If you were to ask a random selection of business owners what the main purpose of their business is, most answers would probably involve doing what’s best for the business itself. Whether this is purely profit-driven, or takes into account the development of employees, customers or other stakeholders: the majority of companies are mainly inward-oriented. And this also applies if they undertake corporate social responsibility.
But not all of them have this mentality. As more and more citizens become increasingly concerned about making a positive impact on the world, social entrepreneurship has become a business model in its own right, combining capitalism with an altruistic mindset. Social enterprises are businesses that exist primarily for a social purpose, but unlike charities, they make a profit. However, making money is not their primary goal, and much of what they do earn will be reinvested in achieving their philanthropic goals.
All in all, there are probably millions of social enterprises around the world, of which there are almost 500,000 in the UK alone. Incredibly, such companies contribute over 15% to the GDP of countries such as Italy, the Netherlands and Belgium. Here we look at three reasons why social entrepreneurship is the way forward.
1. It makes the world a better place
Quite simply, investing so much time and money in social causes can make the world a better place. The planet faces countless challenges, from climate change and poverty to unemployment and social injustice, and social enterprises can help tackle these challenges and make a significant difference to people’s lives.
For example, there are many environmentally focused social enterprises helping to combat climate change, such as TerraCycle, an innovative recycling company. The company makes it easier for individuals and businesses to recycle hard-to-recycle items such as toothbrushes, cigarette butts and chip packets. People can send trash directly to them in exchange for credits, which can be exchanged for cash or donated to the nonprofit of their choice.
Many social enterprises also act as catalysts for social change. Companies like BuildHer and Tiwale, for example, aim to give women more work and training opportunities in typically male-dominated fields such as construction and music. Others, like Olmec and The Diversity Trust, champion racial equality through employment opportunities and diversity training.
2. It’s easier than ever to succeed
More consumers than ever are aware of social and environmental issues and are therefore actively looking to collaborate with companies that are doing good themselves. In fact, 63% of consumers prefer to buy from purpose-driven brands, with many willing to spend a little more on products or services if it means helping others or the world in some way. As such, social enterprises are better placed to thrive given the groundswell of public support for them.
Furthermore, there is so much financial help for social enterprises these days, with investors increasingly reevaluating their traditional portfolio approaches and turning to more altruistic projects. Take SAP, the Germany-based software giant that lists jobs across the country and in more than 140 countries overall, and recently launched their ‘5 & 5 by ’25’ initiative. The aim is to spend 5% of the company’s addressable spend on social enterprises by 2025. Similarly, Salesforce launched a $100 million Impact Fund for cloud startups with a social purpose in early October, following its first $50 million Impact Fund in 2017.
More governments are also providing support to social enterprises, such as the UK’s Social Investment Tax Reduction Scheme, the US Social Innovation Fund and India’s Maharashtra State Social Venture Fund.
3. It’s rewarding on a personal level
For many people, working alone to earn money is no longer enough. While the work they enjoy generally offers entrepreneurs a greater sense of purpose, working toward altruistic goals they are passionate about is the only way they can truly feel rewarded by what they do. Social entrepreneur Matt Saunders perfectly explains his own personal eureka moment when this fell into place for him, when he suddenly realized that his “skills could be used to do something that has social value, rather than just raising money for to deserve someone.”
Speaking to Forbes, Melissa Levick, co-founder of the social enterprise Honeycomb, summarized the satisfaction this business model provides entrepreneurs like her on a daily basis. She said: “Built social impact into your business model…[is] a real mechanism for solving social problems while feeling connected to a higher purpose.” This can be remarkably rewarding and gives entrepreneurs all the motivation in the world to keep going once they reach the level of success they dreamed of when starting a business.