Why Social Enterprises?

Once a non-profit girl, I have now become a fan of social entrepreneurship. The core of a social enterprise lies in its application of business models to tackle urgent social and/or environmental issues.

That’s the easy-to-go theory. However, in practice, it is by no means clear-cut to judge whether an organization qualifies as a social enterprise or not. Due to regional variations in financial and legal restrictions, a social enterprise can take on any form from a mission-driven for-profit entity to a revenue-generating NGO.

Setting aside the mess of putting on a “social enteprise” label, I believe that in whichever form, a true social enterprise represents the following 3 key reasons that explain how the idea of social enterprises has captured my heart and more importantly, how it is breaking new grounds in the art of creating change:

1. “You’ve got the best of both worlds”

Imagine it this way: Marry the business and social sector, and you have social enterprises as the children with a social worker’s heart and a business man’s head. Indeed, a social enteprise is believed to carry the best genes of a traditional business and NGO, using one’s strengths to compensate for the weaknesses of the other.

The business world has always been known to function in a highly efficient and innovative manner. It is where wealth concentrates and talents aspire to step into. On the flip side, the never-ending race to make profits has proved to breed unethical practices that leave behind horrible trails of social and environmental damages, such as labor abuse or forest destruction (Think no further than the recent Formosa scandal in Vietnam!). Cut-throat market competition easily reduces social and environmental values in humans’ life into financial numbers ready to be subtracted from the profit bottom line.

On the other hand, in the social sector, we have aspirational souls commited to addressing human’s most urgent problems. However, the good intention of NGOs is all too often paralyzed by their restricted financing structure. Reliance on unstable flow of donation and institutional funding leads to multiple long-standing problems – unwanted compromises with donors’ requirement, short-term engagement with disadvantaged communities, funding corruption and/or underpaid staff – which might derail an NGO from its original mission track.

As a combination of these two worlds, social enteprises are envisioned to achieve both the efficiency and innovation of the business world and the goodwill of the nonprofit world. As an entity, a social enterprise centers around its social mission, while also operating strictly in a sustainable business model. In other words, social enterprises function within market laws to generate their own money, then re-invest their profits into building community and tackling market inefficiencies. In the upcoming posts, I hope to introduce more social entrepreneurial models that lend evidence to such fulfillment of both financial and social goals.

2. “Give a man a fish and you feed him for a day; teach a man to fish and you feed him for a lifetime” (or even further, as Bill Drayton put it, “social entrepreneurs…won’t stop until they revolutionize the fishing industry”)

Let’s answer this question:

What will you do to help disadvantaged children?

A. Pay yearly visits to donate toys and gifts to the shelters where those children stay

B. Donate money to a charity/ foundation/ nonprofits that work with these children

C. Put together volunteer tours to organize some educational/ fun activities with these children for a few days.

D. Open a business that creates a space for these children to showcase their talents/ innate abilities (e.g. drawing), then sell their products/services and invest the profits back to their education.

(E. Fill in your own innovation)

While different people with varied backgrounds and ideals will make different choices, D is the final call for a social entrepreneur. To He, a social enterprise in Vietnam, can serve as a concrete real-life example. To He organizes free art workshops for disadvantaged children, then scan their drawings and polish them into unique designs of clothes, bags, and other daily accessories that are up for sale.  The profit To He makes will go back to financing more art workshops as well as providing financial support to more disadvantaged children.

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 Products by To He (Image source: To He’s Facebook)

 

What makes option D stand out from the rest is its commitment to building skills and creating “jobs” within the marginalized community it is trying to help. Linked back to the “fishing” philosophy, a social enterprise seeks to provide tools – the fishing rod (or innovate new methods of fishing) – that enhance a community’s social and economic resilience against its problems/circumstances. After all, the most sustainable solutions should build and take advantage of internal strength and capacities, rather than relying on external short-term help such as money or gifts.

This characteristic of a social enterprise also signifies an important bottom-up approach to serving any community: Instead of coming in and expecting to “help” anyone, we should start spending enough time to understand the needs of a community as problem analysis and explore their assets as the base for potential solutions, instead of imposing what we think is the problem statement and the “right” answer. Think about how To He taps into children’s innate talent and enthusiasm for drawing, no matter what physical or mental disabilities they might face, rather than positioning these children as unfortunate victims in need of outside donation. This essence of social enterprises links the growth of social entrepreneurship closely with the rise of design thinking and other human-centered tools in shaping social initiatives that ground their solutions on the resources a community already has.

3. “Keep Calm and Buy Local”

Since a social enterprise is founded on the base of community assets, its products represent the push-back of local values against the “race-to-the-bottom” forces of an ever-expanding global market, where local businesses are drowning under the influx of foreign products.

There are different models for a social enterprise to carve out its share of customers for the movement of local goods: Some create high-quality products that employ the skills of disadvantaged groups and/or utilize local delicacies and resources (e.g. To He). Some build platforms to deliver local products directly to consumers (e.g. Xanh Shop). Others innovate unique products or services that serve the Bottom of the Pyramid (BOP), who would otherwise be neglected by the big MNCs and government (e.g. Nam Thanh Long’s lifebuoy-bag).

In any cases, the underlying line is clear: Social enterprises utilize their social mission as a critical value differentiation for their products. If a high-end Western goods or a cheap made-in-China one contain little more than their commercial worth – prices of materials, labor cost, brand etc., a made-in-Vietnam product offered by a social enterprise, for example a To He’s purse, speaks beyond that: It also tells the story of disadvantaged lives, of talents striving above circumstances, of Vietnamese innovation, of love and support. The social message ingrained in a To He’s product secures its niche customers, on whom a good impression of Vietnamese brand is left. The business equation is now better balanced, as social/ environmental impact carries as much weight as commercial values.

That being said, at the end of the day, social enterprises have to compete by quality. A To He’s purse would not be able to sell if it were made out of bad materials, badly designed or poorly fulfilled the function of a purse. Social values are necessary, but never the sole factors that make a social enterprise’s product stand out and be well-received by its targeted customers. As social enterprises face market needs and fluctuations like any normal business would, they are constantly driven to improve the quality of their products and catch up with new trends or international standards.

Though still confronted with fierce competition, social enterprises’ unique value proposition promises to open up a channel for positioning local products in the global market, from there raising and protecting local voices, as well as preserving local values and resources.

Final thoughts

You might hear the idea of social entrepreneurship presented in different names, e.g. “business with impact”, “responsible business”, “inclusive business”, “impactful SMEs (small- & medium- enterprises)”. You might find yourself asking the same question as I did: what the  hell are the differences between all these names? I was super confused in the beginning as well. However, I gradually realized that as a saying goes, “a rose by any other name smells sweet”, it’s less about the label than the actual values and impact a so-called social enterprise embraces. To me, the 3 above-mentioned characteristics are what define a “social enterprise” and what gives me faith in this concept, even if it might come under a different name in another context.

With that in mind, I would quote Sally Osberg, President of the Skoll Foundation, on what I heard from her talk at the Peter Drucker Forum in Vienna last week to summarize this whole article:

“The key of social entrepreneurship is the primary and utmost attention it pays to marginalized communities, not a for-profit or not-profit model.”

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One important disclaimer:

Exciting as social enterprises look like in this post, they are NOT a rosy path. In fact, a social entrepreneur struggles no less, if not more, than a businessman or a social worker to run their organization. In each of these strengths lie a social enterprise’s own challenges that I wish to explore in upcoming posts. Social enterprises cannot and will not solve every social problems of the world. After all, we need an ecosystem of different types of players – from small enterprises to big foundations – to create any meaningful changes.

 

 

 

 

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