The Emergence of New Businesses Shifting the World Towards Social Awareness
Helping society does not have to come at the cost of profit and profits can be sought in the pursuit of doing good
#GivingTuesday, a movement that created an international day of giving is entering its Sixth year on Nov 27th 2018 and is influencing charity work in a positive way globally. During this time of the year, charity giving is most talked thing about as everybody soaks in the festive spirit awaiting Christmas. There is also a season to talk about profits, money making and savings. That is around the tax season.
There are places where both charity and profits are spoken about all year round. These are businesses for which making money is as important as anything else. What makes them different from the others is their social consciousness. They have learnt the fine art of striking the balance between profit-making and social good. We know them as social enterprises.
When everybody from Hollywood actors and politicians to budding entrepreneurs is taking in on a trend, it must be more than just a passing fad. So what exactly is it that social enterprises do differently. Bill Drayton, one of the tribesmen of Ashoka says this:
“Social entrepreneurs are not content just to give a fish or teach how to fish. They will not rest until they have revolutionized the fishing industry.”
So What is it all About?
At its core, a social enterprise is a company that works to increase the well-being of our planet and its inhabitants. Think Goodwill and Newman’s Own. The idea is that profits are not an inherent reason to justify the means and that there are other important motivations to business than money. As the Social Enterprise Alliance puts it, “Social enterprises are businesses whose primary purpose is the common good”. Throw the adversarial relationship between businesses and consumers out the window, and replace it with one of working towards the same goal.
Business ethics says that profits are a zero-sum game, where if it doesn’t help your bottom line, you shouldn’t be doing business. Social enterprises operate under different assumptions, thinking that business really is a positive sum game; helping society does not have to come at the cost of profit, and profits can be sought in the pursuit of doing good.
Former Philippines president Ramon Magsaysay who was known for his commitment towards social good had a great way to differentiate a for-profit business from a pro-social one.
The difference between both is that social entrepreneurship has more financial transparency. There is no financial viability and that is where a corporate sector makes a difference because we maintain a balance between both the financial status and the social service. - Ramon Magsaysay
Let’s understand how it works by taking the example of Goodwill. They sell a wide range of items at their stores in pursuit of profit – they certainly are not giving the products away – while simultaneously employing millions who would otherwise struggle to find work. Inherent in the idea of Goodwill, as is apparent by its name, is transforming an otherwise normal commercial transaction into an opportunity to give back to the community at large.
The first question asked about most businesses when assessing their success is, “Are they making money?” you will hear this question many times over as founder of a no-fee crowdfunding platform.
A more accurate question here would be: “Are they actually creating a positive impact?”. The remarkable characteristic of Goodwill is not its retail business – Gap, American Apparel, and thousands of others do that as well. What makes it different is its core ambition of creating social impact simultaneous to the selling of clothes and making a profit. Similarly, the difference between Newman’s Own and Bertolli is the number of lives touched by their respective profits.
How to Identify Social Enterprise?
Identifying a social enterprise is easier than you might think. Here are the three main tenets of such organizations:
Either through their product or service or with respect to whom they serve, the company’s mission speaks directly to doing good and helping underserved sectors. E.g: Change.org, Swipes For the Homeless
The funding of and support for impactful change comes from sales, as opposed to the more traditional donation-based approach for funding such projects. E.g: Tom’s Shoes, Laughing Man coffee, FeedProjects
The company was founded with the intention of creating change, and the mission of the company is deeply seated in the quest to create a better world. E.g: Grameen Bank, School
Are Social Enterprises Non-Profits?
Many of the cornerstones that nonprofits stand on are shared with social enterprises, in that both are working to increase the public good. The two diverge in their use of profits, the application of the tax code, and of course revenue generation. More importantly, social enterprises are tasked with running a business that functions in large part identically to normal businesses.
What if my bank Donates a Couple of Dollars to Charity Every Year, Does That Make Them a Social Enterprise?
The donations, gifts and charitable contributions that businesses give are incredibly important to many organizations, non-profits or otherwise. Social enterprise, however, is not the same thing as a non-profit. Its fabric is weaved with the threads of both business and do-gooding, whereas many donations could be considered compensation for the lack of consciousness during much of the year. More conscious businesses choose to support nonprofits under their corporate social responsibility projects.
So How Does One Know if a Company is a Social Enterprise?
Well, the first step would be to see if their business satisfies the main tenets. Second, would be to ask if you are a business that trades to tackle social problems improve communities, people’s life chances, or the environment. A social enterprise is a growing, worldwide movement of businesses that exist to change the world for the better.
Companies that are working on your behalf are going to be thrilled to that their customers are taking an interest, and companies not involved in the pursuit of the public good may reconsider their business model if customers are clamouring for a different approach.
Let’s Look at the Numbers…
When something becomes a trend, doubts start arising about its lifespan. The trends visible in the social enterprise sector prove however that it is here to stay with us. Last November, a report from Mintel threw light on the emergence of this sector. Here are some of the interesting findings:
56per cent of US consumers stopped buying from companies they believe are unethical.
63per cent of consumers feel that ethical issues are becoming more important
34per cent of consumers tell others when they believe a brand to be making ethical, honest or fair actions.
29per cent of consumers take it to social media to share their support of ethical companies.
58per cent of consumers revealed that buying ethically produced products makes them feel good.
Consumers are bound to buy the utilities regularly. However, knowing that the money they spend on essentials is also helping someone in need makes them feel happier about the spending. They also feel happier about being able to make an impact in a meaningful cause. All this makes them come back for it more often than they otherwise would.
There is a mythology about millennials as selfish individuals interested only in instant gratification. It is greatly misleading as they are a socially conscious and sensitive bunch. California based marketer Alex Rynne, herself a millennial, says about her generation as consumers: ”Our values and concerns when shopping are just as global. We favour companies that are ecologically conscious, and we think about how our choices affect the world we all live in. More importantly, our values define us more than our demographics. We identify with people who share our outlook on life, our priorities, our goals, without putting too much emphasis on age or nationality.”
Not only as consumers but also while thinking of a business idea, they are more likely to think about solving a social issue. In a recent interview billionaire entrepreneur and investor Mark Cuban said, “When someone in their 20s come on Shark Tank, inevitably they have a social component to what they do.” The availability of technology and global connectivity makes it easier for them to work out global solutions to problems in any part of the world. No wonder we see a lot of small and big businesses today that directly benefit impoverished African countries by selling to consumers in Europe and America.
A New Horizon for Business and Social Change?
The number of opportunities to support a social enterprise has expanded greatly in the past decade. The black and white dichotomy between profits and doing good is dead, more companies than ever are emphasizing the common good over the limited reward. It has become harder and harder to justify not addressing crucial problems facing our world when that has become the explicit mission of so many incredibly successful businesses. Social enterprises are rapidly becoming the case studies for business classes and used as analogies for climate change. The promise is great and the implementation is powerful.
Your Choice Matters
Spending your dollar at a social enterprise effectively turns one dollar into two. The money multiplier is why bank loans stimulate the economy, and the same is true for spending at social enterprises. By supporting their business you are giving to all of the business they support.