Though social enterprises have a lot in common with standard for-profit business models, maximising financial returns is not the main aim. Here, the objective is creating positive social and environmental impact.
What is a social entrepreneur?
Social entrepreneurs are individuals who try to tackle society’s most pressing problems and attempt to drive social innovation in fields such as healthcare, agriculture, education, environment and human rights, using new approaches and products and more rigorous applications of known technologies or strategies. The way they pursue these goals is what makes them distinctive. Similar to a business entrepreneur, a social entrepreneur operates with entrepreneurial determination and business methods to create financially-sustainable organisations that often have an income-generating stream built into the business model. A couple of keywords that are applicable to social entrepreneurs are: Innovation, Sustainability, Reach and Social Impact.
Social enterprises are often confused with Non-Governmental Organisations (NGOs). However, the main difference here is the revenue model. Whereas NGOs rely primarily on charitable contributions and public funding, social enterprises aim to generate enough revenue to sustain themselves financially; they have a steady stream of income, take out loans or grants, search for investors, form partnerships and more.
The business approach is just one among many ways to create social value. Therefore, NGOs and social enterprises complement each other, rather than stand in each other’s way.
Three types of social entrepreneurship
In their book on social businesses, The Power of Unreasonable People: How Social Entrepreneurs Create Markets That Change the World (2008), John Elkington and Pamela Hartigan distinguish three types of social entrepreneurship:
• Leveraged non-profit ventures
This is a non-profit type of venture. The entrepreneur engages a cross section of society, including private and public organisations, to realise a particular social innovation. Leveraged non-profit ventures depend on outside philanthropic funding, but since their partners have a vested interest in their continuation, longer-term sustainability is often enhanced.
• Hybrid non-profit ventures
A non-profit type organisation as well, but this model includes some cost-recovery by means of selling goods and services. To be able to sustain their activities, entrepreneurs must mobilise other sources of funding besides public or philanthropic sectors. Grants or loans offer a solution to money shortages. These loans, however, need to be paid back at a certain point.
• Social business ventures
Social business ventures are for-profit entities that provide a social or ecological product or service. Although financial profits are an underlying goal here, accumulating wealth is not the main objective. The focus of the enterprise is to grow as a social venture in order to reach more people in need and positively impact one or multiple sectors of society. Hence, a great deal of the profits is reinvested in the enterprise to fund expansion. The entrepreneur of this type of venture seeks investors who are interested in combining financial and social returns on their investments.
Social entrepreneurship is a relatively new term, but the underlying concept can be traced back much earlier. Before the term social entrepreneurship was coined, there were already many entrepreneurs who worked for children’s rights, women’s empowerment, socio-economic development, environmental issues and more. Two noteworthy entrepreneurs who established social ventures as early as the 19th century are Robert Owen (1771-1858), the founder of the cooperative movement and Florence Nightingale (1820-1910), who founded the first nursing school and developed various modern nursing practices.
The term “social entrepreneurship” has been tossed around since the 1960s, but it is thanks to 2006 Nobel Prize winner Muhammed Yunus that it has gained its place in the spotlight. In 1976, Yunus founded the Grameen Bank, an institution in Bangladesh that provides microcredit loans to low-income earners to encourage economic growth at the grassroots level and foster financial self-sufficiency. Yunus’ Nobel Prize winning enterprise has proven to be hugely successful and helped a great deal in bringing social ventures to the fore.
Nowadays, the concept of social entrepreneurship is widely used and supported. Organisations such as the Skoll Foundation, the Schwab Foundation, Ashoka: Innovators for the Public, Echoing Green and Omidyar Network were established to enhance and encourage social entrepreneurship. These organisations identify, highlight and (financially) support social enterprises all over the world, creating networks in which social entrepreneurs can exchange insights, strategies, form partnerships and learn how to improve their ventures.
A Global Phenomenon
Social entrepreneurship is without doubt a global affair. With 260 social entrepreneurs in its community, the Schwab Foundation, which is under legal supervision of the Swiss Government, has representatives all around the globe. The nearly 3000 Ashoka Fellows work in over 70 countries in every area of human need. The US-based Skoll Foundation has invested approximately 400 million USD in social entrepreneurship on all five continents. eBay founder Pierre Omidyar’s Omidyar Network has offices in Silicon Valley, Mumbai, London, Johannesburg, Washington DC and there are many more similar organisations that support social entrepreneurship worldwide.
A recent report, published by Global Entrepreneurship Monitor (GEM), shows us the prevalence of social entrepreneurial activity around the globe. GEM utilised two definitions for its research. The broad definition covers any kind of activity, organisation, or initiative that has a particularly social, environmental or community objective. The narrow definition focuses specifically on organisations that are driven by social impact for their society and the environment rather than potential financial impact for the organisation, and are market- rather than non-market-based.
