Social Entrepreneurship: A Complete Guide To This Booming Business Model

Long gone are the days of donation dependent NGOs and small-scale but big-hearted projects. A new generation of businesses are changing the game – making doing good the essence of who they are and commerce as their key to achieving it.

Businesses are becoming more and more socially and environmentally conscious. 

You can see it from all the carbon neutral pledges, donation campaigns for social causes and partnerships with social impact organizations. However, a rising crop of entrepreneurs don’t think this is enough. 

Social entrepreneurs believe that helping communities and the environment should not be an auxiliary by-product of a business, but it’s very mission and core. 

This mission-focused business model is gaining popularity globally and some even suggesting it may be the future of business itself.

Is all the hype really worth it, and if so, should you be jumping on it too?

We’ve put together a little guide so you can make that decision for yourself.

WHAT IS SOCIAL ENTREPRENEURSHIP?

Social entrepreneurship is the application of entrepreneurial principles, processes and operations to build a financially independent business that creates social change or addresses a social issue.

Due to its varying legal definitions, lack of coherent framework and fragmented nature, every website is going to have a slightly different definition. 

Sadly there is no universally agreed upon definition of the term. However, there are three central characteristics social enterprises commonly have:

  •  They value social and environmental value over financial value
  •  They operate in the market by producing goods and services
  •  They are financially independent and self-sufficient

Now simply because they place higher value on society and the environment does not mean they do not value income and profit. Just like any other business, a sustainable income-stream and profit generation is crucial to a business’ success and growth. 

What makes social enterprises different is how it is generated and used.

Two Common Business Strategies of Social Enterprises

An article by Abu-Saifan identifies the two most common model business strategies of social enterprises:

Non-
profit
For-Profit
Social Entrepreneurs
Entrepreneurs
Non-Profit with
Earned Income
Strategies
Mission Growth
For-Profit with
Mission-Driven
Strategies
Profit Growth
Sustainability
Dependency
Examples:
SickKids Foundation
The Salvation Army
Canadian Cancer Society
Heart & Stroke Foundation
Self-Sufficiency
Examples:
Proximity Designs
Ashoka
Goodwill
Housing Works
Examples:
DripTech
Revolution Foods
Grameen Bank
SEKEM
Examples:
Microsoft
Apple
Mary Kay Cosmetics
Ben & Jerry's
Figure 1. The entrepreneurship spectrum illustrating the boundaries of social entrepreneurship

1. Non-profit with earned income strategies

The main aim for organizations under this model is to be self-sufficient and their primary goal is to maximize the delivery of goods and services for the sole purpose of increasing social value and impact. 

It is not accountable to shareholder profit demands nor influenced by personal gains from profit. They often apply a hybrid combination of commercial and social entrepreneurial activities.

2. For-profit with mission driven strategies

For-profit organizations perform both social and commercial entrepreneurial activities with the goal of sustainability, primarily economically. In this model, profit is emphasized as a means of attracting necessary investment and talent to strengthen mission-driven initiatives that are dependent on profit margins. 

Here, the product pits itself against the competitive commercial market and it is through its self-sustainability that further social impact is made.

What it is not : An Ethical Business

It should be emphasized that social enterprises are not the same as ethical businesses. A social enterprise centers itself on its social mission and uses commerce as a means of achieving sustainability and impact. 

Ethical businesses are primarily focused on generating profit for shareholders but apply ethics-based approaches such as applying environmentally friendly production processes, proper community engagement and ethical trade standards.

Social Enterprises are everywhere

Social enterprises can come in all shapes and sizes. They span all types of industries and fields. 

From multi-million dollar fashion labels, flourishing financial institutions, to your local coffee shop – social enterprises are tapping into vast markets as innovative technologies are introducing more efficient and effective ways of becoming more sustainable both socially and environmentally. 

Some are so prevalent in the market, you may not even realize they are a social enterprise. Gone are the days when feel-good companies are brushed off as over-idealistic and unproductive businesses.

WHY IS SOCIAL ENTREPRENEURSHIP ON THE RISE?

There has been a distinct shift in both consumers and producers towards more socially-conscious practices. 

Political, social and economic changes have brought the environmental and human cost of ‘business-as-usual’ into the spotlight, spurring on a wave of radical values which challenge the current harmful norms of business.

Deloitte’s 2018 Human Capital Trends survey reveals consumers are becoming increasingly vigilant of the social and environmental efforts of businesses, with 77% of respondents rating citizenship and social impact as a critical factor to their choice of business. They also revealed that 86% of millennials believe business success should not only be measured by financial performance.  

Businesses are also showing a growing shift with 65% of CEOs rating “inclusive growth” as the top-three strategic concerns, more than three times the proportion selecting “shareholder value”.

