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Traditionally, people with innovative ideas, drive, and the funding to kick-start a business venture became entrepreneurs. They would put together a business plan, discuss it with banks or potential investors, and get to work. The result was a successfully growing business that gained customers and generated revenue and added to the country’s economic growth.
With time and technological advancement, the startup world took over the business landscape and in extension the corporate social responsibility. Much like how consumers now have different motivations to buy, entrepreneurs also have a new impetus behind starting a business.
More businesses are showing interest in aligning their business goals with social responsibility. Thus, the mission is not just to scale business and make money anymore, but to serve people and the world at large. This social venture is exactly where social entrepreneurship has successfully filled the void.
Read on to learn more about who social entrepreneurs are, the impact of social entrepreneurship, and how they are transforming the business landscape!
What Is Social Entrepreneurship? Definition of Social Entrepreneurship.
The concept of social entrepreneurship is similar to that of entrepreneurship but with the added objective of taking up a social problem and doing something to change it. Anyone who takes up the challenge is called a social entrepreneur.
Social entrepreneurs use the same principles of entrepreneurship but to provide a positive impact rather than profit for personal gain. Going by the social entrepreneurship definition, the primary goal is to promote social and environmental goals that have the potential to offer sustainable development.
Social entrepreneurs are generally associated with nonprofit organizations in some way. While generating profit is one aspect of social entrepreneurship, it’s usually not the main social entrepreneurship goal. They start a business as a form of corporate social responsibility.
Many organizations fall under the concept of social entrepreneurship, having different sizes, missions, and values. But it is easy to distinguish them from for-profit businesses. Generally, entrepreneurs measure performance by using traditional business metrics like profit, revenues, and stock prices. On the other hand, social entrepreneurs are completely nonprofits like NGOs or have some for-profit goals with the aim to generate a positive return to society like you can see in most developing countries. Hence, their performance metrics are different from traditional ones. Social entrepreneurship organizations are driven typically by the voluntary impulse to transform important social areas, like poverty alleviation, health care, education, research, and development, etc.
History of Social Entrepreneurship
Social entrepreneurship is a relatively new concept that has only been around for a few decades. While the definition of social entrepreneur might have come around only recently, the concept can be traced back throughout history. The truth is you can find a great number of entrepreneurs who built up social enterprises to provide positive social impact trying to emulate how the Schwab foundation and how any other social organization is run.
Despite its many similarities, social entrepreneurship is also quite different from the concept of entrepreneurship. French economist Jean-Baptiste Say defined an entrepreneur as someone who takes an idea and transforms perspectives in a way that changes or impacts society.
Conventional entrepreneurs emphasize increasing their profit margins, while social entrepreneurs want to run a business that solves a societal problem or addresses a global challenge. Therefore, social entrepreneurs integrate resources for the well-being and uplifting of societies. Social entrepreneurs are commonly known as philanthropists
The concept of social entrepreneurship might not be new, but impact investing wasn’t popular until the 2000s when it became popular far and wide. In 1997, British writer Charles Leadbeater shared one of the earliest texts on the topic titled, “The Rise of the Social Entrepreneur,” raising global interest. It featured examples that interested individuals can emulate to bring about a positive change.
The terms ‘social entrepreneurship’ and ‘social entrepreneur’ first came into use after H. Bowen used them in his book Social Responsibilities of the Businessman. Later, in the 1980s and 1990s, the concept was further promoted by Bill Drayton, Charles Leadbeater, and others.
Similarly, during this period, British politician Michael Young was another prominent figure who promoted social entrepreneurship a great deal. He came to be known as the world’s most successful entrepreneur of social enterprises. Michael Young established over sixty new organizations around the world to support and encourage individuals to create and sustain social work. Another notable social innovator is Andrew Mawson OBE, who received a peerage in 2007 due to his urban regeneration work.
While the concept might have found a formal name much later, social entrepreneurship was practiced and promoted in all forms and across various sectors. A few renowned social entrepreneurs whose work truly defined social entrepreneurship include Florence Nightingale, the founder of the first nursing school and creator of modern nursing practices, Vinoba Bhave, founder of India’s Land Gift Movement, and Robert Owen, the founder of the cooperative movement.
A more modern example of social entrepreneurship is that of the brand TOMS, which has put social entrepreneurship on the radar. TOMS initiated operations as a one-for-one model. In this model, the organization matches each pair sold with a donation of a pair of shoes to a child in need. As the business continued to expand, so did their social goals. Today, the brand works to provide shoes, clean water, sight restoration surgeries, prenatal care to disadvantaged communities, and work on anti-bullying advocacy around the world.
What Is a Social Entrepreneur Trying To Accomplish?
Social entrepreneurs are driven naturally by a goal to dedicate the better part of their profits towards bringing a positive change. It might seem like a disadvantage for the business itself as this means that the organization will have lesser financial returns into scaling the business. But there are various other benefits and importance of social entrepreneurship that can help give your business a competitive edge over your competitors.
