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Building political commitment for the social enterprise

Policy recommendations

Evert-jan Quak | March 13, 2014

Policies to promote social entrepreneurship cannot cover up cuts in public expenditure. It should promote equality, greater civic participation in the economy, and the small and medium sized productive sectors. This means an incentive package including not only public procurement, taxation and legal forms, but also regulation of the financial sector and changes in corporate laws to decrease the emphasis on maximizing short-term profit.

This article summarizes policies discussed in the four articles in this dossier. The Broker analyzed academic and policy debates and literature related to social entrepreneurship. The policy recommendations will be sharpened and deepened through the debate that The Broker is hosting on its website.

The general idea is that social business models could help start-ups, existing businesses and NGOs to become real social enterprises and make the right decisions for a financial sustainable future that generates a lasting social impact. This means that social entrepreneurs should aim to look further than just delivering one product or service to help solve a local problem. It requires contributing to a broader impact on society, production processes that are sustainable and socially acceptable, and profits that contribute or are reinvested in a responsible way. To generate such an impact social enterprises must make use of an integral approach and be engaged with other organizations. To deliver impact, it is not only the size of the organization that matters, but the size of the network in which it participates.

Achieving this is, however, easier said than done. Social entrepreneurs face many obstacles and challenges, including what type of legal entity they choose to adopt, limited access to finance, higher costs, etc. that restrict their potential for generating a socioeconomic impact. Although it may be too early to suggest that social entrepreneurship is the catalyst of a transition towards an inclusive economy, this must be its overall aim.

Therefore The Broker made some initial policy recommendations for all kind of stakeholder focusing on five topics: political commitment, social impact measurement, a catalyst for economic transformation, social business models and change agents.

  • Social entrepreneurship can only succeed if there is political commitment. And using it not to cover up cuts in public expenditure, but to promote equality, greater civic participation in the economy, and the small and medium sized productive sectors. This means an incentive package including not only public procurement, taxation and legal forms, but also regulation of the financial sector and changes in corporate laws to decrease the emphasis on maximizing short-term profit.
  • For social enterprises to succeed they need to measure their social impact, otherwise they cannot learn how to increase it. However, a lot of social entrepreneurs are still not measuring their impact, despite this being their main raison d’être. Integrating social impact measurement within the organization and being transparent about it is key to becoming more influential.
  • This also applies to social business models. There should be more emphasis on what models social enterprises can use to balance their social mission with their need for financial stability. Such a business model should also integrate ways that services and products can be resourced sustainably, decent wages paid and environmental damage avoided.
  • Better social impact measurement and using a more comprehensive social business model can only help a social entrepreneur to become a real change agent. There should be a greater focus on promoting social enterprises as game changers on a more macroeconomic level. There are many challenges, but it is necessary to understand better the potential for social entrepreneurship to bring about economic change.
  • This raises the question of whether social entrepreneurship should be a transitional tool that should become an integral part of doing business or promoted more as a separate entity with its own institutions.

Photo credit main picture: Cobalt123