Emerging from this change has been the economic philosophy of the triple-bottom-line. This approach suggests that instead of businesses only focusing on one monetary bottom-line, it should be expanded to consider environmental and social impacts of the business. 

This led to the introduction of the three P’s – Profit, People and Planet. The end goal is to achieve sustainable growth by accounting for all costs holistically.

It is no doubt that the rising popularity of social entrepreneurship can also attribute itself to successful icons who have helped elevate the economic business model to the main stage. 

Figures such as Muhammad Yunus, the founder of the prolific Grameen Bank in Bangladesh, was awarded a Nobel Peace Prize in 2006 for his contribution to microcredit and its ability to “create economic and social development from below.”. 

Even celebrities have jumped onto the movement with Jaden Smith co-founding the multi-million dollar sustainably sourced and renewably packaged water company, Just Water.

But it’s not just a handful of successful icons that have made it popular. Keep scrolling to let the figures below speak for themselves.

SOME SHOCKING STATISTICS ABOUT SOCIAL ENTREPRENEURSHIP

1. Social Enterprises employ millions worldwide.

Though it’s hard to get collective global figures, the impact of social enterprises in countries are vast. 

Probono Australia found more than 20,000 social enterprises active in Australia across all industries, employing 300,000 Australians and contributing 3% to the national GDP. 

In the UK these numbers are even higher. There are 100,000 social enterprises, employing 2 million people and worth £60 billion or 5% of their GDP.

2. Social Entrepreneurship is growing fast

Social enterprises are growing up and growing fast. 

In the US, over half of social enterprises are under 15 years old. In India, this figure jumps up even higher, with 89% of social enterprises being younger than 10 years old

This young but growing field makes it a prime opportunity for budding entrepreneurs who don’t want to fight against the big traditional businesses. It also gives them space to be creative and innovative to grab their market.

3. Social Enterprises impacts diversity, equality and inclusion

The Global Entrepreneurship Monitor 2016 discovered social enterprises are much more equitable and diverse than their commercial counterparts. 

They found that 45% of social entrepreneurs are female, representing a much higher proportion than the 2:1 (male to female) ratio in the commercial space. 

Furthermore, social enterprises are also a pioneering space for minority groups, particularly in the UK, where 31 percent of social enterprises have either black, Asian or ethnic minority directors, and 40 percent have a director with a disability. 

As such an inclusive space, no matter your race, gender, religion or disabilities, social enterprises are a welcome space for all.

4. Social Enterprises helps developing nations

In countries where governments may not have the capacity to provide necessary services, social entrepreneurship is helping communities help themselves. 

Though economic stability is only one facet of poverty, social enterprises are able to help alleviate poverty through job creation that directly addresses localized needs. They also embody key values of ownership, empowerment, inclusion, and sustainability enshrined in the United Nations Sustainable Development Goals.

GEM’s 2016 study found Senegal has been quick to catch on with over 18% of its workforce involved in a degree of social entrepreneurial activity. According to the British Council, social enterprise co-operatives accounts for 45% of Kenya’s GDP, contributing more than both private and public sectors.

Governments are also jumping on. The city of Santiago has been dubbed ‘Chilecon Valley’ as the newest hub for social entrepreneurs as the government has pushed for entrepreneurship with a social lens through its start-up accelerator program ‘Start Up Chile’.

5 SUCCESSFUL SOCIAL ENTERPRISES YOU SHOULD KNOW

So you’re halfway sold on this model and you’ve got all the statistics to back them up but you’re not 100 percent convinced. 

What type of business can I build? What type of social issue can I address? What type of impact can I actually make? 

Well, lucky for you we’ve made a quick list to show you a wide range of successful social enterprises right from the big multi-million dollar businesses to your local café down the street.

1.   TOMS : World-renowned brand helping the poor

Some of you may know TOMS for their characteristic canvas shoes and may even own a few pairs yourself. 

Founded by Blake Mycoskie in 2006, it started out just selling shoes and has now expanded to apparel, eyewear and accessories. At its peak, they were generating $400 million in revenue in 2016. 

They became well-known for their one-for-one model – buy one pair and TOMS will give another pair to a child in need. They later expanded their initiatives to healthcare and social investments. 

To date, TOMS has donated 95 million pairs of shoes, restored eye-sight to 780,000 people and have pledged $6.5 million to social impact grants to keep social entrepreneurship flourishing.

2.   Grameen Bank: Loan for the poor made sustainable

Known affectionately as the godfather of social impact and social entrepreneurship, Muhammad Yunus’ Grameen Bank in Bangladesh was a gamechanger who put microcredit in the spotlight.

Grameen Bank specialized in providing poor people with necessary financial loans to support income-generating assets that are crucial to poverty alleviation and social mobility. 

Its customers, most of which are denied loans from traditional banks due to lack of collateral, are held accountable through alternative assets known as ‘social collateral’ – making groups and communities crowdsource their ideas to make repayments. 