While social entrepreneurs seek to make society and the environment better, they are still not registered NGOs in any case. Thus, they are created to generate profits but do it responsibly and ethically. They choose to carry out their corporate social responsibility focusing on positive social impact. Social entrepreneurship organizations make unique supplier choices and structure business operations to avoid and prevent unethical and environmentally harmful practices. Besides this, these organizations often also reinvest their profits into the business or use them to further accomplish social value creation.
A social entrepreneur’s objectives can be best understood by comparing social and for-profit enterprises. On one hand, you have a nonprofit organization that stems mainly from social values. The main focus of this type of organization is to employ all their efforts toward making positive changes, rather than making a profit on goods or services. On the other, you have businesses operating primarily to create profit and grow. These businesses hardly have to address a societal issue. Social entrepreneurship falls somewhere in between these two types.
Thus, characteristics of social entrepreneurs include continuously striving to accomplish the following:
- A long-term mission to create and sustain social value that transforms the present and the future
- A relentless and consistent pursuit of new opportunities to fulfill that mission
- A proactive engagement in learning, innovation, advancement, and adaptation
- Initiative without the limitation of resources or support
- Sincere service to both customers and society with their expertise and resources
All of these above goals inform a social entrepreneur’s work. A social entrepreneur holds the desire to offer a social change. Hence, the closer a business is to these values, the more it qualifies for that middle point between nonprofit and profit-oriented organizations.
Challenges of Social Entrepreneurship
Take any social entrepreneurship organization as an example; the primary goal for each one is to give a positive sustainable impact. The goal that comes next is ensuring that the business operates successfully without any disruptions. While there is nothing wrong with focusing all your business efforts toward being morally good and socially responsible, the truth is you cannot be a changemaker if your business itself is closing down.
Whether a business is a basement startup or a full-fledged Silicon Valley enterprise, social entrepreneurship faces all kinds of challenges that vary depending on its niche. Some of these challenges are listed below:
1. Raising Investment Capital for Operations
Finding investment capital for your venture and operations can be considered the biggest challenge for social enterprise sustainability, especially when most of its profits would go towards serving communities in need. A great idea can’t bring results on its own; it needs the necessary capital for putting it into action. This capital will not only fund operations but also cover structural costs, promotions, salaries, etc.
On top of it all, venture capitalists are almost always looking for a venture with a potential for rapid growth. Unfortunately, it is not something that social entrepreneurs can always ensure. As a result, this makes social entrepreneurship organizations a less appealing option for investors.
When this challenge is explored further, we find two aspects to it. One; convincing venture capitalists that an investment that is not likely to give much return for the next few years is worth a shot. Two; making your social enterprise stand out in the competition with so many other ventures campaigning for support for their critical issue.
The best way to tackle this challenge is by using alternative funding routes. For instance, crowdfunding has especially become increasingly popular in recent years as it offers social inclusion. Not only is it a legitimate way of finding funding for your social enterprise, but it also works great for promoting your cause. Another advantage is that you can raise funding without having to pitch for your idea and cause repeatedly.
2. Sticking to Your Mission
Recognizing a social issue and coming up with an idea to solve it is the easy part. It’s often the simplest ideas and solutions that make a social enterprise both successful and influential. Yet, on the other hand, a social enterprise often also derails from its mission and initial idea as it begins to grow. As a result, it kills a business as people start to lose interest and trust in the venture.
It is true that once your business starts to receive more funding, you will feel that there’s much more that you can do with it. In some cases, you might even feel some pressure from your investors to expand your business and test new ventures.
The best way to tackle this challenge is by remaining true to your social enterprise business model and your social purpose. Unless there are other aspects to the same cause, it is best to focus your efforts and resources on your business’s found success. If you fail to provide social innovation, there is a high chance that you will lose grip on your initial idea as people look for social change, and your business might begin to seem irrelevant to your customers. Therefore, it is best to avoid diverting the money into another issue only because it is getting you more funding.
3. Lack of Clarity in Your Message
Social entrepreneurship is all about your message, how others perceive it, and the impact it bears on society. Therefore, if your message is not clear or powerful enough to evoke an emotional response from the people, you will fail in attracting investment and an audience.
Your unique cause and thoughtful message is the only thing that is setting you apart from for-profit businesses and even other social entrepreneurship ventures. Without a clear message, your business is just another online store, service, or unimpressive startup. So, you need to remember that you cannot let anything compromise your social goals and financial return. A weak or vague message can be the death of a sustainable social impact with good intentions.
To deal with this challenge, ensure that the message is articulated properly and your social goal is bringing positive change which is geared towards touching people’s lives positively. It is best to hire marketing professionals, copywriters, and social media influencers to get the message out there in the best way possible. And all of this will start with understanding your audience, recognizing a social need, social business that will bring positive change to marginalized communities, understanding a social purpose, social mission, social value, and using the best tools and strategies to source the right topics for a great impact.
