Social Entrepreneurship:

What is it and Why Does it Matter? 

by | Nov 7, 2019

Social entrepreneurship, as a movement and as a term, is moving aggressively into the mainstream and has been doing so for quite some time. 

Since the turn of this century, social entrepreneurship has been the subject of serious academic study and advocacy at more and more business schools and their affiliated dedicated institutions. And social entrepreneurs are being honored at elite gatherings like the World Economic Forum as a specialized ecosystem develops to support and finance their ventures. 

With this rise in the interest and popularity of social entrepreneurship—and as increasing numbers of passionate people are racing to the scene—it’s worth getting to know social entrepreneurship and why it continues to generate so much buzz. 

In this post, we will provide a comprehensive introduction to social entrepreneurship, its definition and development, noteworthy social entrepreneurs and social enterprises, and what its role in society might be.

Overview

  1. What is social entrepreneurship?
  2. What is a social entrepreneur?
  3. Different models of a social enterprise
  4. Prominent people & companies
  5. Innovation through partnerships
  6. Challenges moving forward


What is Social Entrepreneurship? 

As far back as 2007, the Stanford Social Innovation Review (SSIR) made a case for definitively defining and deconstructing social entrepreneurship, which it called a “nascent field.” 

However, the term “social entrepreneurship” and “social entrepreneur” is thought to have first appeared even further back, making an early appearance in 1953 in H. Bowen’s book Social Responsibilities of the Businessman. One could also argue that the 19th century cooperative movement that sought to empower workers and protect them from falling into unacceptable poverty and neglect through a communal business model was also a historical iteration of social enterprise

Many years on, the definition of social entrepreneurship continues to be debated, which is hardly surprising given that the term tries to marry two usually separate and often opposing worlds— the business world or the venture-capital-fuelled, fast-paced glamour of Silicon Valley, evoked by the term “entrepreneurship,” and the social or humanitarian sector referenced in the “social.” 

Traditional business practice tends to prioritize making a profit for the company and their investors, while rationalising any social issues in the surrounding community as concerns for the local or national government. 

On the other hand, social sector organisations have a long history of social activism often denouncing for-profit businesses. So, on the surface, these two should not be reconcilable, but that is precisely the radical proposition of social entrepreneurship: that there is an overlap between these two different approaches that is the best of both worlds—intentionally identifying social problems and attempting to bring social change with the innovative, daring, and experimental mindset of the entrepreneur.

As what are considered pressing social issues and global problems of our times expand and gain more mainstream attention, issues of environmental sustainability are now often included in conversations about social entrepreneurship. 

Entrepreneurs who start companies to tackle climate change and environmental injustices are finding it easier and easier to be included in the growing club of social entrepreneurs, and their enterprises are considered legitimate social ventures.  

Much like conventional entrepreneurs, social entrepreneurs encounter a problem or inefficiency and seek to address it with a new solution, product, service, or process that usually doesn’t simply ameliorate the current situation but upends the status quo and creates a new industry or ecosystem in the process. This is the reason entrepreneurs like Steve Jobs and Pierre Omidyar (co-founder of Ebay) are held in such high esteem. 

At the same time, social entrepreneurs differ from classic entrepreneurs in that they seek to not only resolve a costly inconvenience or economic inefficiency but to also resolve social injustices. They integrate considerations of the welfare of their community, society, and greater human welfare into their business operations, and these considerations also constitute the core mission of the successful social entrepreneur’s ventures. 

In traditional for-profit business ventures, wealth creation is considered an end in itself, and the overriding obligation is to drive as much profit as possible to the shareholders. For the social entrepreneur, wealth creation is a means to an end, the end being a positive impact on society. 

Social Enterprise

What is a Social Entrepreneur?

This then leads to the important question of who counts as a legitimate social entrepreneur, since so much of the definition as it currently stands depends on internal motivations and intent, which can be challenging to measure or identify objectively. 

Moreover, as more and more established businesses and corporations jump on the social impact bandwagon, incorporating familiar messaging and terminology of the social entrepreneurship movement in response to pressure from consumers to be more socially aware and sustainable, it can often be difficult to differentiate between a social entrepreneur and a regular businessperson or entrepreneur that adopts practices associated with social entrepreneurship to varying degrees but without transforming their company into a full-fledged social enterprise.

For example, Microsoft has led or been involved in a number of projects around the world to boost access to information technology, computer literacy, and education in countries with high poverty rates like India, often donating their own computers, software products, and/or employee time and expertise. Microsoft’s founder Bill Gates, currently the second richest person in the world, and his wife Melinda Gates are working toward giving away 99% of their wealth to projects and organisations that actively promote poverty reduction and the advancement of vulnerable individuals and communities by the end of their lives. 

