For centuries, successful businesses have held the power to make waves. What might happen if their core priority shifted from profit-making to uplifting society?
This is where we find social entrepreneurs. People with an innovative mindset, a passion for people and the planet, and an eagerness to understand the world of business (if they don’t already).
Let’s unpack social entrepreneurship – what it is, why it is necessary in our world, which issues social enterprises aim to address, and whether or not these ventures are successful in their mission.
What is social entrepreneurship?
Social entrepreneurship combines the basics of business – identifying an issue or a gap, coming up with a solution, and creating the means for the solution – with a philanthropic viewpoint to birth businesses whose primary goal is to make a difference in society.
These enterprises are closely related to socially responsible investing (SRI) and environmental, social, and governance (ESG) investing. Unlike many impact investment projects, however, social enterprises exist as the sole business, rather than a branch of a greater company.
While social and environmental change are the main focus, social entrepreneurs still aim to generate a profit and are thus not to be confused with non-profit organisations, which rely on fundraising, government support, and donations to function. Social enterprises may require an injection of financial support at the start, but are designed to become free-standing businesses once they start generating a profit.
Why do we need social entrepreneurs?
The complex and interwebbed problems our world faces require creativity and innovation to be solved. Social entrepreneurs devote their time and resources to filling the gaps in addressing some of these challenges. Their novel approach thus aids in the positive development of industries, systems, policies, and decision-making.
Social entrepreneurs play a large role in transforming the world of business as well, which too often prioritises profit over well-being. By putting social causes first, social enterprises imbue other businesses with a spirit of collaboration and striving to contribute to the greater good.
With businesses controlling much of the globe’s resources, we need corporations who are committed to taking care of the planet and its people. The successes of social entrepreneurs uplift humanity, create awareness, and inspire seeds of hope for future generations.
Issues social entrepreneurs seek to address
All social enterprises put the health and well-being of people at the fore of their business strategy.
The key problems many of these ventures aim to solve often revolve around the violation of human rights, including inequality, poverty, hunger, racism, gender discrimination, safety and security, fair trade, and a lack of access to basic human needs such as education, water, electricity, and physical and mental healthcare.
As environmental shifts can have a drastic impact on human populations, social entrepreneurs may also focus on finding ways to reduce our impact on the Earth’s altering climate, while coming up with solutions to mitigate the effects of climate change on society that we are already witnessing as a result of past and present harmful practices.
Successful social enterprise business models
Each business has its own blend of ingredients to ensure its success. Social enterprises are no different. In order to reach financial goals and make a change, it is vital to have a structure that suits the original idea and will support the vision of the business.
Social entrepreneurs will need to ask themselves how they can make a difference in society and how the business will make a profit at the same time to decide on a fitting framework for their venture.
A few models that have proven successful over the years include:
- Awareness and cause: Getting the word out about a particular issue to mobilise people and get them involved.
- Employing and empowering: This model may involve simply hiring people who have not had equal access to employment or it can mean taking things one step further and equipping people with the resources and skills to make and sell their own products. This creates self-sufficient, independent workers who may grow to become employers themselves.
- One-for-one: Pioneered by TOMS founder Blake Mycoskie, one-for-one is about donating one product to those in need for every product the business sells.
- Environmental change: Making a positive impact on the environment through the business venture.
Challenges that social entrepreneurs face
While the outcomes of social enterprises can be impactful and rewarding, social entrepreneurs still encounter their share of challenges in the process:
- Arguably the biggest obstacle that social enterprises experience is accessing adequate funding for their start-up capital. There is a misconception that social impact businesses do not make a profit, which keeps many banks and institutions from providing the financial backing needed. Social entrepreneurs therefore need to seek funding in places they may not know about.
- Many founders bring the ideas and innovation, but lack experience in the context of the problem they wish to solve and may also be without the entrepreneurial expertise required to run a successful business. This can result in a steep learning curve along the way.
- The conditions in which social entrepreneurs work can be quite harsh, especially when dealing with complex social problems in deprived communities.
- If a social enterprise fails to gain a big enough reach, opportunities for expansion may be limited in the long-term and financial growth will be stunted.
Does social entrepreneurship actually work?
The short answer is yes. Social enterprises, when able to access the support they need to manage start-up costs, have the potential to develop into well-functioning businesses that do make a difference in society.
With the market for value-based businesses expanding exponentially, it is vital to mobilise funders, decision-, and policy-makers to create channels specific to the needs of burgeoning social enterprises, which are in danger of failure without adequate backing and involvement. Clearly defining social impact businesses and growing awareness of their purpose is key to achieving this.
Have an idea? How you can become a social entrepreneur
If you have an idea for a social impact business that you are passionate about, here are a few important steps to follow:
- Determine the problem you want to solve. This may be sparked by a cause you are passionate about, a personal experience, or inspiration from other social entrepreneurs.
- Perform thorough research of the issue, its context and background, what has been done to address it already, if at all, and where the gap specifically lies. Not only will this help you distinctly outline your mission statement, but it will also demonstrate the need for your solution to potential funders.
- Come up with your mission statement and a broader vision for the long-term impact and sustainability of your business.
- Decide what unique aspect you are bringing to addressing the social problem at hand.
- Craft a business model that best suits your idea to ensure that it will be socially impactful and financially successful.
- Reach out to funders.
- Pull together a team who will help you reach your goals and who share the same dedication to the issue you care about.
Social enterprises are playing a crucial role in shifting the priorities of the world of business and our society. This makes it paramount to support their growing presence and ensure the best chances of their success in the future.
If your idea seeks to combat early childhood development issues in South Africa, contact us to find out more about our funding structures and support for new and growing social enterprises.