The Biggest Challenge of Running a Social Enterprise
Still in its infancy, social enterprise as an industry is quickly moving from a slow crawl to a giant leap. The commercial world is starting to pay attention with success stories like ThankYou Group, Toms and Warby Parker leading the way and inspiring others to step up into this exciting new arena of socially focused commerce.
The journey is not without its challenges, however, and those who embark on it often struggle to balance business building with nurturing their social cause. But when they succeed, the results are world changing.
WHAT IS A SOCIAL ENTERPRISE?
A social enterprise is a businesses that trades to intentionally tackle social problems such as improving communities, providing people access to employment and training, or helping the environment. They apply commercial strategies to maximise improvements in human and environmental well-being. A social enterprise exists solely to generate profits which are redistributed to social programs or charitable activities.
Imagine a scale. At one end is commercial business with charity at the other. You might think social enterprise fits neatly in the middle, however there are many similar business models. Closer to the commercial end is social and ethical business. These businesses are driven commercially but maintain ethical and social principals. At the charity end is the NFP (not for profit) sector who pour their profits back into building a sustainable enterprise for the benefit of others.
Many at the charity/NFP end are highly profitable and, like social enterprise are in business to fulfil a need in the community. The difference, however is that most rely heavily on funding through government programs, grants, public donations, bequests etc. Social entrepreneurs, whilst not averse to funding, derive their income mostly from the sale of goods or services.
A FEW STATS*
In 2015 Canada reported a new wave of social enterprise with 57% less than three years old. 81% described themselves as having a social purpose, 45% operate to achieve a cultural purpose, 26% work towards employment development and 27% focus on the environment. In Europe, one out of every four start-ups are social enterprises, whilst in Australia, an estimated 20,000 social enterprises were operating in 2010 and constitute 2-3% of GDP.
Social entrepreneurship is being taught in universities around the world with 75% of universities in The Middle East teaching this new form of business. In the USA, 22% of social enterprises have over $2 million in annual revenue (2012). The UK reported their social enterprises were more likely to be led by women and those from minority ethnic groups.
In Vietnam, 68% are working towards poverty reduction and 48% have environmental objectives (2012), whilst in Senegal, over 18% of the population are pursuing social entrepreneurial activity.
ONE MAJOR CHALLENGE
As with any business, managing viability, growth, finance, staff and marketing can test the social entrepreneur. On top of that, they’re faced with a unique challenge; HOW TO EFFECTIVELY MANAGE AND ACCURATELY MEASURE THEIR SOCIAL IMPACT.
The bottom line for a social entrepreneur whilst derived from commercial sources is directly related to their cause; how much social value they provide. Growth is predominately measured from the external beneficiary perspective rather than that of internal financial gain.
It’s a balancing act between the creation of social value and profit generation. While they may not answer to shareholders or a board of directors, social entrepreneurs do have stakeholders who demand accountability; to know where the funds are distributed and the impact being made.
Many social entrepreneurs set up their own charity, not-for-profit or foundation. This is a logical and sound way to be certain that funds are being channelled correctly – but it’s a complex and time consuming process.
AN INSPIRING EXAMPLE
NALU is a streetwear clothing company in Bali. It was founded by teenagers Dali (15) and Finn (12) Schonfelder with the sole purpose of funding school uniforms for children in India.
Once you turn 12 in India, the rules are clear – no uniform, no school. No school means no room and board and leaves children vulnerable to child labour and early marriage. After visiting India several times with their parents, Dali and Finn decided there must be a way to keep these children safe and help them continue their education.
The pair had been interested in clothing as young children and with the help of their philanthropic parents, decided that combining fashion and giving was the perfect formula. Dali and Finn found a way to give a school uniform to a child in need for every article of clothing they sell. From humble beginnings, NALU now has a strong online following, a shop in Bali and the range has even come to the attention of international fashion designer Donna Karan.
With a goal to give 20,000 school uniforms each month, these young social entrepreneurs are well on their way, having already given more than a thousand. Most importantly there has been a 78% increase in school enrolments in the first school they supported.
GIVING MADE EASY
Dali and Finn quickly realised that the more successful they became, the more difficult it would be to manage both the business side of things and the giving. They couldn’t fly to India every time they wanted to deliver uniforms. They also didn’t want to set up their own foundation and have to manage that as well as the production, promotion and sales of their range.
Discovering global business giving initiative Buy1GIVE1 (B1G1) came at just the right time. Not only would B1G1 help by managing the giving side of the enterprise, the pair were immediately connected with other like-minded businesses around the world.
Many more social enterprises are turning to this model to take care of the giving, allowing them to focus on building the enterprise. B1G1 works with over 800 projects globally and through their 1200 strong business membership have delivered close to 100 million measurable impacts.
For Dali and Finn it means they simply calculate their sales figures, go to the B1G1 online platform and give… and 100 percent of the money they give through B1G1 is delivered directly to their chosen project. That figure would be impossible for a social enterprise to achieve if they were to run their own charity.
They receive updates on their charity and full financial reporting. As well, they can connect their customers to B1G1 to add their own personal giving to the impacts created by NALU, encouraging a model of buy one, give one… and give a little more!
A NEW WAY FORWARD
The rise in social entrepreneurship is not surprising as people with a passion to create a better world lose faith in governments and big business. They seek a more equitable system for all and enjoy utilising their business talents to make a real difference.
This new generation of social entrepreneurs understands that profits need not come at a cost, but can instead offer a benefit to society. They are being supported by a growing band of conscious consumers who look beyond price tags, sales and advertising to ethics, sustainability and social responsibility.
For the sake of the world, let’s hope it’s a trend that continues to grow and thrive.