Social enterprises are part of a movement in continuous growth to the point where it’s shaping a new economy. Here’re some of the key aspects in which they can contribute to community development.
Most envision nonprofits or charities when imagining a career devoted to the greater good. But for-profit social enterprises may be an even better model for bringing about positive change, even though it is not as popular.
It may even sound counterintuitive at first. But, over the last few decades, social entrepreneurs have launched successful social enterprises that have drastically improved the lives of millions as well as made money.
What makes social enterprises different from enterprises that only claim to be socially responsible is the way they go about accomplishing noble goals. A social enterprise does not neglect its primary mission in order to focus on profits, and it stands up to scrutiny.
But how exactly do social enterprises make a difference? If you support such a business, how will your money actually help those in need?
Types of social enterprises
Social entrepreneurship is a huge term that encompasses different kinds of ventures. Some of them address social issues through indirect means, such as providing volunteers to help with local projects or paying equitable wages.
North American social enterprises differ from other businesses in a couple of ways: They pursue a double or triple bottom line using earned revenue (they address their environmental or social impact as well as their financial obligations).
Social enterprises also address social needs through the number of people in need employed, or through their services and products.
According to the “Social Enterprise: A Portrait of the Field” study, the main sectors in which social entrepreneurs venture are health, education, community and economic development, housing, and workforce development.
Social enterprises dealing with micro-loans help people by offering funding to entrepreneurs that would not be able to get it otherwise. Micro-lending is of great help to entrepreneurs in third-world countries, where starting a business with no capital is almost impossible.
To this day, Grameen Bank is one of the most wonderful examples of a social enterprise. It has taught us a thing or two about ethical banking.
Muhammad Yunus founded the bank way back in 1983. To this day, his organization provides small loans rather than charity to the most impoverished citizens of Bangladesh, mainly women.
Muhammad Yunus won a Nobel Peace Prize in 2006 thanks to his microfinance project built on solidarity and trust. Grameen Bank has helped millions of people realize their potential through their agricultural or business ambitions.
The sole purpose of this social enterprise is to find and fund people who need a helping hand. Its only business is lending money to the poorest citizens at flexible, friendly, and empowering rates.
Moreover, the borrowers themselves own Grameen Bank. The tenet of the bank’s existence is its connection with the local community.
The give back model
Some social enterprises are like a convergence point between traditional companies that practice sustainability and responsibility and non-profit organizations that generate revenue to supplement charitable contributions.
Toms Shoes and Newman’s Own are two prominent examples. Both organizations connect to the community in a similar way.
Blake Mycoskie, the founder of Toms, pioneered the One for One model in 2006. The principle is simple: the company donates a pair of shoes to someone in need for every pair of shoes it sells.
Although Toms is shifting away from this model, it continues to donate to projects with the help of its “Giving Partners.”
Giving Partners are organizations that distribute Toms’ resources locally. Today, Toms donates to projects that include safe birth resources, clean water, and eyewear in over seventy countries.
Newman’s Own is a company that gives all of its profits (after-tax) to its own non-profit organization—Newman’s Own Foundation. The foundation donates to a variety of different charities, from conservation organizations to those that focus on religious-based work.
In both cases, the social enterprise funds a separate entity, or a third party, that oversees projects.
The Innovation Model
Solar Sister is a great example of a social enterprise that tackles both environmental and social issues through innovation. Solar Sister is coaching women leaders and building a women-centred direct sales network in order to bring clean, renewable energy to rural parts of Africa.
This social enterprise is active in areas where the lack of energy limits economic and educational opportunities. According to OECD, access to energy is correlated to 59% higher wages among rural female salary workers.
Moreover, rural female entrepreneurs with access to energy earn as twice as much as their counterparts without access to energy. Other businesses that provide innovative services and products in order to solve social issues include FairPhone, Drink Soma, Kiva, and BioLite.
The many definitions of “Socially Responsible”
“Socially responsible” can mean many different things; it’s not easy to apply one rigorous standard. It’s like “All-natural” at the supermarket.
However, there are a few organizations doing a fairly good job of creating a credible standard. For instance, the non-profit organization, B Lab, certifies social enterprises.
For a company to become a “B Corp,” it must demonstrate positive social impact and live up to the strict standards of the B Lab. Let’s take two B Corps, for example, Method Products and GOOD Worldwide.
Method Products makes their bottles from recycled plastic, gives preference to fair trade suppliers, pays suppliers to reduce carbon emissions, and pays their workers above the living wage.
GOOD Worldwide, on the other hand, doesn’t make other contributions to local communities outside its environmental efforts such as office-wide recycling and its outstanding treatment of its workers. But who are workers if not people? And what’s an office if not a community?
Solopreneurs that have devoted themselves to social enterprises also deserve a special mention. Cath Prisk is one such social entrepreneur. She founded the Outdoor Families Camping Project.
Prisk and her team of volunteers help local communities by taking kids camping, providing families with camping equipment, and teaching them all the skills they need to have a good time in the great outdoors. To fund the project, Prisk offers tents for hire and for sale all year round.
These contributions of societal good are undoubtedly effective at increasing the positive impact of business in local communities even though they are harder to quantify than Toms’ One for One Model.