Sharpening the focus of a blurred landscape – What to read and where?

Inclusive Economy28 Oct 2013Evert-jan Quak

Welcome to The Broker Dossier on Social Entrepreneurship. Social entrepreneurship is increasingly popular as a way of doing business while achieving a social and economic impact. However, many questions still remain about what social entrepreneurship exactly is, how to engage in social business and how to increase its social impact. In this dossier, The Broker aims to sharpen the focus and scope of the current debate on social entrepreneurship.

NGOs and businesses that look beyond corporate social responsibility (CSR) are increasingly interested in experimenting with ways to introduce the concept of social entrepreneurship into their organizations. Most of them integrate elements of social entrepreneurship into programmes or business units without changing their whole organization into a social enterprise. Some prefer to start new social ventures outside the existing organization. The result is a blurred landscape of many hybrid or mixed ways of engaging in social entrepreneurship.

NGOs’ and the private sector’s flirtation with social entrepreneurship is paralleled by the emergence of small social enterprises around the world, set up by individuals who believe in the potential of doing good in an entrepreneurial way. However, with social entrepreneurship growing fast in popularity, there is a danger that it will be misunderstood or even misused. When do you enter the grey area of what can still be called social entrepreneurship?

This dossier is about what makes an enterprise social. The 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.

New knowledge agenda

In this dossier The Broker makes suggestions for a knowledge agenda 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.

In his editorial article in this dossier Editor in Chief of The Broker Frans Bieckmann emphasizes the need to move social entrepreneurship to a higher level if it is to be influential rather than just a promising but short-lived trend or hype.

Core articles in the dossier

The emerging social enterprise’, by Anja Cheriakova, discusses four schools of thoughts in social entrepreneurship, each focusing on one dimension: income generation, social impact, job creation, and social entrepreneurship as a change agent. The article concludes that, to become a change agent, social entrepreneurship must generate a social impact and embed it in a process of continued learning and participation of the community. Revenues and profits should largely be reinvested to fulfil the social mission.

Doing social business right’, also by Anja Cheriakova, examines social business models. These models include different building blocks to balance financial and social values within an organization. The article concludes that social enterprises should be organized around their social purpose on the basis of a social business model, not only to solve an isolated problem but to apply an integrated approach that includes avoiding environmental damage, paying a decent wage, building fair supply chains and ensuring the participation of local communities.

Balancing social and entrepreneurial values’, by Sothy Khieng and Evert-jan Quak, focuses on the opportunities and challenges facing NGOs that embrace the concept of social entrepreneurship. It distinguishes four models for transforming NGOs into social enterprises: a model in which NGOs integrate social business activities into their organization or programmes; an embedded model which goes further, making the whole organization or programme self-reliant on the basis of revenues from its social business activities; an external model in which an NGO sets up a separate social venture; and a mixed model in which an NGO applies parts of the other models.

The final article, ‘Social enterprises: catalysts of economic transition?’ by Evert-jan Quak, analyses the potential of social entrepreneurship to change the economic system and how it can be linked with the idea of an inclusive economy. It concludes that we might be expecting too much from social entrepreneurs to become catalysts for economic transition, as they have to struggle too much to keep their heads above water. However, if social entrepreneurship is to become more influential within mainstream business, consumers, shareholders, citizens and government have to be encouraged to create incentives for businesses to embrace the concept.

Related articles

This dossier is also initiating a discussion on how social entrepreneurs and multinational corporations should work together on the ‘base of the pyramid’ (BOP) market. The Broker is organizing the discussion in cooperation with BOP inc. In his contribution, Rutger Bults of BOP inc writes about the importance of multinationals working together with social entrepreneurs on the BOP market. Al Hammond of the Ashoka Foundation and Robert van den Heuvel of DSM Nutrition help kick-off the discussion by giving their opinions.

The dossier also contains an overview of how social impact can be measured, written by Linda Midgley of PriceWaterhouseCoopers, while Marlon van Dijk of Social Evaluator explains in more detail the concept of social return on investment for social entrepreneurs.

Former director of the United Nations Environment Programme and winner of the 2002 Sasakawa Environment Prize, Ashok Khosla, answers three questions about how developing countries could make use of social entrepreneurship. In her article, Nina Koopman writes about how Social Enterprise NL is trying to use the current momentum in the Netherlands to build up the social enterprise sector.

During our research for this dossier, The Broker came across many reports and articles relevant to social entrepreneurship. You can read short summaries of these reports in this document, together with some suggestions for further reading. We also found some interesting videos, which we have gathered together on our video overview page.

Building a partnership

This dossier is not an end product but the start of much more to come on this web page. The Broker will continue to add articles, will start an international debate on its website in January to dig deeper into the potential of social entrepreneurship to drive socioeconomic change, and will publish learning tools for social entrepreneurs.

The aim is establish a partnership with a variety of organizations to set up a knowledge agenda on social entrepreneurship. We welcome contributions to our debates and comments and suggestions on our articles to help sharpen the focus and scope of social entrepreneurship. Better knowledge will contribute to establishing social entrepreneurship as a serious alternative way of doing business that is valuable for NGOs, start-ups and existing businesses.

The making of this dossier

For this dossier The Broker conducted a small survey of 38 social entrepreneurs in Europe and South East Asia to obtain a better idea of the challenges and obstacles they face. And of the opportunities open to them and some lessons learned. As the survey was not representative we will not be publishing the outcomes, but the authors have used them in their research.

Interviews were conducted in the Netherlands for the article on NGOs (Balancing social and entrepreneurial values) with ICCO, Woord en Daad, Cordaid and Hivos. Many interviews were conducted with NGOs and social entrepreneurs in South East Asia by Sothy Khieng during his PhD research, which The Broker was able to use for the article co-written by Khieng.

We would especially like to thank co-readers of the editorial articles: Alan Fowler, David Woodward, Gerd Junne, Jan Jonkers, Andre Vording, Titus van der Spek, Nicole Verhoeven.

The infographics in this dossier have been designed by subsoda.