Social entrepreneurship is the process of pursuing innovative solutions to social problems. Social entrepreneurship is about applying practical, innovative and sustainable approaches to benefit society in general, with an emphasis on those who are marginalized and poor.
Social entrepreneur identifies and solves social problems on a large scale. Just as Business entrepreneurs create and transform whole industries, social entrepreneurs act as the change agents for society, seizing opportunities others miss in order to improve systems, invent and disseminate new approaches and advance sustainable solutions that create social value. Unlike traditional business entrepreneurs, social entrepreneurs primarily seek to generate “social value” rather than profits. Unlike the majority of non-profit organizations, their work is targeted not only towards immediate, small-scale effects, but sweeping long term change. Business entrepreneurs typically measure performance in profit and return, but social entrepreneurs also take into account a positive return to society.
A social entrepreneur is a leader or pragmatic visionary who:
- Achieves large scale, systematic and sustainable social change through a new invention, a different approach, a more rigorous application of known technologies or strategies, or a combination of these.
- Focuses first and foremost on the social and/or ecological value creation and tries to optimize the financial value creation.
- Innovates by finding a new product, a new service, or a new approach to a social problem.
- Continuously refines and adapts approach in response to feedback.
- Combines the characteristics represented by Richard Branson and Mother Teresa.
The concept of “social entrepreneurship” is not a new idea, but it has recently become more popular among society and academic research, notably after the publication of “The Rise of the Social Entrepreneur” by Charles Leadbeater. The terms social entrepreneur and social entrepreneurship were used first in the literature on social change in the 1960s and 1970s. The terms came into widespread use in the 1980s and 1990s, promoted by Bill Drayton the founder of Ashoka: Innovators for the Public, and others such as Charles Leadbeater. From the 1950s to the 1990s, Michael Young was a leading promoter of social entrepreneurship and in the 1980s was described by Professor Daniel Bell at Harvard as ‘the world’s most successful entrepreneur of social enterprises’ because of his role in creating more than sixty new organizations worldwide, including the School for Social Entrepreneurs (SSE) which exists in the UK, Australia and Canada and which supports individuals to realize their potential and to establish, scale and sustain, social enterprises and social businesses. Another notable British social entrepreneur is Andrew Mawson, who was given a peerage in 2007 because of his regeneration work including the Bromley by Bow Centre in East London.
One well-known contemporary social entrepreneur is Muhammad Yunus, founder and manager of Grameen Bank and its growing family of social venture businesses. He is known as the “father of microcredit,” and established the microfinance revolution in helping millions of people in global rural communities’ access small loans. The work that Yunus did through Grameen Bank echoes a theme among modern day social entrepreneurs that emphasizes the enormous synergies and benefits that arise when business principles are unified with social ventures. The George Foundation‘s Women’s Empowerment program empowers women by providing education, cooperative farming, vocational training, savings planning, and business development. In 2006 the cooperative farming program, Baldev Farms, was the second largest banana grower in South India with 250 acres (1.0 km2) under cultivation. Profits from the farm are used for improving the economic status of the workers and for running the other charitable activities of the foundation.
Social entrepreneurs share some common traits including:
- An unwavering belief in the innate capacity of all people to contribute meaningfully to economic and social development
- A driving passion to make that happen.
- A practical but innovative stance to a social problem, often using market principles and forces, coupled with dogged determination that allows them to break away from constraints imposed by ideology or field of discipline, and pushes them to take risks that others wouldn’t dare.
- Zeal to measure and monitor their impact. Entrepreneurs have high standards, particularly in relation to their own organization’s efforts and in response to the communities with which they engage. Data, both quantitative and qualitative, are their key tools, guiding continuous feedback and improvement.
- A healthy impatience. Social Entrepreneurs cannot sit back and wait for change to happen – they are the change drivers.
About organizational models
Leveraged non-profit ventures
The entrepreneur sets up a non-profit organization to drive the adoption of an innovation that addresses a market or government failure. In doing so, the entrepreneur engages a cross section of society, including private and public organizations, to drive forward the innovation through a multiplier effect. Leveraged non-profit ventures continuously depend on outside philanthropic funding, but their longer term sustainability is often enhanced given that the partners have a vested interest in the continuation of the venture.
Hybrid non-profit ventures
The entrepreneur sets up a non-profit organization but the model includes some degree of cost-recovery through the sale of goods and services to a cross section of institutions, public and private, as well as to target population groups. Often, the entrepreneur sets up several legal entities to accommodate the earning of an income and the charitable expenditures in an optimal structure. To be able to sustain the transformation activities in full and address the needs of clients, who are often poor or marginalized from society, the entrepreneur must mobilize other sources of funding from the public and/or philanthropic sectors. Such funds can be in the form of grants or loans, and even quasi-equity.
Social business ventures
The entrepreneur sets up a for-profit entity or business to provide a social or ecological product or service. While profits are ideally generated, the main aim is not to maximize financial returns for shareholders but to grow the social venture and reach more people in need. Wealth accumulation is not a priority and profits are reinvested in the enterprise to fund expansion. The entrepreneur of a social business venture seeks investors who are interested in combining financial and social returns on their investments.