The other day I read the story of TOMS, the company that pioneered the ‘one-for-one’ model, where for every pair of shoes purchased, another pair is donated to a child in need. They eventually expanded their product line to include eyewear and coffee, and have donated millions of shoes to children in need around the world.
I was impressed by Blake Mycoskie’s (founder of TOMS) drive to build a business with a social purpose. Though he eventually sold his shares to the company’s creditors, the ethos of being an enterprise with a social core still exists.
(Architectural Digest)
This brings me to this consuming thought of why social entrepreneurs are a different breed. What makes them tick? But before that let’s go through the basics.
What is Social Entrepreneurship?
Social entrepreneurship refers to the practice of using business methods and principles to address social or environmental problems. It involves the creation of sustainable, innovative, and scalable solutions to tackle social issues such as poverty, inequality, access to healthcare, education, and environmental sustainability.
Social entrepreneurs aim to achieve both financial sustainability and social impact, by creating businesses that generate revenue while also creating positive social change. They may operate in various sectors such as education, healthcare, renewable energy, and microfinance, among others.
Social entrepreneurship differs from traditional entrepreneurship in that the primary focus is on the social mission, rather than on profit maximization. Social entrepreneurs are driven by a desire to make a difference in the world and to create sustainable solutions to social problems.
There are different types of social entrepreneurs based on their approach, mission, and the impact they seek to create. Here are some common types of social entrepreneurs:
Non-profit Social entrepreneurs:
These are individuals who start non-profit organizations to address social or environmental challenges. They may have a mission to support a specific cause or community, such as providing education or healthcare services.
For-profit Social entrepreneurs:
These are individuals who start for-profit businesses with the primary goal of creating a positive social or environmental impact. They may prioritize impact over profit and use business as a tool to drive social change. While TOMS is a for-profit business, it has a strong social and environmental mission that is integrated into its core business operations. The company has invested in sustainable and ethical practices, such as using eco-friendly materials and fair labor practices in its supply chain. TOMS has also expanded its giving model to include grants to grassroots organizations and social enterprises working towards creating positive social impact.
Hybrid social entrepreneurs:
These are individuals who start organizations that blend elements of both for-profit and non-profit models. They may have a social or environmental mission but operate as a business to generate revenue and support sustainability.
Grassroots Social Entrepreneurs:
These are individuals who start initiatives at a local level to address social or environmental challenges. They may focus on issues specific to their community and use their local knowledge and networks to drive change.
Corporate Social Entrepreneurs:
These are individuals who work within corporations to drive social or environmental change. They may develop new products, processes, or business models that prioritize social or environmental impact alongside profit.
Growth Of Social Entrepreneurship Over The Years
The term “social entrepreneurship” emerged in the mid-20th century, when individuals began to recognize the potential for entrepreneurship to address social and environmental challenges.
The concept gained momentum in the 1970s and 1980s, with the emergence of organizations such as Ashoka, which was founded in 1980 by Bill Drayton. Ashoka was one of the first organizations to support social entrepreneurs, recognizing the importance of their work in creating positive social change.
In the 1990s and 2000s, social entrepreneurship gained further recognition as more individuals and organizations began to focus on creating positive social and environmental impacts. The rise of the internet and digital technology also made it easier for social entrepreneurs to connect, share resources, and scale their impact.
Today’s entrepreneurs develop double-bottom line, socially-influenced, ESG-based (Environment, Social, and Governance) business models that fulfill commercial market demands by putting purpose-driven leadership at its root.
According to a 2019 survey on “Social enterprise maturity level: growth increases worldwide 2019,” 32% of organizations that considered themselves industry leaders in terms of their social enterprise maturity increased by more than 10% in 2019 compared to 2018.
A social enterprise should balance the need to respect and support its environment and wide stakeholder network with revenue growth and profit-making.
Some stats that indicate the popularity of social entrepreneurship:
✓ The social entrepreneurship sector is estimated to be worth over $500 billion globally.
✓ A survey conducted by the Global Social Entrepreneurship Network found that over 90% of social entrepreneurs report positive social and environmental impact from their businesses.
✓ The Global Impact Investing Network reports that the impact investing market has grown from $10 billion in 2013 to over $715 billion in 2020, reflecting the increasing interest in investing in social enterprises and other impact-driven ventures.
