Why Social Enterprise Matters

03/17/2015 | By Nicole Mangis

This post originally appeared on blog.up.co

Social entrepreneurship has become increasingly more mainstream over the past decade or so, and has great potentialto address and provide solutions to the many problems we face today.

What is interesting about social entrepreneurship, more so than typical models of enterprise, corporate social responsibility (CSR), or not-for-profit/philanthropic organizations, is that a social enterprise has the power, not only to provide a solution to a societal problem, but  to continue to do so irrespective of grant funding or the imitations of CSR. A social enterprise, which if it can maintain the balance of mission and business, can become a powerful tool to combat systemic issues and problems that manifest from local to global scales.

Social enterprise is a widely debated concept. While the definition may vary, several consistencies help frame the context for this growing practice.

First, there is a consistent distinction between social enterprise and social entrepreneurs. Organizations such as Ashoka and the Skoll Foundation, for example, promote this distinction not only in their definitions but also through their programming. This does not seem too far a stretch, after all entrepreneurs are the doers and the enterprise is the result.

Second, is the “why” the social entrepreneur is building a social enterprise. Rather than “maximize shareholder profit,” which is the typical enterprise objective, the social entrepreneur approaches business from the perspective of “maximizing social benefit.”  Money (profit) becomes one tool available to accomplish social goals.

One final consistency, for purposes of this discussion, is the reality that social enterprises must balance sustainable business practices with their mission-driven objectives, with the resulting and inevitable disruption of the business status quo.

This disruption is evidenced on many levels in the business world, however, the traditional financial/investment paradigms provide a good example for our purposes. Specifically, investors have struggled with how to structure the ROI for a social enterprise because of the dualistic nature of the business. In essence, raising the question of how to evolve the traditional investment paradigms in order to attract investors. And, like anything in the market, where there is a need something will fill it. Crowdfunding, local investing, impact investing, are a few examples of how the old paradigms have made way for new ones.

Given the inconsistencies in definition and shortfalls in managing and investing in a social enterprise, why then do they matter?

  1. As the world adjusts to major generational shifts, and the defining characteristics of the millennial generation permeate the fabric of our global economy, we will begin to see changing expectations with respect to how businesses operate, why they operate, and how they source their operations. While millennials have been ascribed with many negative attributes, they have demonstrated an increasing propensity to support causes through human and monetary capital. Meaning, they volunteer their time and vote with their wallets. Regardless of the varying discourse around the millennial generation, they are a huge portion of our population and the economy and society will adapt to their presence.
  2. Business is not inherently bad or wrong, however it has certainly contributed to many of our global constraints and challenges. Social entrepreneurship can marry the best parts of for and not-for profit organizations in an effort to assuage some, or all, of our global concerns over time.
  3. Social entrepreneurship is innovative. Sure, there are certainly shades of “innovation.” However, some of the most influential social enterprises have converged the high-tech innovation we covet (our widgets, gadgets, and social media) and the most challenging social issues of poverty, environment, energy, quality of life, etc. Just because a social enterprise has a mission does not mean it cannot be on the cutting edge of science or technology.
  4. Social entrepreneurship is refreshing. Nevermind the millennial influence, humans like to know that what they are doing matters. Human interconnectedness is essential but has been dulled by our consumerism. Is it not fitting then that our

    consumerism can drive the resurgence of community?

It is important to note that adopting a social enterprise model does not have to happen when the company starts up, but can be something a company incorporates into their business practices over time. Some may disagree with this concept, but the important piece is that social benefit is at the heart of the operations and is in balance with the business model.