total expenses in the reporting period. Subcontractors and independent contractors working less than 20 hours per week are considered suppliers and should be included in your non-labor expenses.

Underserved is a term used throughout the BIA to describe groups (e.g. populations, individuals, communities, enterprises) that do not traditionally have access to the positive social or economic outcomes delivered by an impactful product or service. Low income, poor, or very poor individuals as well as low income geographic areas are always considered "underserved" in the BIA.
Definitions for "low income" vary by geography, but those that are accepted in the BIA are usually based on generally accepted definitions (e.g. government definitions), rely on reputable socioeconomic data, and/or focus on small-scale geographic areas (i.e. a regional or local income threshold is more likely to be accepted than a national one). Companies should be prepared to explain the methodology, income thresholds, and data sources referenced.
Non-income based definitions of "underserved" may also be considered in the BIA, but will vary widely by context and by geography. Accepted definitions are typically supported by evidence that a group lacks access to the company's positive intervention due to chronic discrimination in a particular market, which may include discrimination based on gender, race, ethnicity, color, disability, political opinion, sexual orientation, age, religion, or social origin.
Near-term outcomes - This refers to the immediate or near-future results or consequences of a particular event, decision, or action. These outcomes typically occur within a relatively short period, ranging from a few days to a few months. Near-term outcomes are often tangible and measurable, and they can influence subsequent actions or decisions. Unlike outputs, which focus on what is produced/delivered, near-term outcomes focus on the impact or changes that occur as a result of the outputs. They are the effects or consequences of utilizing or implementing the outputs.
Long-term outcomes - The results or consequences that occur over an extended period, usually spanning months, years, or even decades. Long-term outcomes often have a broader impact and may be less immediately visible or measurable than near-term outcomes. For instance, long-term outcomes in the context of environmental conservation could include the restoration of an ecosystem, the reduction of carbon emissions over several decades, or the preservation of endangered species.