Using the broad definition, 3.2 per cent of the adult population (18-64 years old) across 58 GEM economies is engaged in a social venture that’s in the start-up phase, with the highest rates of activity in Peru, Hungary and Burkina Faso. The average rate of post-start-up, operating social enterprises is 3.7 per cent of the adult population, ranging from 0.4 per cent in Iran to 14.0 per cent in Senegal.
Using the narrow definition, which arguably fits the concept of social entrepreneurship better, sees 1.1 per cent of the adult population across 31 GEM countries active in start-up social entrepreneurship and 1.2 per cent working in operational entities. Countries such as the Philippines, Australia, Colombia, Chile, Luxembourg and Israel score the highest in this regard.
Areas Where Social Entrepreneurship Is Making an Impact
Social ventures are scattered around the world, active in the fields of healthcare, education, human rights, culture and environment, among others.
One key area where social entrepreneurship is playing a big role is ensuring people’s access to healthcare. This can be done by setting up new hospitals and affordable health clinics, providing medicine, but also by educating patients, who in turn can help out in understaffed clinics. The social enterprise Mothers2mothers (m2m), for instance, identifies HIV-positive mothers and engages them in in-depth training programmes. This way, they learn how to take care of themselves, and are trained to work alongside doctors and nurses as paid Mentor Mothers. Working as mentors, they support and educate their peers, empowering other mothers to access lifesaving treatment for their babies and themselves.
Putting an end to stigma is an important objective for enterprises as well. Many people with HIV, AIDS or other diseases are not able to receive proper treatment, whether because of lack of funds or because of social taboos. By addressing the problem publicly and treating the patients’ know-how and experience as valuable resources, the stigma is broken and lives are saved. Operating in nearly 700 locations in Kenya, Lesotho, Malawi, South Africa, Swaziland and Uganda, among others, m2m’s Mentor Mother model has benefitted approximately 106,700 HIV-exposed infants and provided employment to over 1,200 HIV-positive women. Moreover, in 2014, m2m achieved the elimination of mother-to-child transmission of HIV among m2m clients.
Another field of work in which social entrepreneurship fares well is education. The emphasis here is not on generating revenue and many organisations in this sphere operate as some sort of non-profit venture. Since access to proper education remains a global problem, many social entrepreneurs set out to tackle this. Decreasing drop-out rates, helping students on their educational pathway, boosting attendance, training teachers, providing course materials or infrastructure; a lot can be done by social ventures to enhance education worldwide.
Moroccan-based social enterprise, Al Jisr, deals with educational shortcomings, by cooperating with all sectors of Moroccan society. In concrete terms, the enterprise came up with an adopt-a-school programme, enabling company executives to join parents, students and teachers in a school’s management support council, in order to look into a school’s weaknesses, develop an action plan to improve performance, and monitor progress. The adopting company provides an annual budget on top of government support and brings in management expertise to dramatically improve the school’s needs. Operating this way, Al Jisr has made a positive impact on the quality of education in more than 400 schools.
Often, communities have barely enough resources to operate schools, so intercultural experiences such as exchange programmes or school trips are usually for the lucky few. Social enterprise Safarni, however, believes that positive human-to-human connections build an empathetic, culturally sensitive generation, opens up new perspectives and prevent xenophobia. Therefore, it is popularising intercultural education for Egyptian children. Made possible by crowd-funding, strong partnerships and a network of volunteers, Safarni brings together Egyptian children with people from the expatriate community in Egypt in the children’s neighbourhood, creating a framework for intercultural connection. This enables the students to discover the world’s cultural diversity and ask questions, allowing them to become more socially and globally aware.
When it comes to human rights, social enterprises strive to safeguard matters such as liberty, pursuit of happiness, living free from discrimination, freely exercising religion, freedom of speech, fair trial and more. Educating people, negotiating with governments, providing safe havens, raising public awareness; these are all strategies employed by social enterprises and in doing so, they often help out those who live under the most worrisome circumstances.
An example is the Mexican venture Reinserta Un Mexicano. It is Reinserta’s conviction that coming from a family with a criminal history or even growing up in a prison does not mean one is destined to a lifetime of crime themselves. In Mexico City alone, each year 130 babies are born in prisons. Reinserta works with the Mexican government to change the legal framework in favour of rehabilitation and has already helped to lower the maximum age that infants can remain in prison from 6 to 3 years old. Reinserta also runs a halfway house for adolescents who were involved in serious crime, where they can continue their education.