✓ In a survey conducted by the British Council, 81% of young people said they would consider setting up a social enterprise in the future, indicating a growing interest among the younger generation in pursuing socially-driven entrepreneurship.
Committed to Society
Circling back to the question – what makes a social entrepreneur different from a normal entrepreneur?
Social entrepreneurs are driven by a desire to create positive social or environmental impact through their enterprise. Unlike traditional entrepreneurs, who are primarily motivated by profit and financial gain, social entrepreneurs prioritize their social mission above all else. They are passionate about addressing social or environmental challenges and are committed to finding innovative and sustainable solutions to these problems.
Social entrepreneurs are often motivated by a deep sense of empathy and a desire to improve the lives of others. They may have personal experience with the challenges they are seeking to address or may have been inspired by the struggles of others in their community or around the world.
In addition to their passion for social impact, social entrepreneurs are often characterized by a strong sense of creativity and resourcefulness. They are adept at identifying unmet needs or gaps in the market and are skilled at developing innovative solutions to these challenges. They are also committed to sustainability and long-term impact and are often focused on building enterprises that can create lasting change.
Overall, social entrepreneurs are driven by a deep commitment to social and environmental progress and are willing to take risks and challenge the status quo to achieve their goals.
Incredible Personalities Engaging In Social Entrepreneurship
While we know that giants such as Unilever, SAP, Microsoft, Ikea, Johnson & Johnson, Warby Parker, and Timberland to name a few are all invested in social causes and sustainability, some deserve a special mention.
This microfinance institution was founded by Muhammad Yunus and provides small loans to low-income individuals who do not have access to traditional banking services. The Grameen Bank has helped millions of people around the world start their businesses and improve their standard of living.
(grameenfoundation.org)
Kiva:
This non-profit organization operates a crowdfunding platform that allows individuals to lend money to entrepreneurs in developing countries. Kiva has facilitated over $1 billion in loans to entrepreneurs in more than 80 countries.
Across the world, socially responsible companies are making a difference. And it’s worthwhile highlighting some of them. Let’s have a look at Africa where a large portion of people are fighting for a livelihood.
This Kenyan company provides solar power to households in East Africa through a pay-as-you-go model. Customers make small daily payments for the solar power system, which is affordable and helps to reduce reliance on traditional and often unreliable sources of energy.
Page:
This Nigerian company provides mobile payment services to individuals and small businesses, with a focus on financial inclusion. Paga has expanded rapidly and now serves over 17 million customers in Nigeria, providing access to financial services to many who were previously excluded from the formal banking sector.
This Nigerian company provides a platform that connects smallholder farmers with tractor owners, making it easier and more affordable for farmers to access mechanized farming equipment. Hello, Tractor has helped to improve agricultural productivity and reduce poverty in rural areas.
This Kenyan startup uses data analytics to provide credit scoring for smallholder farmers who lack access to formal financial services. FarmDrive’s platform helps farmers to access loans and other financial products, which can help to increase productivity and improve livelihoods.
This Tanzanian company produces clean cookstoves that use less fuel and emit fewer pollutants than traditional stoves. The company’s cookstoves are affordable and help to reduce deforestation and improve indoor air quality, which is a major health concern in many parts of Africa.
These are just a few examples of social entrepreneurship in Africa, but there are many other inspiring and impactful social enterprises across the continent.
World Governments Engaging In Social Entrepreneurship
Governments in Africa have recognized the potential of social entrepreneurship to drive economic development, create jobs, and address social and environmental challenges. Here are a few examples of grants provided by governments in Africa to promote social entrepreneurship:
South Africa:
The Department of Small Business Development offers various funding schemes to support social enterprises, including the Black Business Supplier Development Programme, which provides grants and funding of up to ZAR 10 million to black-owned enterprises.
Kenya:
The Kenyan government provides funding and support to social entrepreneurs through the Youth Enterprise Development Fund (YEDF), which offers loans and grants of up to KES 5 million to young entrepreneurs and social enterprises. The government also provides funding and support through the Women Enterprise Fund (WEF), which offers loans and grants of up to KES 3 million to women-led enterprises.
