A bank that offers collateral-free loans to support the rural poor in Bangladesh, a bottled water company that invests 100 per cent of its profits to clean water initiatives in the developing world, and a Melbourne café that trains and employs homeless youth providing a pathway out of homelessness. What do these three very different organisations have in common? They are all social enterprises and they are all adopting new and innovative solutions to address some of society’s biggest problems.
A social enterprise is an organisation that applies business practices to create positive and sustainable social, cultural and/or environmental change (ee note 1). In essence, social enterprises combine the heart of a charity with the mind of a business. Social enterprises are distinct from charities in that they are not dependent on government funding or philanthropy to survive. Yet, neither are they corporate businesses, whose primary concern is the creation of wealth for shareholders. A social enterprise is somewhere in between the two, a unique organisation that strives to achieve a distinct social mission through sustainable business methods. Rather then focusing on the economic bottom line, social enterprises operate on a triple bottom line aiming to achieve social and environmental gains whilst remaining financially sustainable.
“Social enterprises are businesses that are changing the world. When they profit, society profits”
Social enterprises come in all shapes and sizes and serve a variety of social purposes. Broadly speaking most social enterprises are orientated around three main objectives: employment creation, service provision, and income generation (see notes 2, 3 & 4). Social enterprises generally operate as for-profit companies where the revenue they raise is invested directly back into their social mission. Organisations such as the Grameen Bank (see note 3) and Belu (see note 4) are examples of such social enterprises. However, social enterprises can also operate as cooperatives and some would even argue, as the profit-making arm of a traditional non-profit organisation. St Vincent de Paul opportunity shops are an example of social enterprise within a non-profit organisation. Regardless of the form they come in, a true social enterprise is one that not only trades to support its social mission, but also revolutionises the way in which things are done.
“Some charities give people food. Some teach farmers to grow food. Social enterprises have to teach the farmer to grow the food, how to make money, turn it back over to the farm and have ten more people. They’re not satisfied until they have transformed the entire food industry”. Jeff Skoll
Social entrepreneurs are the driving force behind social enterprises. They are the revolutionaries and change-makers seeking to solve some of the words most pressing problems through innovative ideas . They are to social change what Steve Jobs was to the personal computer revolution and they pursue social problems with the innovation and relentless energy of Richard Branson. The difference lies in their focus. Social entrepreneurs are interested in solving some of society’s most difficult problems such as poverty, unemployment, homelessness and environmental degradation. To borrow the words of Klaus Schwab, co-founder of the Schwab Foundation an organisation dedicated to identifying, connecting and supporting social entrepreneurs, “social entrepreneurs pursue social problems with entrepreneurial zeal, business methods and the courage to innovate and overcome traditional practices” . Through their work they are transforming the world for the better.
”Social entrepreneurs don’t want to help. They want to change the world”. Bill Drayton
Social entrepreneurs have been around for many centuries however were not recognised as such until recently. Some notable social entrepreneurs from history include: Florence Nightingale who pioneered the modern nursing profession by establishing the first nursing school in 1860; John Muir who established the national park system in the USA in the 1890’s; and Vinoba Bhave who is credited for establishing the land-gift movement in 1951. All of these individuals used innovative methods to create long lasting social and environmental value. What these individuals lacked, however, was a supportive social enterprise sector.
The origins of the modern social enterprise sector can be traced back to the 1970’s when rising oil prices and the collapse of communism led to widespread unemployment and economic downturn. In the wake of these changes, governments were forced to make funding cuts as they struggled to support the growing needs of the welfare sector with an ever-shrinking budget. In this climate, non-profits and charitable organisations were forced to rethink how they operated. No longer able to rely on traditional funding sources from the government, many were prompted to adopt commercial business practices in order to survive. With the failure of the state, the time was ripe for social entrepreneurs to create new and innovative ways of solving society’s mounting problems.
Seeing this potential, many governments, private corporations and academic institutions lent their support to the social enterprise movement. Over time formal support organisations were launched (see note 5), policies implemented, schools established, and access to finance improved, thus spawning the social enterprise sector. Fast forward thirty years and we now have a thriving global social enterprise sector. Evidence of which can be found in the variety of policy, academic and financial support initiatives now available for social entrepreneurs. Examples range from a Brazilian social stock exchange established in 2003, to the creation of President Obama’s Office of Social Innovation in 2009, and the launch of the UK’s first social investment bank ‘Big Society Capital’ in 2011. Furthermore, there is evidence that the industry is thriving despite the current economic downturn. In the UK for example, a recent survey revealed that 59 per cent of social enterprises grew in 2010 compared with 28 per cent of small to medium enterprises.
Although not as advanced as some countries, Australia’s social enterprise sector is slowly but surely growing. Up until recently there has been no available data on the size or scope of the social enterprise sector in Australia. It is therefore encouraging that a recent project called ‘Finding Australia’s Social Enterprise Sector’ (FASES) has taken the first steps to map the sector in Australia. Although only able to offer baseline results, findings were positive indicating that Australia has a robust, mature and diverse social enterprise sector. Findings also indicate sustainability in the sector with 73 per cent of the 22,000 social enterprises in Australia in operation for at least five years and 62 per cent for at least ten years.
The future is certainly looking bright for the social enterprise sector in Australia. Aspiring social entrepreneurs can kick start their career at the School of Social Entrepreneurs (SSE) and access the latest research from the Centre For Social Impact and the Australian Centre for Social Innovation. They can secure finance for their enterprise through institutions such as Foresters Community Finance and receive mentoring and resources from a growing number of support organisations like Social Traders and Social Ventures Australia . Opportunities and support abound for budding Australian social entrepreneurs.
