Social Entrepreneurship-Using Business as a Force of Good
All too often, I hear many criticizing the business/finance field to be filled with greedy, selfish individuals who only care about themselves and money. This stereotype has led people to believe that the business field is “corrupt”; they forget about the benefits business could have on the world. I am a firm believer that our generation can use business as a force to make large strides towards solving major world issues, through social entrepreneurship. I intend to use this blog to clear any current misconceptions and to inspire this next generation of social entrepreneurs.
Understanding Social Entrepreneurs
Social entrepreneurs are individuals who pursue businesses in hopes to lead positive change within society and make a profit. These social enterprises are a combination of nonprofits and regular companies: they start with a mission of making beneficial change, like nonprofits, but also have profit as a main goal, like regular companies. The first priority of these social enterprises is their mission — not the shareholders — as their profit is primarily used as a means to further increase their efforts to change, making them more effective than nonprofits. Examples of social entrepreneurship include microfinance institutions and programs for underprivileged communities.
A primary example of a social enterprise is Patagonia. Patagonia is leading the way for environmental change through their sustainably made products and their pledge to donate 1% of their profits to the preservation and restoration of the environment. Another example of social entrepreneurship(this one being a little more complex) is Muhammad Yunus’s micro-credit system. Yunus’s journey started in 1976 when he gave a loan out of his own pocket to a group of basket weavers in Bangladesh to help support them. This grew into him creating a revolutionary microcredit system. This system gives small loans to poor entrepreneurs who can not afford traditional bank loans. He has helped millions of individuals escape poverty with this system—winning him the Nobel Peace Price in 2006.
Main Types of Social Enterprises:
**Social Enterprises can be any mix of these three types**
Businesses that have created a new social/environmental service or product:
These businesses create products or services that will work towards the company’s mission themselves. Examples of these include alternative energy sources or revolutionary EdTech applications. Ultimately, these businesses aim to have their product or service itself make meaningful changes in society.
Businesses that make a more socially responsible/environmentally-friendly version of existing products/services:
These businesses aim to make changes to the basic products that average consumers use in their everyday lives. Examples of this type of business that come to mind right away are metal straws, Alternative Apparel, and Reformation. Rather than focusing on the revolutionary effect that their product will have once it is in the hands of the consumers, they focus on the supply chains and making of their product to ensure their goals.
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Businesses that use their profits to donate to charitable causes:
This is the most simple type of social entrepreneurship. Many social enterprises donate alongside other efforts to make social change; for example, Patagonia has sustainably made products and donates 1% of their profits. This method is also popular for businesses who did not start off with a specific social mission, but want to start moving towards change. Some businesses may also do this as a form of strategic CSR(corporate social responsibility), which essentially means they are donating to boost their public image.
4 Key Principles for Social Enterprises:
**New Businesses should not take on all of these at the same time, rather they should go step-by-step ensuring the best out of each section. Also, decisions at this point in time are not final and are subject to change. This change can occur due to the development of the business’s foundational ideas or unexpected problems**
1.Social/Environmental Mission
As stated previously, every social enterprise is started with the purpose of solving a social problem. This is the business’s main priority- all business activity will be centered around this mission. The first step to develop this mission is to find a broad target market. This should be a unique group that you can bring real change too. Don’t stress on the specifics of your target group as it is subject to change as you go along with getting your business up and running. By analyzing your target group, you will have a much better understanding of how to help them; therefore, having a better understanding of how to make your business successful!
2.Financial Stability
What makes social enterprises so effective is that they are able to turn their profits into real-world change and do not have to rely on other sources of money. So, A REVENUE STREAM IS VERY IMPORTANT. I have seen many examples of high school and collegiate business plans which focus too much on giving back, and not enough on its funding. All social entrepreneurs must keep in mind that they are still running a business that needs revenue to operate — this is what puts them in a different league when compared to non-profits. We must keep that in mind in order to be successful.
3.Profit Distribution
For social enterprises, the mission is always the first priority when it comes to spending. For growing businesses, profits should be reinvested into the business to optimize growth. Once a stable revenue stream is obtained, a good majority of the profits should go towards donating to the cause, researching more ways to help, etc.
4.Leadership Style
Participation among everyone working at the business is key for the success of not only social enterprises, but every business. This ensures that the moves that the business is making are based on a collective, agreed-upon decision, and not just the decision of one. All employees should be equally committed to the cause that the business is supporting for this to work effectively. This will once again ensure the morale of the employees to increase and increase efficiency.
Social Entrepreneurship is definitely here to stay and will make major positive impacts in our world. Throughout this blog, I hope to inspire the next generation of social entrepreneurs by sparking new passions- mainly through interviews with professionals in this field.
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