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Social Entrepreneurship

Social Entrepreneurship – Concept , Types, Characteristics, Approaches and Examples | Fundamentals of Entrepreneurship

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Social Entrepreneurship

The concept of social entrepreneurship describes how individuals, startups, and entrepreneurs work to develop and fund solutions that address social issues. It can also be known as an organization that uses business methods with the aim of addressing a social or environmental problem in an innovative. It is all about recognizing the social problems and achieving a social change by employing entrepreneurial principles, processes and operations.

In order to improve the living standard of the people and society, social entrepreneurship combines commerce and social issues. With an acute understanding of social needs, social entrepreneurs fulfill the required needs through creative organization. Social entrepreneurs don’t measure their success in terms of profit alone but their success is also shown by the improvement of social value and standards.

The entrepreneurs involved in social entrepreneurship are associated with non-profit sectors and organizations but without eliminating the motive of making a profit. The major focus of social entrepreneurship is on creating social capital without measuring performance in terms of profit or return.

In a similar way, social entrepreneurship also focuses on environmental problems and offers new ideas in business for wide-scale social and environmental impact.

Types of Social Entrepreneurship

Some of the types of social entrepreneurship are as follows:

i. Non-profit organization
ii. Co-operative societies
iii. Social enterprise
iv. Community project
v. Special purpose business

Characteristics of Social Entrepreneurship

Social entrepreneurs aim to contribute to society for the long-term business activities in the society. Their main focus is on creating social capital without measuring performance in terms of profit. Some of the characteristics of social entrepreneurship are as follows:

Characteristics of Social Entrepreneurship

Achieve Social Change: Social entrepreneurship is considered as the means of achieving change in society. It recognizes social problems and achieves social change by employing entrepreneurial principles, processes, and operations.

Initiative Innovative: There is the initiation of social entrepreneurship towards the innovation of new concepts, ideas, and models for solving social problems. The problems like health, education, unemployment, natural calamities, etc. are considered as social problems. There is the generation of new methods and techniques for resolving social problems and issues by social entrepreneurs.

Create Value: The main aim of social entrepreneurship is to create value to society. It focuses on creating social capital without measuring the performance in terms of profit or return. Entrepreneurs perform such business activities that can create and maintain value of the society.

Change Agent: Social entrepreneurs are the change agents of society. They support society through their innovative new concept, ideas, and knowledge. They understand social needs and fulfill it through creative organization. They measure their success through the improvement of social values and standards, not only in terms of profit.

Feel Satisfaction: The application of innovative, practical, sustainable, market-based approaches is emphasized by social entrepreneurship which supports to fulfill the needs of under-served populations. In present time, it has become the priority for decision-makers at the most senior levels.

Approaches of Social Entrepreneurship

There are various approaches for studying social entrepreneurship. The approaches of social entrepreneurship are as follows:

Approaches of Social Entrepreneurship

  • The Innovative School of Thought:

The innovative school of thought focuses on social entrepreneurs as individuals who tackle social problems and meet social needs in an innovative manner. Since social entrepreneurs are change makers, they carry out new combinations in terms of new products or service, new methods of production, and new forms of organization. The systematic nature of innovation brought its impact at a broad part of society.

  • The Social Enterprise School of Thought:

The social enterprise school of thought focuses on social enterprises which are involved in various activities for generating income. The various services which is provided to society is not on a free basis but charge a certain amount of fee.

Such funds are used to serve society in terms of grants and subsidies. This school emphasizes that earning is necessary for every social enterprise for its sustainable development and continuous service to society. Charitable institutions like hospitals, schools, colleges, and NGOs are applying this approach.

  • The EMES Approach:

EMES refers to European research network. As per this approach, social enterprise should be participatory in nature. It basically focuses on three distinct dimensions of social enterprises consisting of economic and entrepreneurial dimensions, social dimensions, and participatory governance dimensions.

The focus of economic and entrepreneurial dimensions is towards continuous production and sale of goods and services taking significant levels of risk and minimum payment of workers. Similarly, social dimensions of social enterprise emphasize an explicit aim of benefitting the community.

In similar way, participatory governance of social enterprises focuses on a high degree of autonomy, decision-making power without being based on capital ownership, and participator nature of decision making.