This revolutionary model has seen massive impact with Grameen Bank stating they have given over $3 billion in loans to nearly 9 million borrowers and sporting a 95% repayment rate. With up to 97% of their borrowers being women, they have also made strides in women empowerment and independence in Bangladesh.

3.   Thankyou: Bottled water and bath soap that alleviates poverty

Founded in 2008 from Melbourne, Australia – the Thankyou brand started off by tackling the highly competitive bottled water market and has since expanded into a massive range of products from handwash to nappies. 

They became known for their unique ‘impact – tracking’ feature which allows customers to directly track where and how their money is being used and donated. 

Though initially focused solely on the issue of clean water accessibility in developing countries, they have since grown to support a broad range of social initiatives. 

They have just recently permanently stopped the production of their bottled water product, citing its long-term impact as environmentally unsustainable and calling it a ‘silly product’ themselves. However, they have already launched massive plans to attain partnerships with leading global product companies and to expand their remaining products to 190 countries worldwide. 

To date they have raised over $17 million in donations and have the courageous goal of funding the current poverty gap by 2030.

4.   Who Gives A Crap: Toilet Paper that doesn’t hurt the environment

This quirky social enterprise started in 2010 with the goal of making environmentally and socially sustainable toilet paper by selling 100% recycled toilet paper in equally funky and recyclable packaging. 

For their health and social contributions, 50% of their profits go directly to building toilets in developing nations to help the 2 billion people on the planet in need of proper sanitation. 

Though toilets may not seem like the most crucial of needs, insufficient sanitation facilities have contributed to nearly 300,000 deaths of children under the age of five every year. 

In the past 10 years, they have raised $8.3 million across 5 countries. 

5.   Parliament on King: Your local café makes a difference

This small café in the neighborhood of Erskineville shows that social enterprises don’t always have to be a multi-million dollar affair. It can start from your backyard, or in this case, Prasad and Bella’s literal front yard.

From the front of their home, the couple has made a café, bookstore, event space, hospitality training center and catering service with the initial focus of helping asylum seekers and refugees upskill themselves to gain employment in Australia. 

So far, they have trained over 250 people in barista skills and food hygiene and service. 

During the Covid-19 pandemic, they went even further to start a campaign called The Soup of Human Kindness – a pay-what-you-can model to support the unemployed, homeless and refugees struggling during the pandemic. 

The café has since become the beating heart of its local community, embodying the pursuit of social engagement, community connection and positive impact.

HOW TO GET STARTED ON YOUR SOCIAL ENTERPRISE

So you’re now potentially interested in social entrepreneurship, have been inspired by some successful business and are thinking of starting up your own venture. How do you get started?

1. Pick your passion

What social issue do you want to address? Is it environmental sustainability or female empowerment or global education? Bring it even closer. What do you think people in your neighborhood would need? 

Whatever it may be – big or small, close to home or miles away – really define what it is you are passionate about and what problem you want to solve. Try to get a single focused issue.

2. Find the Gap

Once you’ve identified your problem, start looking for gaps in the market. Look at what is needed or missing to help solve your problem.

Is there a gap between food waste from supermarkets and homeless people suffering from food insecurity? What can you make that helps get that food to the people who need it? 

This might take some time and it would be worth it to go out in the field and see what is happening in the marketplace.

3. Build your business model

This is the tricky part. To be an enterprise of any kind, there must be an economically sustainable and monetizable product.

Whether you use a hybrid model like Thankyou or you make a groundbreaking alternative to the market like Grameen Bank, it is critical to define your model to get everything started. 

If it won’t make money, it won’t help you or any of the problems you want to solve.

4. Hone on your skills and constantly learn

What skills and talents can you bring to the table to help your business? Are you good at accounting, strategic planning or social media

Whatever it may be, hone your skills as best you can. Once you identify your strengths and weaknesses, upskill yourself through courses, books or workshops to fill in your gaps.

5. Tap into all the available resources

There are so many resources available to budding social entrepreneurs. Don’t hold back and tap into online communities to find like-minded, passion-driven people from LinkedIn to Facebook. 

Try to attend some of the countless social impact conferences and summits happening all around the world which are now mainly happening online (lucky us!). Some conferences that come to mind are the Social Innovation Summit, Stanford’s Frontiers for Social Innovation and the Social Enterprise Summit.

Many governments have been increasing funding to support social enterprises ranging from seed capital, start-up accelerator programs to general entrepreneurial workshops to get your business idea off the ground.

Social entrepreneurship is gaining a lot of support and traction all around the world, so don’t miss out on the resources, talents and ideas that are waiting for you.

Hopefully you’re now inspired and ready to start making a business that can change the world for the better. Make sure to subscribe to our newsletter to get more insightful tips and articles about business and digital marketing to help build your new business!

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