4. Finding the Right Manufacturers
The social enterprise business model faces another challenge- finding the right manufacturers. Social entrepreneurs are likely to bargain hunt for goods as the aim is to use more and more capital for social goals. The main problem is that manufacturers usually require a minimum order that might be difficult for social entrepreneurs to meet due to limited capital.
Even when they can meet the minimum order, social impact investors could face the challenge of maintaining inventory. Suppose a young person who is a social entrepreneur is filling orders in the basement; in this case, managing orders and inventory numbers can be challenging for entrepreneurs without any knowledge of or experience in inventory management.
For these above challenges, many social entrepreneurs get manufacturers overseas to lower costs and support local marginalized communities. Even then, there are other challenges faced by social entrepreneurs. For instance, labor conditions in some countries might not align with your values. Moreover, there is all the possibility of environmentally harmful practices if you go for manufacturing in developing countries.
Needless to say, there is a long list of other challenges that come with using foreign manufacturers. Whether it is high costs, limited availability, natural disasters, or political instability, this strategy has its chances of getting backfired.
How Social Entrepreneurship Is Changing the World
Social entrepreneurship holds the incredible potential of supporting the local community and transforming the entire business landscape around the world. Regardless of how big or small a social enterprise is, each one has a significant role in making societies immorally rich. All of these ventures come together to work towards a better society, and in many ways, they are transforming the world into a better place to live.
Social Entrepreneurship Examples.
Here are some great examples of social entrepreneurship ventures that are changing the world today!
Warby Parker
Warby Parker is an eyewear company whose “Buy a Pair, Give a Pair” initiative has resulted in over 4 million pairs of glasses being donated. The goodwill and public interest generated from this initiative led to increased awareness and sales. Eventually, the initiative helped the company to move ahead of many established competitors in the eyewear industry.
United By Blue
United Blue is another great example of successful social entrepreneurship changing the world. United blue is an apparel store that removes one pound of trash from the world’s oceans and water bodies for every product it sells. They have successfully removed more than one million pounds of trash from oceans around the world.
Good Eggs
Good Eggs is an online delivery service that provides its customers fresh produce and grocery items. The company aims to provide value to customers while also contributing to the communities in which they operate. They do this by working with local suppliers, and over 70% of their fresh produce and spirits are locally sourced.
LSTN
Social entrepreneurs Joe Huff and Bridget Hilton saw a video of a young woman hearing her voice for the first time after getting her hearing restored. Moved by this video, the duo wanted to help more people get their hearing back. They started LSTN Sound Co. to generate funds for the Starkey Hearing Foundation that works for this cause by selling premium headphones online.
To this day, Hilton and Huff have helped restore the hearing of over 30,000 people around the world through the Starkey Hearing Foundation.
Love Your Melon
Love Your Melon is an apparel brand that gives away a hat to every child battling cancer in the country. The brand also provides aid to nonprofit organizations in their fight against pediatric cancer. For every product they sell, the company gives away 50% of the profit on the product to their nonprofit partners. They run beanie donation events throughout the year, which are well-received.
Baraka Shea Butter
Wayne Dunn and Gifty Serbeh-Dunn, a husband and wife duo, founded Baraka Shea Butter, a small Canadian/Ghanaian family-owned business on Vancouver Island, Canada. BARAKA takes pride in every carton of shea butter they create and how they create it. Their products are entirely handcrafted by Northern Ghana’s dedicated women and families. Baraka employs centuries-old techniques that have been passed down through the generations to produce their products. They use no chemicals or additives, no animal testing, and no harsh industrial procedures in their goods, which are pleasant, nourishing, and natural.
Shea Radiance
Shea Radiance started when co-founder Funlayo Alabi worked with her husband to make soap to alleviate their son’s eczema-prone skin. In the process, they helped others facing the same skin-related issues. The company later developed products for the whole body. The company expanded by having a social entrepreneurship perspective. Shea Radiance worked with female-led cooperatives in rural areas of Ghana and Nigeria to source the Shea Butter required for their products. The company ensures that the women supplying the Shea Butter are compensated fairly for their labor.
Bottom Line
In this era of technological advancement and overwhelming competition, social entrepreneurship has emerged as a differentiating factor. It allowed businesses to be more socially responsible and developed a loyal following among customers.
Social entrepreneurship is also equally appealing for employees, who want to be linked to a higher purpose. After all, you can’t expect employees to be motivated by the idea of finding new ways to make big money for investors. In contrast, a strong mission that informs employees that they are working towards bringing positive changes in the world can keep them focused, inspired, and committed. In this way and others, social entrepreneurship gives employees a choice in who they work for.
Becoming a successful social entrepreneur requires you to first understand the challenges and then formulate a plan to turn around the world into a better place to live in and share with others.
