When I tell my friends that I'm passionate about Social Entrepeneurship, I'm used to receiving blank stares. Social Entrepeneurship isn't a new thing: it can be traced back to the 1840's, where a group of workers in Rochdale, England, set up a cooperative to allow workers to have access to affordable high quality food. It sounds like a no-brainer, to start a business that not only can generate profit and provide the founder with a living, but do good and give back at the same time. So why is this idea only starting to take off in the twenty-first century?
I was lucky enough to take part in a course at Brown University taught by the founder of Social Enterprise Greenhouse, Kelly Ramirez. During my very first lesson on campus, one of the first things she talked about was the definition of the phrase "Social Enterprise". As the founder of a start-up incubator for social enterprises, a key thing that stood out to her was the lack of awareness about the phrase "social enterprise" when talking to prospective investors, clients, and friends and family.
Social entrepeneurship is, contrary to public belief, nothing to do with social media, online dating or networking, despite what you might expect from the name. Rather, social enterprises are about operating a 'normal' business in a way that would be socially responsible, and use innovative approaches to create social change in an existing system. These include, but are not limited to, nonprofit (501(c)3) organisations, for-profit enterprises, and hybrid enteprises, which work to provide a service or product to customers, as well as having a socially responsible mission. To put it into context, what a social enterprise does is to fulfill a gap in the market (such as Ben & Jerry's selling ice cream to hungry customers), but also do so in a way that helps the people and the planet (through Ben & Jerry's using sustainable packaging, donating 7.5% of annual profits to minority awareness organisations, and funding wind turbines).
But why can't we keep philantrophy and business seperate? Why should we combine them to form social enterprises? This is because social enterprises can achieve so much more than regular aid providers, or social activists.
For example, traditional aid organisations (such as natural disaster relief, food banks, or shelters for displaced people) alleviate the damage caused by the existing system (wage disparity, discrimination, poverty etc) but don't reform the system which causes it to exist in the first place. This short term approach means that while it helps the underserved communities to survive, it doesn't ensure their safety and stability in the future, or empower them to get back onto their feet. The opposite of this would be the social advocates, who work indirectly, by fighting for changes in governments, policies and legislations. In contrast to aid organisations, they work to target the issue from the root cause, to create lasting change and securing the future for these communities in need. While this helps to create a long-term shift in the way society operates, this fails to provide for the immediate needs of the people, and doesn't help them in the moment.
Social entrepreneurs not only seek to change the system in a long lasting way, but also cause direct change by lessening the negative consequences of the flawed system on a day to day basis. This creates new value for society, releases trapped potential, as well as reducing the suffering for others. Because social entrepreneurs are able to take both a holistic approach and a direct approach to solving these social issues, it’s clear that these enterprises are becoming increasingly sought after in the modern environment.
Too often, people deeply ingrained in the system find themselves entrenched in it, continuing to uphold the beliefs and practices that have been done traditionally. They settle into acquiescence, and just accept it. Social entrepreneurs seek to understand the issue from a new perspective, finding out how the issue started and why it still persists. Because of their foreign or outsider perspective, and their lack of personal investment in maintaining the existing system, this approach helps them to create a transformative effect on the existing system in place.
One example of an organisation that does this fantastically would be the social enterprise, Riders For Health. When Randy Mamola, Andrea Coleman and Barry Coleman wanted to come up with a solution for Africa's healthcare crisis, one of the first causes they pinpointed for the poor healthcare system was the lack of reliably effective transport. With Uganda and Gambia already having a shortage of qualified medical staff, this issue was further perpertrated by the fact that thre was no convenient and accessible methods of transportation in place for the doctors and nurses to go from patient to patient, and this resulted in many doctors having to trek for dozens of kilometers under the blistering sun in order to help others.
While the immediate response for this issue would be to invest in some new forms of transport, such as ambulances, SUVs and trucks, although this was able to help to some extent, many of these vehicles soon rusted or were worn out quickly by the harsh climate, and those that were still in fair condition weren't suited to driving over the bumpy terrain. What Riders for Health did was simple, yet so much more effective than just throwing thousands of dollars towards buying more ambulances. They harnessed the most powerful tool of all: education.
Riders for Health taught the NGO's partnered with the healthcare workers how to service the vehicles they already had, as well as how often to do checkups on the vehicles condition, to prevent it from further deterioating in the African climate. Instead of cashing out on expensive ambulances, Riders for Health realised that motorcycles would be more suited to the terrain, and would be less vulnerable to the damage from UV detoriation and rusting, as well as be more reliable as a form of transporation. This holistic approach proved to be wildly successful, resulting in partnerships with numerous local, regional and national governments.
So why aren't all businesses adopting this business model? For starters, one of the biggest issue with the social enterprise business model means that it's usually less competitive in the market compared to traditional enterprises, particularly if the social enterprise is a nonprofit. This is because of their mission-driven business model, which makes it a less attractive option for potential investors, as well as the fact that social enterprises generally cannot sell shares or list publicly. As all decisions are aimed towards helping to create social change and abolish the status quo, this also means that profits aren't the priority.
Another reason why it's difficult for social enterprises to succeed in the corporate environment is because of the lack of advertisement, and or the stigma towards having high overhead costs. If a social enterprise operates on a partially or fully donations-funded business model, many donors look down on enterprises with high overhead costs, rather than donatating all of the money towards the 'good cause'. This is counterintuitive, unfortunately, as investing a larger proportion of donations towards overhead costs such as hiring, marketing and advertisements would result in an increased interest in the social enterprise, and possibly a significant increase in donations.
Lastly, one of the largest issues for social enterprises is the lack of new talent. There's a common misconception that working in the nonprofit sector prohibits career growth. This may stem from the fact that jobs in the non-profit sector tend to have lower salaries than those in the for-profit sector, even for the same role and qualifications. This largely is due to the concern for high overhead costs of a nonprofit, and results in most nonprofits scrimping on employee pay. This generally causes the individuals with the most potential in terms of career growth as well as talent to choose jobs in the for-profit sector instead, which leads to a lack of new talent in the operation of nonprofits. Instead, they may choose to 'do good' by donating to or joining the board of these nonprofits, rather than actively relying on them for a paycheck. This leads to a vicious cycle, as less talent working for an organisation results in less innovation, less creativity and less efficiency when it comes to operations of a nonprofit, resulting in stunted growth for these organisations.
However, the tides are turning. In Australia, the social enterprise sector has grown by a whopping 37% over the past five years. In Europe, 1 in 4 enterprises set up each year have a social mission-driven objective. With each coming generation becoming more socially-concious than the previous, it results in a shifting market trend where more and more companies are changing to become socially-responsible, as well as allowing for the rise in prevelance of nonprofits or hybrid enterprises in traditionally for-profit markets. Many universities, companies and independant organisations are offering seedfunding, mentorship or incubation programs, targeted to entrepeneurs in the social enterprise sectors, to try to balance the playing field when it comes to competing with profit-driven enterprises. Entrepeneurs are starting to realise that it is possible to both do well and do good, and are able to use this as a way of attracting new customers. This mindset is also being reflected in consumer practices, where the average consumer is made aware of the impact of their actions, and actively chooses to support enterprises who use their platform and resources to benefit others.
How can you as an individual become more socially responsible? As a consumer, you have the power to choose what causes to support, and what enterprises to fund. By choosing to buy your groceries from co-ops, for example, or source your shoes from an enterprise that has a buy-one-give-one business model, you can create a ripple of change just from your daily activities. By becoming more aware of where you buy from, what enterprises you are directly or indirectly supporting, you can help small social enterprises to grow, and take a holistic approach to improve the community.
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