However, we would not think of Microsoft as a social enterprise, nor of Bill and Melinda Gates as social entrepreneurs. Microsoft’s core business isn’t to give away computers for free or raise IT literacy; it’s to manufacture and sell computer software and hardware to paying customers, and the primary objective of the company remains to make a profit, then reinvest those profits to stay ahead of their competitors. 

Therefore, Microsoft’s activities related to charitable causes or social impact creation is better characterised as Corporate Social Responsibility (CSR) rather than social entrepreneurship. Likewise, Bill and Melinda Gates’ targeted donations are a better example of classical philanthropy, a point that is reinforced by the fact that the couple does most of these activities through their own Bill and Melinda Gates Foundation. 

And it’s not just Microsoft. Among multinational corporations, industry leaders and big players such as Patagonia and Ben & Jerry’s are members of the B Corporation community  (which we will discuss further down the line in this post). Many more are joining voluntary initiatives or certification systems attesting to being a force for good, and there is an ongoing debate whether or not these cases count as social enterprises. 

Whatever the ultimate verdict (if there ever will be one), it appears that the distinction lies in the extent to which the organisation and/or the entrepreneur considers making a positive impact toward eradicating a social or environmental problem as the core of its business model and mission.

The Different Models of Social Enterprise

So what are the different models of social enterprise that you’re likely to encounter?

Social entrepreneurship comes in a variety of forms, and not all of them have to be for-profit—the 2007 SSIR article attempting to define social entrepreneurship, for example, considers non-profits that have adopted key characteristic practices of entrepreneurship to be social enterprises. 

What unites them under the same roof is a socially, or environmentally, oriented mission at the core of the organisation and the use of classic entrepreneurial approaches or tools to achieve the mission, achieve financial sustainability, and scale their operations and impact. 

Notwithstanding the active debate on whether long-established multinational corporations can be considered social enterprises under certain circumstances, this section will take a broad and inclusive view of what can be considered a social enterprise.

An article published by Conscious Company Media found that with this approach there are at least 6 different types of social enterprises. Rather than strict classifications, it lays out a spectrum of social enterprise models run by what would be called social entrepreneurs, but those 6 categories are the following:

1) Entrepreneurial NonProfit

The entrepreneurial nonprofit is a nonprofit that has implemented some revenue-generating endeavour or programme. A great example of this would be one of our earliest podcast guests, Austin Buchan, who runs College Forward, a non-profit located in Austin, TX that helps first-generation college students go to and complete a university education. Even as a non-profit, College Forward generates revenue through a SAAS product called Co-Pilot that they developed and sell to other organisations to help them manage large amounts of student data.

2) Non-Nonprofit

These businesses have at their core a social mission and some systemic issue that they are trying to address. 

Everytable, an L.A.-based company that is looking to address food deserts by making healthy and affordable food more widely accessible using sliding scale pricing, making the same food cheaper in lower income areas, is a good example of this model. 

Another example could be Pigeonly, a for-profit company that has the mission to “improve communities by building products that reduce the destructive impact of incarceration.” They provide affordable and easy ways for families to stay in touch with their incarcerated loved ones. 

3) Socially Responsible Business

Socially responsible businesses are those that aren’t directly addressing a social issue but have committed to conducting business in a more responsible and accountable fashion. They can be like the non-nonprofits by addressing a systemic societal issue, or can be something like a traditional marketing agency, which may not directly be addressing a social issue or seeking explicitly to lead a social change but has committed to using their business to “do good” for society. 

Our primary business here at Grow Ensemble, where we train and consult social enterprises on digital marketing, would fall into this category.

4) Donate Portion of Proceeds

These companies have a component of “giving back” or charity as part of their business model, in a way similar to CSR. The revenue-generating activities are separate from the social impact that the business makes. This can be done through non-profit partners. 

A representative example of this category would be TOMS and Warby Parker – TOMS, who popularized what’s called a one-for-one model, donates a pair of shoes to a child in a poor country with every pair of their branded shoes they sell, and Warby Parker does the same for eyeglasses. 

5) Awareness Brands

These are brands that haven’t made any clear charitable giving, nor is it clear that they are operating at the level of “socially responsible businesses,” but they draw attention to socially or environmentally responsible values or practices. They usually sell products that bring awareness to a certain social or environmental issue. Some examples of this model include “conscious fashion” blogs or “all natural” skin care companies.

