Who’s it: Social entrepreneurs are those who pursue business not to maximize their own profits but to maximize social and environmental benefits. They aim to promote the welfare of society by balancing profit, society, and the environment. Some focus on the last two and take no profit. Others take profits but reinvest them in programs to support communities and the environment.
There are many social business models. Some solve community-based and solve problems within. Others focus on covering a wider area and having a far-reaching impact. Regardless, they take risks and introduce initiatives to bring about positive change in society.
Social enterprise is getting more and more popular these days. Various social and environmental issues encourage higher awareness. In addition, widely adopted ethical practices also open up wider opportunities for social entrepreneurship. For example, many companies practice social responsibility. Investors also began to introduce Environmental, Social, and Governance (ESG) investing. It all then opens our eyes.
In the conventional view, we focus too much on “profit” and often ignore “people” and “planet.” In fact, “profit” is an inseparable part of the “people” and “planet” aspects, as the triple bottom line concept emphasizes. For example, to generate “profit,” we need “people” and “planet.” So, without the other two aspects, there is no sustainable profit.
What is the difference between an entrepreneur and a social entrepreneur?
The main difference between entrepreneurs and social entrepreneurs is how they give weight to three goals: profit, society, and the environment. Traditional entrepreneurship emphasizes maximizing profit by selling goods and services to satisfy consumer needs. Thus, they are trying to make as much money as possible.
On the other hand, social entrepreneurs aim to positively impact and benefit society and the environment. Maximizing profits is not their orientation. They may make a profit, but they reinvest it into society, for example, by increasing the reach and impact of their socio-environmental programs. Some use it to build vital facilities such as health and education. And, others take profit but by giving fair compensation to society.
How social entrepreneurs impact society can vary widely. Each has a different business model. For example, some aim to improve access to finance for disadvantaged communities as provided by microfinance institutions. Others may encourage people’s entrepreneurship, aiming to generate enough income to sustain their lives.
In addition, the scope of the social entrepreneurship area also varies. For example, some focus on community. Others focus on a wider area.
Meanwhile, traditional entrepreneurship has a big impact on shareholders (owners or founders). First, they pursue a competitive advantage to generate above-average profits over their competitors. Second, by doing so, they can maximize shareholder wealth, either through dividends paid or from capital gains on the company’s share price.
Why are social entrepreneurs important?
As explained above, social entrepreneurs think about how to deliver benefits through their initiatives. They use profits for social and environmental agendas. Thus, when compared to conventional companies, they generate higher returns on social investment.
We can see why social entrepreneurs are important from the impact they make. It can be economic, social, and positive changes in people’s behavior.
Economic impact
Social entrepreneurship has an economic impact, for example, through the jobs and income they create.
- Some social enterprises recruit people in a community to produce products. They then help sell it and return the profits to the community, for example, by providing fair compensation or by building education and health facilities.
- The Faire Collection is a good example, where it employs disadvantaged people in developing countries and offers fair wages.
- Others may provide affordable capital to encourage entrepreneurship in economically disadvantaged communities. So, with entrepreneurship, they can support their income and the community around them.
Environmental impact
Several social enterprises contribute to preserving the environment. There are many models for it. For example, they run a plastic waste processing business.
- Others may produce products by harvesting organic raw materials available in the natural environment and then replanting them. Or they make recycled products to reduce waste.
- Another example is using renewable inputs to generate energy, as Solar Sister does. This organization empowers people in rural Africa to introduce clean energy technologies into their communities.
Social impact
It is concerned with helping to improve aspects such as quality of life, economic skills, and knowledge of the community. For example, social enterprises encourage entrepreneurship in a community. They provide skills training for producing goods.
Then, the social enterprise helps community members to market their products overseas or in other areas. In addition to paying people in the community, they use the money from the sale to reinvest in the community. For example, it could be by building education and health facilities in the community or elsewhere.
Take Better World Books, for example. The organization reuses book sales to fund literacy initiatives around the world.
Four characteristics of social entrepreneurs
The four important characteristics of social entrepreneurs are:
Strong determination. Social entrepreneurship often has the desired impact in the long term rather than the short term. In addition, by taking risks to make a social impact, social entrepreneurs may find their business idea a loser and difficult to sustain.
But, it all did not slacken their intentions and then switched to profit-oriented. So, they are not easily discouraged just because the program has not achieved its goals. And it requires strong determination.
Community driven. Social entrepreneurship’s idea often starts with problems in a community. Social entrepreneurs then think about how they can offer solutions and make a positive impact. In contrast, traditional entrepreneurs start with problems and then calculate how economically viable they are before starting a business.
Inspire. Traditional employers use money and profits to motivate employees to do work. But social entrepreneurs often use inspiration to move people toward change. They don’t count on big profits to run a social business.
Creative and innovative. Social entrepreneurship requires a solutive and creative approach in looking at problems. For example, targeted people may perceive their problems as mundane or unsolvable.
But social entrepreneurs see it from a different perspective. It forces them to think creatively to find new approaches to overcoming obstacles.
Take an example in bringing behavior change in a positive direction. It’s not just how social entrepreneurs develop product or service innovations. But, it also forces them to think about paradigm innovation, where they have to change the way people think about their problems.
Types of social entrepreneurs
Social entrepreneurs can vary widely. Some focus on the people in a community. They serve members in a small geographic area. And they work directly with community members.
Others take up a wider area than just being community-based. While results often take a long time, they can have an effect on a larger scale.
Then, the social business model adopted by social entrepreneurs also varies. They can differ based on their goals and how they achieve them.
For example, some social enterprises focus on providing jobs and empowering members. They recruit people in a community to produce goods. They then market the product and reinvest the profits by offering training or building facilities such as education or health.
- For example, Goodwill Industries employs the poor to work with donated goods. Then, the company reinvests all profits into job training programs.
- Another example is Greeneration Indonesia. This social organization redistributes the proceeds from the sale of reusable bags for waste management programs.
Meanwhile, some other entrepreneurs are encouraging people’s entrepreneurship. For example, they provide microfinance loans. They increase access to cheap capital to encourage people in a community to become entrepreneurs. They then reinvest the profits to support similar programs in other areas. An example is Kiva, which provides funds to underserved communities.