  • UK Approach:

As per this approach, social enterprise’s primary objective is to fulfill social expectations. This approach emphasizes that social enterprises can be involved in various types of commercial activities to earn revenue and surplus. The major part of the surplus should not be distributed to the shareholders or investors. It should be invested in the social enterprise for its sustainability.

Sustainability of Social Enterprises

The availability of resources and the capability to survive and perform social activities for long duration of time is known as the sustainability of social enterprises. It is dependent on the ability to meet expansion and operating costs.

When social enterprises are able to fulfill the expectations of society and able to generate resources can only perform social activities for a long duration of time. The major factors affecting the sustainability of social enterprises are funding and management.

Sustainability of Social Enterprises

A) Funding:

Funding is one of the factors affecting the sustainability of social enterprises. The sustainability of social enterprises depends on the ability to manage funds. Funds can be generated through internal sources and external sources.

The internal sources include self-financing, subscriptions from members, and fees collected for service provided. In a similar way, external sources include grants, subsidies, prizes, donations, etc. There are different sources of funding for social enterprise. Some of it are:

Self-Financing: The investment of capital by social entrepreneurs is an important source of funds of social enterprises. Social entrepreneurs contribute both fixed capital and working capital. They invest capital at the initial stage of the establishment and operation of social enterprises.

Subscription: Subscription consists of membership fees paid by the members. Social enterprises involve different types of members such as whole-life members, fixed-time members, general members etc. Whole-life members and fixed-time members contribute a membership fee at a time whereas general members contribute a membership fee at the end of every fiscal year.

Fee Collected: There is the provision of providing different types of services to different clients based on requirements in social enterprise. For instance, organization of training or efficiency development programs, distribution of medicines, public awareness programs, etc. These programs are organized by charging nominal fees from clients.

Grants and Subsidy: These are important sources of funds for many social enterprises. Grants are provided by the government or the other organization in terms of cash whereas, subsidy is provided in terms of goods and services while organizing any social program.

Donation and Prizes: The different forms of donation to social enterprises based on their social programs is provided by government institutions, business enterprises, and entrepreneurs. Social enterprises are felicitated by providing cash prizes for their better service to society.

B) Management:

It is necessary to have proper management in the business for its successful functioning. The entire success or failure of an organization is totally dependent on its management system. It is essential to have effective management for the successful functioning and sustainability of social enterprises.

Some of the issues that need to be considered for the effective functioning of social enterprises are as follows:

Management Team: It is necessary to have an effective management team for the sustainable development of social enterprises. Team members must practice of mutual interaction, discussion, support, and control to each other while accomplishing assigned jobs. It is also a support system for the effective functioning of social enterprises.

Clear Vision and Mission: There is the necessity of a clear vision, mission, and strategies for social enterprise. Vision shows the desired future position of the enterprise whereas mission shows the pathways of achieving objectives. In similar way, strategies involve the formulation of a long-term plan with a focus of the long-term objective of the enterprise.

Sufficiency of Resources: Sustainable development of social enterprise should make proper use of the availability of sufficient resources. The resources involve manpower, materials, machines, technology, etc. When there are sufficient resources, social entrepreneurs can organize social programs in an effective way.

Flexibility in Operation: It is necessary to have flexibility in operation to perform social activities for a long duration of time. The social environment is dynamic and it brings new concepts, issues, and complexity in social activities.

That’s why, social enterprises should change their process, methods, and techniques of social activities on the basis of the changing environment of the society.

Training and Development: Effective training and development programs is essential for improving work efficiency of employees. Training supports for improvement of the technical skills of subordinate-level employees whereas development programs support for improvement of the managerial skill of managers.

Good Governance: It is an important means of sustainable development of the social enterprise. There is the requirement of maintenance of transparency and open communication of each and every activity of the enterprise. There should be the avoidance of the practice of manipulation, misuse of resources, and secrecy of internal matters.

Strong networking: Strong networking development with national and international institutions is necessary for the sustainable development of social enterprise. In order to build a strong network, social entrepreneurs must maintain good public relations with such institutions.

They should maintain regular correspondence with the institutions that are supporting to the enterprise for organizing social programs.