6) Everything else

Since social enterprises may come in one of the five previously listed forms or in a hybrid combination of two or more of these models, and new and experimental models are constantly emerging, the 6th category is the requisite miscellaneous category, allowing for anything else that has been missed or may make an entrance to the scene in the future. 

Current such examples include the social enterprise employment model, where social enterprises use their businesses to provide meaningful work and employment to a disadvantaged group, and the social value enterprise (SVE) model. An offshoot of the cooperative movement, SVEs are defined by democratic ownership of the company by employees and the use of 100% of their profits for social good.

Beyond the individual firm level, countries and governments are pioneering new categories of incorporation to make room for new business models and business plans that allow social enterprises to flourish. 

South Korea, an early enthusiast of social entrepreneurship, set up various government funding schemes and tax breaks for companies that sought to address social problems, leading to a growth of enterprises that followed the SVE model in particular, employing persons with disabilities or low-income women. 

The UK government set up a new legal company category called a Community Interest Company (CIC) in 2005, specifically for companies that seek to prioritise social good and whose profits are reinvested for the betterment of communities and society. Several state governments in the USA pioneered the Benefit Corporation business registration category, not to be confused with the B Corporation movement (more on that later) but spiritually related in terms of objectives.

Giving back gif

Prominent People & Companies

As you can see from the previous section, social enterprises and the entrepreneurs that run them come in all manner of shapes and sizes, but what is also clear is that social enterprises can be just as financially successful as traditional businesses and social entrepreneurs can make money and profit while enriching their communities, society at large, and/or the environment. 

It’s now come to a point that even those outside the social entrepreneurship circle have heard of admirable and successful members, such as Muhammad Yunus, who built the micro-credit industry practically single-handedly through his Grameen Bank coined the term, “social business,” in his various published books. He has been recognised for his work by the likes of the Nobel Committee but also industry bodies from the traditional business world.

But what other examples are there of noteworthy social entrepreneurs and their work?

The B Corp Movement

B Corporations, or B Corp for short, are for-profit companies of any size that is certified by B Lab—the nonprofit entity that certifies and bi-annually audits companies that apply to become a B Corp—as being in compliance with an extensive and rigorous criteria measuring social, environmental, and governance impact. 

Certified B Corps commit to meeting “the highest standards of verified social and environmental performance, public transparency, and legal accountability to balance profit and purpose”. Originally an American idea, B Corps now exist in over 60 countries across 150 industries. Notable members include Patagonia, Ben & Jerry’s, and Brazilian multinational ethical cosmetics conglomerate, Natura. 

If you’d like to learn more about B Corporations and their culture, check out our blog post on the B Corp Champions Retreat.

Tech for Good

More and more social startups are adopting positive aspects of Silicon Valley’s tech startup culture—adopting the LEAN mentality and methodology and an openness to tech—in order to effectively bring about the social impact they envisioned. These include startups built around mobile apps that seek to reduce food waste, plastic pollution, or improve healthcare and the efficiency of existing charities like food kitchens that are cropping up in practically every country.

Social Enterprises As Global Development Agencies

While a great many social enterprises start in order to serve their local community and address problems and concerns in their locality—which can only be a good thing—there is a group of social enterprises and social entrepreneurs that exist to tackle issues of global development in developing countries, usually working directly with populations on or below the poverty line in order to improve their conditions. In many ways, they operate like international development agencies, without the heavy-handed bureaucracy and using business tools or concepts. 

One Acre Fund, for example, assist smallholder farmers in a number of Africa countries through a flexible loan and repayment model that provides agricultural inputs like seeds and fertilizer, training in modern and sustainable farming techniques, and access to global markets to maximize profits off their crops. 

Jibu, which operates in several African countries including Kenya, Rwanda, Tanzania, and Zambia, equips micro-entrepreneurs in these countries, who are often from slums, with the equipment and training to purify and sell clean drinking water in their underserved communities as Jibu franchisees.

Innovation through Partnerships

Needless to say, the problems facing our world today can’t and will not be successfully addressed by the traditional, established actors like governments and conventional businesses alone. This is, in fact, one of the main reasons that social entrepreneurship as a movement and social enterprises exist and why they matter so much to society: in not being tied to the constraints and traditions of the traditional actors, social entrepreneurship can offer innovative solutions that might not otherwise emerge. 

There will always be some portion of the population that is not part of any market and therefore will get left behind. And one shouldn’t forget that business and industry have been responsible for much of the global-scale problems we are currently facing, from climate change to income inequality—their role in solving these problems brings the relationship full circle. 

