Many of us care deeply about social issues that are dear to us, yet we often are far too busy managing our own businesses to give more than a donation or a modicum of time. As the nonprofit sector feels the pinch of not only fewer dollars, but also fewer active volunteers, innovative approaches are being sought. From these efforts has evolved the new field of social entrepreneurship. Social entrepreneurs essentially approach social issues from an entrepreneurial perspective.
According to the Institute for Social Entrepreneurs, "a social entrepreneur engages in the same tasks (as an entrepreneur), but in the nonprofit arena and for an entirely different reason - to benefit the members of a target audience and society in general." They essentially use traditional business skills to create social rather than private value.
There are a number of differences between for-profit entrepreneurs and social entrepreneurs. Social entrepreneurs base their strength in the collective wisdom of and experience of the organization and its key stakeholders rather than on their personal skills and knowledge, seeing profit as a means rather than an end, and risking organizational assets, image and public trust rather than personal or investors' assets. The same qualities of innovation and risk are there, but with a different focus.
Social entrepreneurship is happening globally. Innovative approaches to social issues are occurring on a daily basis worldwide. Being entrepreneurial about social issues can be accomplished in a variety of ways. The most obvious one is to run a not-for-profit organization in innovative ways that create funding for their programs or create employment opportunities for their clients. Many nonprofits have taken this route. The Salvation Army and Goodwill paved the way with their thrift stores.
Many nonprofits have added some fascinating innovative twists to this model. Some examples are:
Homeless shelters that start businesses that train and employ their residents.
The Women's Bean Project that gives job training, GED tutoring, individual counseling, internships and job placement to "at-risk" women by while employing them in manufacturing and distributing bean soup and salsa mixes. The sales of the mixes covers 80% of job placement.
The Fifth Avenue Committee that operates a cleaners, a temporary staffing service and is in the planning stages for the launch of an auto repair facility - all as part of an effort to provide community development in South Brooklyn.
Development of social purpose businesses such as for-profit community development banks
For-profit businesses often participate in creatively addressing social issues through such programs as giving their employees paid leave to perform community service or partnering with a nonprofit in joint marketing. Banks can help through creative lending to stimulate housing, business, or community development, employment training can be offered through non-profit affiliates, benefit packages can be structured to allow employees to participate in nonprofit ventures, partnerships can be formed to pursue mutual interests, and business owners can integrate social responsibility into their daily operations.
One of the most promising developments in social entrepreneurship is the emergence of "venture philanthropy" funds. Under the venture philanthropy model, an organization funds and helps guide nonprofit organizations in planning, launching and managing new programs that are designed to provide ongoing funding for the organization. While primarily supported through donations, the funds also generate income through loan generation fees, interest on loans, cost-sharing fees for consulting services, and interest income on cash balances. Possibilities of equity-based financing are being explored as a future opportunity for income. The critical component of this type of operation is that the nonprofit become at least partially, if not wholly, self-sustaining. Simply supporting a good cause is not sufficient. The venture philanthropy funds provide traditional venture capital type funding and expertise in the expectation that the nonprofit will fly on its own at sometime in the future. Leaders in this movement include the Roberts Enterprise Development Fund, Ashoka, the Entrepreneurs' Foundation, Robin Hood Foundation, and Social Venture Partners.
Social entrepreneurism is providing some exciting new directions for the resolution of social problems - and it is also providing for-profit businesses with opportunities for partnerships that add a sense of social purpose to their business, while enhancing their own profitability. It sounds like a win-win for all involved.
