This section provides two possible organizational models for creating sustainable social impact. Great care is taken to avoid compromising the core principles of either entity — profit or values — on the assumption that it limits their ability to function as effectively. The nature of each socially responsible enterprise determines which model works best.

1. Sustainability in a Values-Based Enterprise
This model assumes a full-fledged strategy to create a sustainable not-for-profit enterprise, not simply collecting donations or generating revenue with a product or service on the Internet. It operates on the premise that it is better to leverage the strengths of a values-based organization to create sustainability around its unique content and constituency base than to try and shoe-horn NGOs into traditional business models and shove them up on the Web.

As dot-com entrepreneurs are well aware, the business model for the Internet involves first and foremost attracting eyeballs and generating user site loyalty or "stickiness," and then defining the revenue models for profitability based on the communities and visitors that coalesce around the Web site. A good Web presence provides entrée to a client base of a size unprecedented in human history. NGOs have a natural constituency and unrivaled client loyalty as a result of their values-based mission. More often than not, they also have access to unique information, products and services. This can be leveraged even further to increase traffic and extend socially conscious activities on the Internet.

If an NGO must be structurally modified to become sustainable or profitable, then the most promising socially responsible enterprise lies in a hybrid I refer to as a "dot-corg" — a combination of the best of the dot-org and dot-com worlds. The information and services provided by a values-based entity forms the foundation of its e-commerce and sustainability strategy. Yet these e-commerce activities are engaged in separately from the work of the values-based entity, and the objective of the enterprise is still values-based. However, it has a supplemental income-generating component through selling commercially some of the services, information or tangibles developed from its not-for-profit activities. Examples include "Sesame Street" selling Big Bird dolls from the character developed by the Children's Television Workshop, or Public Broadcasting's "News Hour" setting up a for-profit production company around its not-for-profit news show. The revenue-generating portion of the entity is run like a business, with the usual rules of management and investment.

By contrast, the socially responsible portion of the enterprise requires public funding for its startup in order to insure its mission is not compromised and it can deliver the appropriate information and services to its not-for-profit constituency. While the revenue-generating portion of the enterprise helps sustain the not-for-profit activity, the not-for-profit entity never relies on the revenue-generating component as its sole means of support. It must always be able to rely on public subsidy even if it is just a fallback in the event of an income shortfall. This is not because the sustainability of such an enterprise is questionable. It's to insure that the values-based motive of the core entity is never compromised by the profit motive. The only way to do that is to insure its independence even while being supported by the for-profit side. I don't see this dependence on public funding as any different from the government subsidies or "corporate welfare" many industries are allowed. If a case can be made for this type of government subsidy to meet a profit motive, then it should certainly apply to public funding as a means of supporting organizations with a socially responsible, values-based mission.

One might argue that dependence on public funding would constitute "cheating" regarding self-sustainability. This assumes that the for-profit entity would be self-sustaining and profitable. On the not-for-profit side, the reality is that most NGOs that successfully meet their missions have less problem finding public funding for new and creative program initiatives. They all have problems, however, finding funding to support their core operating budgets. Most funders aren't interested in supporting organizational infrastructure. They want to fund something "sexy." If an NGO could count on funding its operating costs through a for-profit vehicle, it would go a long way toward guaranteeing it a more stable existence. If funding by its for-profit component also covered expansion or new program ideas, so much the better.

The organizational structure of such an organization has its roots in the commercial media model. In this model, the editorial mission, like the NGO mission, is sacrosanct and cannot be infringed upon by the business side of the operation. In the media model, the entity functions as one organization. In light of the not-for-profit tax rules in the United States and the difficulty even the media world has in balancing the editorial and business mission in one organization, setting up a dot-corg entity would most likely require two organizations, one for-profit and the other not-for-profit, with an appropriate legal relationship to transfer funding.

An alternative to the dot-corg model is a "dot-org to dot-com" model. In some instances it may be best to start off exclusively meeting a values-based mission and then become a for-profit entity once that mission is achieved. An example is an ISP that the Open Society Institute started in Romania to provide connectivity where it did not exist due to one provider's monopoly. This new ISP fostered competition, and as new operators entered the marketplace, prices dropped to levels consumers could afford. When that happened, we spun the project off as a pure commercial entity that still provided discounts to social-sector clients meeting specific criteria. The profits of the sale of the commercial enterprise will go to benefit a local foundation. In this model, OSI anticipated the success of the not-for-profit meeting its mission, and when it did, new commercial opportunities arose around it. My advice to such an enterprise is that when the model evolves from not-for-profit to profit, board and executive management must be reassessed and altered as appropriate to meet the new mission.

In the dot-corg model of a dual enterprise, the primary organization is values-based with an interrelationship to a supplementary profit-generating arm. This is not as uncommon in socially democratic Europe as it is in the United States. Since writing my "Digital Divide" piece, I've been approached by two organizations in the U.K. that have indicated this is how they operate.

2. Social Impact in Profit-Based Enterprises
It is wonderful if a group can link social impact to profitability at the outset. It's understood in the model of a profit-based enterprise, however, that social impact may be compromised in some cases to insure profitability. But since profit and sustainable growth is the motivation, the primary principle is never in danger of being compromised. Social impact is exercised to the extent it can be as long as profit comes first. Take the example of a for-profit enterprise that generally hires inner-city workers to do Web development work. If the company occasionally needs to go outside this hiring pool to fill certain positions, it is willing and able to compromise on its social goals in order to insure its own long-term sustainability. This in turn means it can continue to help its main workforce. By contrast, a values-based dot-corg would not be the best model for this enterprise. A nonprofit with a core mission to hire only inner city workers would compromise its viability if it hired outside its mission under any circumstances.

Venture capital has begun to respond to this model. After some years in the foundation sector, Cathy Clark of Flatiron Partners, a venture capital firm based in New York City, is directing and developing the firm's new fund, the Flatiron Future Fund, which finances for-profit companies that use social impact as their primary way of achieving profitability. Companies are evaluated first for their efficacy in achieving financial viability through social impact, with that mission closely scrutinized for both viability and contribution. Once invested in, these enterprises are evaluated on profitability criteria matching those for the regular for-profit startups Flatiron Partners invests in.

Where this profit-based social impact model falls short, and one must rely on the dot-corg model, is when the mission is values-based and can neither be changed or developed to begin with as a profitable enterprise. For example, it would be quite difficult to create a profitable business plan if the objective is inoculating children or relieving hunger. You certainly wouldn't compromise on vaccinations and food to achieve profitability. As indicated above, however, successful values-based enterprises may create opportunities for sustainability after achieving their social mission. An inoculation program started as a dot-org or dot-corg might well attract corporate underwriting or advertising revenue if it developed successful new inoculation techniques.

Needless to say, there needs to be further discussion about the evolution of appropriate models for sustainable development in the digital age. As it has in so many other fields, the Internet has created an entirely new landscape in the field of social philanthropy. Dot-coms and dot-orgs must work together to evolve models that maximize both value and profit without compromising either.

— Jonathan Peizer (jpeizer@sorosny.org) is CIO of Soros Foundations, one the funders of MediaChannel.org.