Ghana:
The Ghanaian government provides support to social enterprises through the Ghana Youth Social Entrepreneurship Programme (GYSEP), which offers training, mentoring, and funding to young social entrepreneurs. The government also provides funding and support through the National Entrepreneurship and Innovation Plan (NEIP), which offers loans, grants, and training to entrepreneurs and social enterprises.
Rwanda:
The Rwandan government provides funding and support to social enterprises through the Rwanda Development Bank, which offers loans and grants to entrepreneurs and social enterprises working in areas like healthcare, education, and agriculture. The government also offers funding and support through the Business Development Fund, which provides loans and grants to small and medium-sized enterprises, including social enterprises.
Where does India, a growing economic power stand on Social entrepreneurship? Here are some companies that are at the forefront of social change.
SELCO Foundation:
This organization, based in Bangalore, is working to provide clean energy solutions to rural communities in India. The organization has helped to install over 450,000 solar lights and other energy solutions, providing access to reliable and sustainable energy to many who were previously living without electricity.
Goonj:
This social enterprise, based in Delhi, is working to address the issue of clothing waste in India, while also providing clothing and other essential items to those in need. The organization collects and recycles clothing and other materials, which are then distributed to communities in need across the country.
Drishti Eye Care:
This social enterprise, based in West Bengal, is working to provide affordable and accessible eye care services to rural communities in India. The organization has set up a network of eye care centers, which provide services such as cataract surgery and eyeglasses at low cost.
Barefoot College:
This organization, based in Rajasthan, is working to provide education and training to rural communities, with a focus on empowering women and promoting sustainable development. The organization provides training in a range of areas, including solar energy, water management, and artisanal crafts, helping to build local capacity and promote economic and social progress.
Chitkara University’s Centre for Entrepreneurship Education and Development (CEED):
This organization is working to promote entrepreneurship and innovation in India, particularly among young people. CEED provides training and mentorship to aspiring entrepreneurs, as well as access to funding and other resources, helping to create a supportive ecosystem for social and environmental entrepreneurship.
Self-Employed Women’s Association (SEWA):
Founded by Ela Bhatt in 1972, offers its members, mostly impoverished self-employed women, financial, health, insurance, legal, childcare, vocational, and educational services.
S Rajagopalan and Svati Bhogle’s Technology Informatics Design Endeavour (TIDE):
TIDE promotes the transformation of profitable and environmentally sustainable techniques developed by top research institutes into successful businesses.
The Government of India provides various grants and funding schemes to promote social entrepreneurship and support social impact initiatives. Here are a few examples of grants provided by the government of India to promote social entrepreneurship:
National Initiative for Developing and Harnessing Innovations (NIDHI):
This is an umbrella program launched by the Department of Science and Technology, which includes several funding schemes to support startups, social enterprises, and innovators. One of the programs under NIDHI is the Technology Business Incubator (TBI) scheme, which provides funding of up to INR 15 lakhs to incubate and support social startups.
Ministry of Micro, Small, and Medium Enterprises (MSMEs):
The MSME ministry offers various funding schemes to promote entrepreneurship and innovation, including social entrepreneurship. One of the schemes is the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), which provides credit guarantees of up to INR 2 crores to social enterprises and micro-enterprises.
National Bank for Agriculture and Rural Development (NABARD):
NABARD offers various funding schemes and grants to support social entrepreneurship in rural areas. One of the schemes is the Rural Innovation Fund (RIF), which provides funding of up to INR 30 lakhs to social enterprises and innovators in rural areas.
Social Venture Challenge:
The Social Venture Challenge is a joint initiative by the Indian School of Business and the Centre for Innovation, Incubation, and Entrepreneurship, which provides funding and mentorship to social enterprises working on issues like poverty, education, and healthcare.
India Taking The Lead In Social Entrepreneurship
In India, companies are required to invest at least 2% of their average net profits in Corporate Social Responsibility (CSR) initiatives under the Companies Act, 2013. There is a set criterion for a company to comply with this requirement. This measure encourages a company to pursue a relevant and stay committed to it.
Several large companies in India have embraced social entrepreneurship as a way to drive innovation and impact social and environmental challenges. Here are some examples of large companies in India that are actively involved in social entrepreneurship:
Tata Group is one of the largest and oldest conglomerates in India, with interests in a wide range of industries, including steel, automobiles, and technology. The Tata Group has been involved in social entrepreneurship for several decades and has launched several initiatives, including the Tata Social Enterprise Challenge, which supports social enterprises across India.