A new wind is stirring and bringing with it the seeds of change. These seeds are the social entrepreneurs of today and tomorrow. No longer content to sit back and wait for government to address society’s inequalities, social entrepreneurs are stepping in and making change. They are transforming systems, inventing new ways of doing things and creating sustainable solutions to some of the worlds most entrenched and difficult social problems. Ultimately they are forging a more ethical way of doing business and providing an alternative to charity. In essence, they are ‘doing well while doing good’.
“I’m encouraging young people to become social business entrepreneurs and contribute to the world, rather than just making money. Making money is no fun. Contributing to and changing the world is a lot more fun” Muhammad Yunus
Note 1: What’s in a Name?
The term ‘social enterprise’ has been in use since the 1970’s however the world has yet to agree on a single definition. The Social Enterprise Alliance in the USA defines a social enterprise as,“an organisation or venture that advances its primary social or environmental mission using business methods” .
Social Enterprise UK defines social enterprise as, “a business with primarily social objectives whose surpluses are principally reinvested for that purpose”.
Social Traders in Australia defines social enterprises as organisations that are, “1) led by an economic, social, cultural, or environmental mission consistent with a public or community benefit; 2) trade to fulfil their mission; 3) derive a substantial portion of their income from trade; and 4) reinvest the majority of their profit/surplus in the fulfilment of their mission.
The consistent theme in all definitions is that social enterprises are businesses that trade for the primary purpose of creating a positive and lasting impact on society.
Note 2: A Café for the Homeless
STREAT is an example of a social enterprise that is focused on job creation. Based in Melbourne, STREAT provides pathways for disadvantaged and homeless youth to gain skills, experience and ultimately employment in the hospitality industry.
Co-founder, Rebecca Scott, came across the idea whilst biting into a rice paper roll made by KOTO, a social enterprise offering career pathways for homeless youth in Vietnam. Scott launched STREAT in 2009 with a small food cart and a handful of homeless youths. Since then, STREAT has expanded to three cafes and a coffee roasting business in inner city Melbourne.
STREAT provides unemployed youths with up to six months work experience in the hospitality industry during which they undertake Certificates I and II in hospitality. STREAT has a retention rate of 74% with a total of 52 unemployed youths graduating from the program. Of these, 41% have taken on further hospitality training, 18% are in higher education in another field, and 18% are employed in the hospitality and retail industry.
Note 3: A Bank for the Poor
The Grameen Bank is a social enterprise that has achieved enormous social and economic change by improving service delivery to disadvantaged communities.
Founded by Muhammad Yunus in 1978, the Grameen Bank was the first bank to offer loans to the rural poor in Bangladesh. Yanus established the bank in response to the failure of traditional banks to provide finance to the poor.
Yunus was inspired to create a new kind of bank where customers where prioritised according to their needs rather then their assets and small loans were provided collateral-free. Unlike traditional banks whose focus is on maximising profits, the Grameen Bank was founded with the primary purpose of helping the poor pull themselves out of poverty.
From humble beginnings, the Grameen Bank has grown to over 2500 branches providing services to over 81,000 villages across Bangladesh. It has over 7.5 million borrowers, of whom 65% have been able to lift themselves out of extreme poverty.
The Grameen Bank achieved financial self-sufficiency in 1995 and has since operated without external funding. The bank has also encouraged local ownership with 94% owned by borrowers.
Yunus’ model of fair and sustainable banking has been adopted around the world and he was awarded the Nobel Peace Prize in 2006 for his efforts.
STREAT’s profitability continues to grow at a rate of 20% each financial year and predicts that it will be able to cover 100% of its costs by 2015.
Note 4: Clean Water for All
Belu is an example of a social enterprise that generates income to invest in ‘doing good’. It does this by donating 100% of its profits to WaterAid, a clean water project in the developing world.
Belu generates income through its environmentally friendly bottled water business. The business and aims to minimise its environmental impact by using only recycled materials and refusing to export its goods. Belu proudly claims to be 100% carbon neutral and has recently developed the world’s first compostable bottle.
In 2011 Belu pledged £300,000 to WaterAid over a three-year period. It has far exceeded its expected performance with profits in 2011 alone close to £200,000. Such profits are likely to provide clean water to an estimated 20,000 people in developing countries, transforming their lives for the better.
Belu has been recognised for its efforts and is shortlisted for the Charity Partnership – Small Business Award at the 2013 Third Sector Business Charity Awards.
“We want to inspire other companies and demonstrate that being ethical and having sustainable business practices can yield excellent financial results [and] prove that, as a social enterprise, it’s possible to compete with successful mainstream brands”. Karen Lynch, Chief Executive of Belu
Note 5: Innovators for the Public
Bill Drayton coined the term ‘social entrepreneur’ in 1980. In the same year he established Ashoka: Innovators for the Public, the first ever support network for social entrepreneurs.
Ashoka’s purpose was to identify budding social entrepreneurs and support them to succeed. Three decades from its inception, Ashoka has grown to over 3000 fellows in over 70 countries.
Ashoka’s functions have expanded from supporting individual social entrepreneurs, to building networks of entrepreneurs, and finally to building the infrastructure necessary for social enterprise to flourish. Such infrastructure includes greater access to financial services, linkages with businesses and academic institutes, resources, research, and competitions and awards to recognise outstanding social entrepreneurs.
Taking Ashoka’s lead, several similar such support organisations have emerged over the last couple of decades including: the Schwab Foundation of Social Entrepreneurship founded in 1998, and the Skoll Foundation established by Jeff Skoll of e-bay fame in 1999.
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