Reading: Social Entrepreneurship

Making a difference through business

If you’re one of those entrepreneurs who wants to help solve some of the world’s problems, this section is for you. And you’re making a wise choice: more and more entrepreneurs are finding that business ventures can make money and improve the world at the same time.

As discussed in the previous section, a traditional entrepreneur sees an opportunity to make money by fulfilling a consumer or business need, usually in an area they’re familiar with. A social entrepreneur sees an additional opportunity to improve quality of life by fulfilling a social need.

What does it mean?

The term “social entrepreneur” is used in many different ways. Ashoka’s and The Schwab Foundation’s definitions (see below) aim high. Others define social entrepreneurs as leaders of non-profit organizations that use best business practices to create social change. In for-profit social ventures, a social entrepreneur typically garners the title by simultaneously seeking financial and social returns.

According to J. Gregory Dees, adjunct professor of social entrepreneurship and nonprofit management in Duke University’s Fuqua School of Business, what distinguishes social entrepreneurs is their “explicit and central” mission. They are driven not only by the bottom line, but by a distinct social goal. To quote Dees, “Social entrepreneurs play the role of change agents by:

• Adopting a mission to create and sustain social value (not just private, financial value),
• Recognizing and relentlessly pursuing new opportunities to serve that mission,
• Engaging in a process of continuous innovation, adaptation, and learning,
• Acting boldly without being limited by resources currently in hand, and
• Exhibiting a heightened sense of accountability to the constituencies served and for the outcomes created.”¹

Simply put, social entrepreneurs find innovative ways to create better outcomes for society.

Focus on impact

Success in a social venture is achieved by maximizing financial returns and impact to the cause, known as Social Return on Investment (SROI). SROI can come in the form of improving people’s lives or reducing environmental harm. Just as any competitive business must create a product to best satisfy its customer’s needs, a social venture must focus on superior quality for both its customers and its cause (and these may be the same). A worthwhile social venture opportunity should include a marketable idea that also provides non-financial returns to the community you intend to serve. Idealism will help you construct a vision of what you want to achieve, but to create social value you must find viable ways to produce results. This involves a mix of passion and practicality. As an entrepreneur, you need to shape your plan around what’s realistically possible, even if you continually redefine what is possible. Entrepreneurship is challenging. Adding social aims increases the complexity, but also increases the rewards.

The triple bottom line

No matter what your goals are for your business—to accomplish social change, earn high profits, improve the environment, or all three—it’s useful to think about how you will reach them. To that end, corporate social responsibility (CSR) practices can be integrated throughout your business’ operations. The Business for Social Responsibility defines CSR as, “achieving commercial success in ways that honor ethical values and respect people, communities, and the natural environment.”²

This is what’s called the triple bottom line: expanding the spectrum of values and criteria for measuring organizational success to include not only economic, but also environmental and social concerns. For some, a commitment to CSR brings with it a need to institute triple bottom line reporting.

A good beginning

It can be helpful to incorporate your values from the start. Evidence shows that CSR can help maximize bottom line financial and social benefits. Incorporating your values into the process during the product development stage of your business will help you think of better ideas and evaluate your options more carefully. A philosophy that incorporates respecting people and the environment can be useful in guiding your venture’s growth. Good corporate citizenship will not only give you personal satisfaction, but can resound with employees, funders, customers, suppliers, and your community.

Case studies

Integrating values

Seth Goldman founded Honest Tea to fill the gap between the too sweet and the tasteless bottled drinks on the market. He also sought to improve society. Goldman designed a business that completely integrated his philosophy of social responsibility, from the product he sells to the ways it's produced.

Goldman believes that Honest Tea has many social benefits. "Every time someone picks up our product instead of one of the sweet teas out there, they are cutting back on the sugar and calories they put into their bodies. Plus, almost all of our line is organic. Every time a tea state or garden switches to organic production from conventional it means there are less toxins being put into the water, land and consumer's bodies. We are also creating relationships with our supplier and partners that enable us to create wealth with them. Tea is one of the few products enjoyed in some of the wealthiest nations but produced by some of the poorest. The disparity really enables you to create wealth through this business."

"Define why your venture is important to you and what is important about it," Goldman recommends. "Once you get out there it's kind of easy to lose your way or lose your purpose. I think that's something we have always been very clear about and it's helped us stay disciplined in our approach."

Aiming high

Ashoka and the Schwab Foundation, organizations committed to supporting major social change around the world, see social entrepreneurs as revolutionaries.

Ashoka’s definition: The job of a social entrepreneur is to recognize when a part of society is stuck and to provide new ways to get it unstuck. He or she finds what is not working and solves the problem by changing the system, spreading the solution and persuading entire societies to take new leaps. Social entrepreneurs are not content just to give a fish or teach how to fish. They will not rest until they have revolutionized the fishing industry.

Identifying and solving large-scale social problems requires social entrepreneurs because only they have the committed vision and inexhaustible determination to persist until they have transformed an entire system. The scholar comes to rest when he expresses an idea. The professional succeeds when she solves a client’s problem. The manager calls it quits when he has enabled his organization to succeed. Social entrepreneurs go beyond the immediate problem to fundamentally change communities, societies, the world.

The Schwab Foundation’s definition: A social entrepreneur is a different kind of social leader who identifies and ap-plies practical solutions to social problems by combining innovation, resourcefulness and opportunity; innovates by finding a new product, a new service, or a new approach to a social problem; focuses first and foremost on social value creation and in that spirit, is willing to share openly the innovations and insights of the initiative with a view to its wider replication; doesn’t wait to secure the resources before undertaking the catalytic innovation; is fully accountable to the constituencies s/he serves; resists being trapped by the constraints of ideology or discipline; continuously refines and adapts approaches in response to feedback; has a vision, but also a well-thought out roadmap as to how to attain the goal.