Differentiation is one of the key drivers of success for an SME. Can your social impact help your business be differentiated from the herd?

Some years ago large corporates clearly thought so as they piled mob-handed into Corporate Social Responsibility badged projects. These were ‘measured’ and proudly publicised in terms of social impact. Typically, this was through ‘tick box’ reporting in the corporate’s annual accounts. But guess what, even absent extremes such as greenwashing, that approach didn’t work. Customers, the wider public, and other stakeholders weren’t fooled by such a cynical ‘nod’ towards doing good and making a social impact.

So whilst big corporates have now sought – and are being encouraged by government – to behave in a manner which might be recognised as more meaningful, where are SMEs?

Points to note in relation to social impact:

Operating your business in a more sustainable manner and with social impact in mind can drive enhanced profitability and positive change.

There are lots of options.

An obvious one is simple financial support for local or national charitable organisations with a similar ethos. Did you know that UK corporates can make charitable donations from pre tax profits? This is a great way to make a difference, generating a meaningful social impact, at a lower than expected cost.

Of course, if your business is a service provider, many charities need other organisations to deliver services to achieve their charitable objects. They also need to engage professional service companies to help with back-office functions. Additionally, they need support for the marketing of front-of-house activities.

Perhaps less obvious is the fact that you and your workforce could benefit from engaging with a charity or charities more generally. Consider forming a relationship with a local or national charity with objectives that resonate with those of your business. You could offer the charity a volunteer team-building day when you place your people at the charity’s disposal. But you should understand that a much more meaningful engagement, centered around social impact, might be possible. Such engagement could enhance your business.

Corporate sponsorship

Corporate sponsorship is a commercial arrangement where you agree to pay a fee to the charity. In return, you would receive benefits: for example, publicised credits as a supporter/sponsor of the charity’s activities. You might also receive private invitations to events or exhibitions or tickets to charity events, to which you could invite your business clients.

Most corporates have no real understanding of what charities need and how they operate. Equally, many charities don’t understand what a for-profit corporate might be seeking from a corporate sponsorship relationship. Sometimes, a simple donation of people’s time or cash might be preferable.

When corporates and third sector organisations meet it’s rare in our experience for each not to learn something from the other. For example, many beacons of success in charity terms stem from the exceptional leadership qualities of key individuals. Often, there are lessons about social impact to be learned on the corporate side. There are important lessons about those leadership skills and how they can be developed in a corporate context.

Farringford Legal has first-hand experience of supporting clients with social impact and seen the benefits which engagement between for-profit entities and social or charitable enterprises can bring. We can advise on the complete range of legal arrangements to manage any such relationship in the interests of both parties.

Let’s make a difference together

Written by our small business legal expert Janet Turner KC. Janet specialises in providing commercial advice to both for-profit and not-for-profit organisations. She works across sectors such as commerce, science and technology, higher education, health and social care, and real estate.