By the same token, social enterprises also can’t be expected to solve these daunting problems by themselves. No matter how many shoes I donate to poor children by buying TOMS shoes, that doesn’t directly address the question of why there are kids without shoes in the first place. 

Perhaps recognizing this, the latest trend in the social entrepreneurship world is to form partnerships across sectors, public and private, in order to maximize their impact. It certainly helps that there is usually as much enthusiasm on the other side, thanks to the popularity of social impact and the desire of corporate businesses to be associated with the values of social entrepreneurship. 

Partnerships with Governments and International Organisations

Governments and international organizations like the UN and their agencies are increasingly understanding the value of social entrepreneurship and of partnering with social enterprises. As unavoidably bureaucratic and politically sensitive entities, there are often only so many governmental organizations can do on the ground. They usually partner with NGOs and local stakeholders to implement projects at the local level, but more and more they are looking to social ventures and startups as potential strategic partners. The UN’s World Food Programme has set up its own accelerator in order to benefit from the innovative approach and inventions of social entrepreneurs and partner with some of them.

Partnering with Multinational Corporations

Similarly, multinational corporations have been eager to partner with social enterprises, in particular in developing countries. It’s a win-win for the parties, since social enterprises benefit from the support (sometimes material) and reach of global corporations while the corporations enjoy the increased brand capital of working with a values-based enterprise. 

Starting from 2016 the Skoll Centre for Social Entrepreneurship began hosting workshops for and documenting collaborations between multinational corporations and social enterprises jointly with the Acumen Fund. 

The inaugural report recorded a handful of representative cases of social enterprise-corporation partnerships, including a partnership between Microsoft and Operation ASHA in India to improve patient compliance in TB treatment in urban slum areas, as well as between the previously mentioned Jibu and EY and Levi and Change Associates to improve the lives of factory workers in Bangladesh, among others.

Partnership

Challenges and the Way Forward

Social entrepreneurship has never been so popular as it is now. With Millennial and the rising Gen Z generation making it abundantly clear that they are motivated to work for and patronize companies that value more than pure profits and actual value, well, values, social entrepreneurship will likely continue to grow in prominence in the mainstream. 

Even as the debate on what the definition of a social enterprise or a social entrepreneur is before the meaning becomes too broad and includes everyone as more and more conventional firms take on the trappings of social impact, there is no denying that social entrepreneurship, the value and discourse being created around it, are impacting long-entrenched societal and business practices, and usually for the better. 

And therein lies perhaps the real importance of the social entrepreneurship movement. Its simple existence is shifting the behavior of the established players like big businesses that, increasingly put under pressure and being held accountable for contributing to some of today’s gravest social and environmental injustices, are compelled more than ever to associate themselves with the values of the social entrepreneurship movement. As a result, there may soon be a time where every entrepreneur is by default a social entrepreneur. 

Nonetheless, this ideal outcome should not be taken for granted. Unscrupulous ventures or unscrupulous profit organizations could take advantage of the brand capital of social entrepreneurship and the goodwill it arouses, using it to hide unethical practices and thereby eroding the value of the movement. We have already seen a few high-profile cases of this in the form of Volkswagen’s emissions scandal and the scam of health-tech startup Theranos. Even without cases of cynical or nefarious uses of the term, simple overuse may devalue it. 

Moreover, there is the fact that social entrepreneurs are not necessarily exempt from all the hardships of regular entrepreneurs and then have the added burden of also being socially-oriented in their business dealings. In addition to running a business to be financially sustainable, create wealth, and scale, social entrepreneurs obviously also have to simultaneously create large-scale positive social impact. 

It still remains a challenge on how to best support these budding and idealistic talents. While funding and support mechanisms are emerging and reinforcing into a social entrepreneurship ecosystem, it’s still relatively early in its development and promising social entrepreneurs still find it a challenge to get the support they need.

If you want to learn more about social entrepreneurship or if you are considering becoming a social entrepreneur or change agent yourself, check out our podcasts, in particular, this especially helpful episode with a true leader in the social impact space, Russ Stoddard of Oliver Russell.

Min Ji Kim

Min Ji Kim

Writer & Social Impact Consultant

Min Ji is a former UN (specifically ILO) staff member from South Korea who also holds an MBA degree from the University of Oxford. She has dedicated her academic and professional career to humanitarian causes. She has been a consultant for many social enterprises and startups based in Asia and enjoys writing about social impact, social entrepreneurship, and public-private partnerships for sustainable development.

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