Mahindra Group is a diversified conglomerate with interests in industries like automobiles, finance, and technology. The company has a strong focus on social entrepreneurship and impact investing and has launched several initiatives, including the Mahindra Rise Prize, which supports social entrepreneurs working in areas like healthcare and agriculture.
Godrej Group is a diversified conglomerate with interests in industries like consumer goods, real estate, and agriculture. The company has a strong focus on sustainability and social entrepreneurship and has launched several initiatives, including the Godrej Good and Green Fellowship, which supports social entrepreneurs working in areas like waste management and sustainable agriculture.
Infosys is a technology company that provides consulting, software development, and other services to clients around the world. The company has a strong focus on social entrepreneurship and has launched several initiatives, including the Infosys Foundation, which supports social entrepreneurs and non-profit organizations working in areas like education and healthcare.
Wipro is a technology company that provides software development, consulting, and other services to clients around the world. The company has a strong focus on sustainability and social entrepreneurship and has launched several initiatives, including the Wipro Earthian Awards, which supports social entrepreneurs and non-profit organizations working in areas like environmental sustainability and education.
Who Funds Social Enterprises?
Social entrepreneurs can seek funding from a variety of sources, depending on their needs and the stage of their enterprise. Here are a few examples of funding sources that social entrepreneurs can consider:
Grants:
Grants are a common source of funding for social entrepreneurs, particularly those in the early stages of their enterprise. Grants can be obtained from a range of organizations, including foundations, government agencies, and corporate social responsibility (CSR) programs.
Impact investors:
Impact investors are investors who are looking to generate both financial returns and positive social or environmental impact. Impact investors can provide equity or debt financing, and may also offer support and mentorship to social entrepreneurs.
Crowdfunding:
Crowdfunding platforms, such as Kickstarter and Indiegogo, can be a useful source of funding for social entrepreneurs, particularly for those with innovative and compelling ideas. Crowdfunding can help to build community support for an enterprise, while also providing a way to raise funds.
Social impact bonds:
Social impact bonds (SIBs) are a relatively new form of financing, in which private investors provide upfront capital to fund social programs or initiatives. The government or other third party agrees to pay a return on investment if the program meets pre-agreed-upon social outcomes.
Banks and financial institutions:
Banks and other financial institutions can provide loans and other financings to social entrepreneurs, particularly those who have a track record of success or have collateral to offer as security.
Accelerator and incubator programs:
Accelerator and incubator programs can provide funding, mentorship, and other resources to social entrepreneurs, helping to support their growth and development.
Corporates with ESG objectives:
Large companies are likely candidates to invest or partner with social enterprises as it falls under their ESG or CSR mandate.
These are just a few examples of the many sources of funding that social entrepreneurs can consider. It is important for social entrepreneurs to do their research and identify the funding sources that best align with their goals and values, and to be prepared to pitch their enterprise in a way that demonstrates their social impact and potential for growth.
Conclusion: Future of Social Entrepreneurship
Social entrepreneurship is important because it can create positive change in society, promote sustainable development, drive innovation, and encourage responsible business practices. It is a growing movement that has the potential to transform the way we think about business and its role in society.
Social entrepreneurship is important for several reasons:
Addressing social and environmental challenges:
Social entrepreneurs are uniquely positioned to tackle complex social and environmental problems that are not being adequately addressed by governments or traditional for-profit businesses. They can develop innovative and sustainable solutions that create positive social and environmental impact.
Creating economic opportunities:
Social entrepreneurship can also create new economic opportunities in underserved communities by providing access to education, employment, and affordable products and services.
Promoting sustainable development:
Social entrepreneurship can play a key role in promoting sustainable development by using resources more efficiently, reducing waste and pollution, and creating businesses that are designed to be sustainable over the long term.
Driving innovation:
Social entrepreneurs are often driven by a desire to challenge the status quo and find new ways to solve problems. This drive for innovation can lead to breakthroughs in areas such as renewable energy, healthcare, and education.
Encouraging responsible business practices:
Social entrepreneurship can serve as a model for responsible business practices, demonstrating that it is possible to create profitable businesses that also have a positive social and environmental impact.
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