What is social entrepreneurship?
Read this article, if you have heard about social entrepreneurship and want to understand the concept behind. Look through it, if you wonder what is the difference of social entrepreneurship with doing business?
1. Social entrepreneurship vs. business
Social entrepreneurship is a kind of entrepreneurship/business that aims at solving social problems through entrepreneurial practices – creating a competitive product, selling it in market, generating revenues, etc. Business activities and existence in the market is the driving force of the company. It ensures its financial standing, thus contributing to the solution of social problems.
The primary purpose of this kind of businesses is the solution to a social problem. Profit comes second.
2. How businesses do it better?
But how business methods have appeared to solve social problems?
There are numerous benevolent organizations, charities that have very long tackle social inequalities and poverty. It is also government function to deal with these problems. How businesses do it better? Benevolent organizations have reached to an understanding on poverty reduction on long run, which can simply be put this way: “give a man a fish and you feed him for a day; teach a man to fish and you feed him for a lifetime”.
Business practices and competition are the driving force that will make people work hard and build their well-being by themselves.
3. Types of Social Enterprises (SE)
Social entrepreneurship in Armenia is very often associated with non-profit and non-governmental organizations (NGOs) in the way they earn money for their mission. However, there are numerous kinds of organizations coming from different spheres, that can be considered social enterprises, from for-profits to non-profits.
Non-profits have long tackling social problems, and motivation of doing business comes from the willingness of those organizations no more be reliant on external funding and focus on their mission.
There are also different legal types of SEs that many countries adopt by law and define their work. These legal types are adopted and put into action based on country specifics, and consider several factors, such as traditions, society structure, types of successful unions, societal needs and problems, etc.
There is no adopted concept or legal form of SE in Armenia. Companies in our country, who distinguish themselves as social enterprises, operate both as business entities (mainly LLCs) and as foundations and NGOs.
However, there is no evidence that legal forms limit SE efforts and service to public good.
4. How to determine social enterprises?
Are there specific characteristics? Yes, there are. However, opinions vary among scientists and entrepreneurs.
Below, see several factors, that I consider very important to be called a social enterprise. My thoughts come from extensive research of academic disputes and analysis of exemplary social enterprises.
- The purpose of the company. It should aim to have primarily social benefit purpose and lead all actions to reaching the social mission. It can be easily determined from the way how company positions itself on the eyes of public and how it brings real solution to the social problem.
- Innovative and new way of doing things. It is very distinguishable for social enterprises to find some new ways to reach their social aims, bringing and merging the opportunities existing, as well as creating new ones. It can be seen in the way company organizes its work, reaches its stakeholders and offers its services and/or products. SEs have more methods of work and resources than businesses or NGOs do separately. For instance, voluntary efforts, governmental support and cheap money can be used to finance an SE, which is not the tool of a traditional business. SE can benefit from such resources, however, it should be capable of operating successfully in a market as an enterprise and generate the money for its existence and ultimately for the solution of the social cause.
- Social value creation should be inherent in all the parts of the business’ value chain, i.e. its customers, employees, stakeholders, with respect to society and nature.
- Income generation activities should eventually lead to profit. Who owns the profit of social enterprise? Companies should decide to reinvest the substantial part of their profit to social enterprise. That is the main approach.
- Social enterprises are to be inclusive in terms of letting stakeholders be part of every works inside social enterprises. Eventually, it is their problem, and stakeholders are to be part of social problem solution for themselves.
As you can see, there are no strict requirements or boundaries. These are all matters of decisions to take to succeed, which in its turn is dependent on external factors: the social problem it chooses, the level of economic development in the country, culture etc.
Being a social enterprise is a matter of decision to be taken in internal level. Social Entrepreneurship is all about conscious choice toward the social purpose, which is truly a hard one.
What are some of the social enterprises in Armenia that you would recall?