When most people think of entrepreneurship, they think of a successful startup raking in big profits. For social entrepreneurs, though, starting a business is about more than just profit. In addition to revenue, social innovators measure success by their impact on people and their communities
Social entrepreneurship empowers consumers and positively affects society when executed well. This blending of business goals with community and environmental needs is likely to be a driving force of growth for companies big and small.
What is Social Entrepreneurship?
It’s now easier than ever for consumers to see social entrepreneurship in action through social media activity, making it seem like a new trend. While social media and technology have undoubtedly made it simpler for social entrepreneurs to connect with their target markets to share values and accomplishments, the concept of making a social impact through business wasn’t born with social media.
Business professionals have been trying to solve community and societal issues with innovation for decades. Bill Drayton, the founder of Ashoka, an organization that supports social entrepreneurs, said, “Where do solutions come from? They come from entrepreneurs. Entrepreneurs committed to the good of all.”
To that end, social enterprises attempt to impact people’s well-being, the environment, and communities through entrepreneurial and innovative business efforts. This commitment by organizations allows consumers to make purchase decisions based on both their needs and values.
Social entrepreneurship can be hard to identify because it can be executed in various ways. For example, being a social enterprise does not mean an organization does not want to profit. Many companies that give back make huge profits, but the goal of social entrepreneurship is to take business goals even further by addressing societal and environmental issues.
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Types of Social Entrepreneurship
Social businesses come in many forms, but The Social Enterprise Alliance recognizes three general models for these types of business:
1. Opportunity Employment
These organizations employ people who have trouble securing employment due to physical or mental barriers. A well-known example of the opportunity employment model is Goodwill Industries. The company accepts donations and re-sells them while investing in jobs programs and employing those who struggle to secure work elsewhere.
Jim Gibbons, president of Goodwill from 2008 to 2018, stated, “Each agency operates our stores that collect donated goods and uses the revenues to fund job-training and placement programs in their communities. Acting as their own social enterprises, Goodwill agencies on the local level serve their communities by creating a culture of service, innovation, and collaboration.”
2. Transformative Products or Services
These social businesses create a good or service with the specific goal of having a societal or environmental impact. Entrepreneurs who develop transformative products and services have diverse objectives, but they all share the goal of positively changing society somehow with their innovation.
Final Straw took this approach to social entrepreneurship. Their website states, “Our mission is to create reusable Foreverables™. . . that reduce the need for plastics, empower individuals to change their buying habits, and raise awareness of the impacts of our everyday decisions.” Their collection of reusable straws and cutlery offers an opportunity to reduce the amount of single-use plastics purchased. The business itself makes people aware that there are alternatives to excessive waste.
3. Donate-Back Organizations
Donate-back companies contribute a portion of their profits or physical goods to a cause. Bombas is an excellent example of a donate-back enterprise. In addition to getting a quality product, each consumer knows that their Bombas purchase gives something valuable to those in need. For each item of clothing purchased, the company donates one of the same items to a homeless shelter. They went a step further and designed their clothing to be ideal for people who can’t wash it after every wear.
The company website states, “We exist to help support the homeless community, and to bring awareness to an under-publicized problem in the United States.” At its core, the company’s purpose is giving back, not selling clothing, making it a solid example of social entrepreneurship.
Companies That Give Back
The Social Enterprise Alliance list above is not exhaustive. Some experts define social entrepreneurship so broadly that they include for-profit businesses that operate in a socially responsible way. A socially responsible company attempts to make a just or sustainable world through its everyday business operations. Their sole goal is not social outcomes, but they still seek to create positive changes and contribute to society. Examples of steps that companies can take to be socially responsible include reducing carbon footprints, improving labor practices, charitable giving, and encouraging volunteerism.
As consumers communicate their values with their dollars and the social impact of this type of entrepreneurship is fully recognized, businesses will likely adapt their daily operations and how they distribute their profits to be more socially responsible.
The Impact of Social Entrepreneurs
Unlike other returns on investment, social impact can be hard to measure, but there are noticeable benefits. Business leaders and consumers alike find value in social business practices. From consumer empowerment to the actual effects that money can have on communities, social entrepreneurship is felt in many ways.
When a business seeks to make social change, consumers indirectly take a stand with their spending. Customers shopping at social businesses don’t merely get the goods or services they set out to buy — their purchase also allows them to make a difference through their consumer behavior.
According to a 2018 global Nielsen report, 73% of consumers say they would adjust their consumption habits to reduce their impact on the environment. A Mintel report from 2018 stated, “Half (50%) of Americans say that they would switch to a company that supports a cause they believe in, rising to 61% of adult iGeneration consumers (aged 18-23) and millennials (aged 24-41).” Alternatively, 65% said they’d stop buying from a brand if it had irresponsible business practices.
These numbers suggest that consumers will adapt their spending habits to support their values and expect businesses to champion causes so shoppers can make socially conscious choices.
Social enterprises signal their values with their initiatives, allowing the public to purchase goods and services with the knowledge of, for the most part, how their dollars will be used long-term. A social entrepreneur starts a conversation with the consumer and is transparent about what they value, and the public can decide whether they want to partake. This openness fosters trust between the public and organizations.
According to a 2019 global report from Edelman, 76% of those surveyed felt CEOs should take the lead to create change instead of waiting for the government to do it. Fifty-six percent believed CEOs could affect issues such as the environment, equal pay, personal data, and job training. This belief that business leaders should seek to do more than just run a successful business exemplifies the public’s trust in organizations to do powerful things with their operations and profits.
The social impact of social entrepreneurship is vast. As consumers are empowered and more companies begin supporting community causes, the possibility of businesses having a significant role in social and environmental change will grow. Through social innovation, organizations are no longer beholden to profit only, but also to greater ideals that make consumers and employees proud and stronger than ever before. By creating jobs and giving back, companies can create a cycle of social impact that is sustainable and inspiring.
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