Another enterprise, called Stars Of Hope Society (SHS), which seeks equal rights and opportunities for Palestinian women with disabilities intensely lobbies government as well, encouraging them to enforce existing laws such as a five per cent quota among all employment opportunities. In the end, the purpose stays the same, humanising and supporting those who are discriminated against or stigmatised.
An enterprise might use culture to promote social transformation and community integration but it may also boost culture simply for culture’s sake.
The Paraguayan enterprise Sonidos de la Tierra uses music to reduce poverty, create employment opportunities and encourage civic participation. Under the motto “the kid who plays Mozart during the day does not break shop windows at night”, this social enterprise has established musical institutions all over Paraguay. Over half of the music professors hired by Sonidos de la Tierra learned to play their instruments within the enterprise’s music programme. The organisation has also trained independent micro-entrepreneurs, who repair and maintain the instruments in their communities and are able to make a living with these skills. 30 per cent of the members of professional Paraguayan orchestras are former students of Sonidos.
For social enterprise Artscape culture is more a goal than a means to an end. This Toronto-based organisation generates spaces that emphasise culture and creativity (think event spaces, studios and residential areas) and provides viable living areas for artists. An agreeable side-effect of this creative placemaking is the vibrancy that the artists add to city districts. This, however, often triggers the so-called “SoHo effect”, a phenomenon when artists move into low-rent neighbourhoods, make these desirable, but are eventually forced out due to rising real estate values. To prevent this from happening, Artscape establishes trust relationships between real estate developers, government housing agencies, the arts and culture community, and local community groups. To get projects off the ground, Artscape relies on public and private funding. Once a space is up and running, the team ensures financial sustainability through rents (which are purposefully kept below market rates), memberships and user fees.
Social entrepreneurs have plenty of possibilities to focus their attention on with regards to the environment: developing businesses that supply sustainable products or services, distributing resources responsibly, waste disposal management, emissions reduction, preserving land and wildlife or even negotiating with municipalities, companies and governments to decrease their ecological footprint.
An established social enterprise within this field is BioRegional. This enterprise is involved in various activities, but is probably most recognised because of its BedZED eco-village in London. This large-scale sustainable community contains 100 homes (for 220 people), a college, office spaces, community facilities and is able to use local and recycled resources to meet its needs.
The idea of being able to provide for oneself on a local scale is also present in numerous social enterprises that focus on urban gardening and greening projects. One such project is Essbare Stadt (edible city), which is part of the enterprise Wesentlich – Büro für urbane PflanzKultur. What sets this urban greening project apart from others is the holistic approach. Greening and gardening is not limited to a borough or patch of ground in the city, but is applicable on district or even city level. To secure a sustained impact, the project is customised to local needs and restrictions, and uses a buy-in financial model, involving various stakeholders (city administration, local associations, schools, kindergartens), which avoids being financially dependent on one central institution. Then, it was just a matter of reshaping public areas, developing green spaces and implementing planting concepts with diversified and mostly edible plants, which citizens can harvest free of cost.
When it comes to waste recycling, the Canadian-based Plastics for Change operates in a ground-breaking way. The organisation targets wastepickers in developing countries who pick out recyclable plastic from waste and sell it to middle men who then sell it on for recycling. Plastics for Change set up a virtual marketplace accessible via mobile technology that allows wastepickers to check market prices for plastics, increasing their bargaining power when negotiating a sales price with middle men. This helps provide a fair source of income to wastepickers while also addressing problems surrounding plastic waste disposal.
These environmental enterprises actively involve citizens, giving them responsibility and a strengthened understanding of environmental issues. They show alternative ways of living and alternative economies, demonstrating people that fundamental and large-scale change is possible.
The Future of Social Entrepreneurship
Faced with overwhelming social and environmental challenges, the world is seeing an ever-increasing number of social enterprises. Even though these enterprises certainly do not make up the majority within the corporate sector, social entrepreneurship is already a field of study in many management courses and some experts even believe the phenomenon is on the verge of hitting a tipping point. A determining factor in this context is Generation Y (millennials), regarded as a more socially-conscious generation, demonstrated by the products they buy and the companies they seek to work for. The field offers them independence, the possibility to experiment and the freedom to integrate their own values in their future career.
Via support from large organisations, networks are constantly expanding, peers are better able to exchange knowledge and many ventures have better access to (financial) resources. The increasing activity attracts external investors, governments or businesses that, in turn, are able to support future growth. Hence, if this progression persists, social entrepreneurship might eventually redefine what we think we know about doing business.
Author: Nils De Malsche 2016 / RESET editorial.