Examples of Social Entrepreneurship

Amul:

In 1946, Amul was formed to counter unfair milk trade practices in India, inspiring local and marginalized farmers to form cooperatives independent of trade cartels. After the help of Tribhuvandas Patel and Verghese Kurien, the Amul cooperative model became so successful that it was eventually replicated all over India in 1965. Since then, Amul has:

• Produced excellent value for money food products for customers
• Created a lucrative source of income for local dairy farmers in India

Fifteen:

The Fifteen initiative was founded in 2002 by English celebrity chef Jamie Oliver as an effort to offer disadvantaged youths (aged 18-24) a chance to create better lives for themselves through the power of good food. Restaurant initiative is named after 15 young people who entered apprenticeships as a result of this program. In the past 15 years, Fifteen has:

• Delivered delicious Italian food to patrons and opened two other restaurants in Amsterdam and Cornwall
• Trained 220 young locals in the art of cooking and hospitality and inspired many of its graduates to pursue successful careers in the restaurant business
• Reinforced the value of local produce and cooking techniques
(Source: Ring Central Blog)

Impact and Performance of Social Enterprises

In order to create and sustain social enterprises there should be an assessment of the impact and performance of social enterprises. The measurement of the impact and performance of enterprises provide information that would be supportive for making managerial decisions.

This facilitates accountability and maintains transparency about the activities of enterprises to all the stakeholders consisting of employees, investors, clients, volunteers, and the community at large.

Some of the common tools that are used for measuring the impact and performance of social enterprises are as follows:

A) Social Return on Investment (SROI):

The SROI tool is used for measuring the value of social enterprises in society. It incorporates social, environmental, and economic costs and benefits in terms of monetary value. Its main motive is to assign monetary values to results that are social and environmental outcomes. The stages which are carried out for doing SROI analysis are as follows:

a) Establishing scope and identifying key stakeholders
b) Mapping Outcomes
c) Evidencing outcomes and giving them a value
d) Establishing Impact
e) Calculating SROI
f) Reporting to the concerned authority

B) Social Accounting and Audit (SAA):

The Social Accounting and Audit tool is concerned with examining and reporting the performance of social enterprises to the concerned authority for evaluation. It can also be considered as the main source that involves detailed documents, data, authentic financial information, and accounts of the impact the organizations have on society.

It also involves four steps consisting of planning, accounting, auditing, and reporting. The basic principles that should be considered in SAA are as follows:

a) Defining area of operation
b) Stakeholders involved
c) Determining facts, figures and information
d) Comparative with other organizations or same organization over time
e) Making transparent of all the information
f) Verifying all books of accounts
g) Inclusive all the activities of an organization
h) Fulfill all the process of reporting
i) Verified by the people external to the organizations

C) Logic Model:

A logic model is a planning and program tool that defines the inputs, outputs, and outcomes of programs implemented by social enterprises. Its focus is on the assessment of the program which tends to be on outputs rather than outcomes.

It also provides the framework that enables enterprises to insert performance evaluation and assessment into the program and through the life cycle process of the social program. This model involves three components i.e. Inputs, Outputs, and Outcomes.

Thus, it provides a common approach to integrating planning, programs, implementation, and evaluation of social activities along with a clear definition of ways of implementing social programs in an effective way.

D) Social Impact Assessment (SIA):

The SIA technique is used for measuring social impact through observing, analyzing, and managing expected and unexpected social consequences of the implementation of a plan. The objective of this technique is to know the actual impact of the performance of social enterprises.

Some of the key elements that should be considered in SIA tools are as follows:

a) Identification and management of social issues
b) Project description and analysis policy
c) Legal, and administrative framework
d) Stakeholder identification and analysis
e) Socio-cultural, economic, historical, institutional, and political context, etc.

E) Balance Scorecard: 

The balance scorecard tool is a performance measurement tool that incorporates different dimensions to balance financial and non-financial outcomes. Short-term and long-term outcomes of social enterprises are also measured by a balanced scorecard.

It generally initiates four dimensions to develop objectives and measurement of performance outcomes, which involve financial, customer/ stakeholder, internal business process, and learning and growth.

References

Hisrich, R. D., Peters, M. P., & Shepherd, D. A. (2007). Entrepreneurship. New Delhi: Tata McGraw-Hill Publishing Company Limited.
Poudyal, S. R., & Pradhan, G. M. (2020). Fundamentals of Entrepreneurship. Kathmandu: Advanced Saraswati Prakashan.
Ring Central Blog. (n.d.). Retrieved from Ring Central Blog: https://www.ringcentral.com/us/en/blog/5-successful-examples-of-social-entrepreneurship/

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