Exploring Social Entrepreneurship: Definition, Types, and Issues

What is social entrepreneurship? Understanding this approach to social change and knowing the different types of social entrepreneurship may be key to keeping up with a rapidly evolving business landscape. Also interesting: how a dataroom can support your secure business transactions.

Putting Conscience to Work

Social entrepreneurship is a broad concept that comprises several different approaches, all with an underlying desire to affect positive change for society as a whole. Most social entrepreneurs have a particular focus on marginalized and exploited populations, including the poor, the sick, the vulnerable and the defenseless. Rather than simply sitting back and watching social injustices and large-scale tragedies unfold, social entrepreneurs translate their feelings of grief, sympathy, and despair into action. There’s a combined sense of innovation and social responsibility behind each endeavour in this category.

Ultimately, whether they’re building a charitable organization or want to find a way to embrace a capitalistic approach to doing good, social entrepreneurs share certain qualities and goals. According to the Schwab Foundation for Social Entrepreneurship, professionals in this field share “an unwavering belief in the innate capacity of all people to contribute meaningfully to economic and social development” along with “a driving passion for making that happen.” The Schwab Foundation cites Richard Branson and Mother Theresa as individuals who embody different aspects of the social entrepreneur’s approach.

Forms of Social Entrepreneurship

Clearly, social entrepreneurship is not a one-size-fits-all designation for a specific type of activity. There are different types of entrepreneurs and entrepreneurship that fall under the umbrella of social innovation. These different types of social entrepreneurship show just how varied the concept can be.

Community Project

A community project is a relatively small-scale effort to address an issue within a specific community. Social, environmental and economic issues are the primary focus of most community projects, but the interpretations of what this means can be quite broad. Anything from an effort to build a community garden in an affluent suburb to the organization of a volunteer fire department in a poverty-stricken rural area can fall under the umbrella of a social entrepreneurship community project.

Community projects are one of the best examples of the idea that anyone can be a social entrepreneur. You don’t need a business degree, power or connections to affect change where you live. All you need is the entrepreneurial initiative, creativity, tenacity, and commitment to see a project through to completion.

Non-profit Organization

The exact structure of a non-profit organization is likely to differ based on legal jurisdiction, but on the whole, non-profit organizations exist not to generate revenue for shareholders and stakeholders but to create an enterprise focused on a specific cause. One common misconception is that non-profit organizations funnel all the donations they receive into their mission, but this isn’t the case. Executive leadership for large non-profits can often be quite well compensated; their income generally isn’t nearly as high as that of the leader of a comparably sized organization in the private sector, but nonprofits do spend money on operational expenses like salaries, marketing, and offices. Any extra revenue is put back into the organization’s endowment or reinvested in other ways rather than paid out to shareholders.

Aside from operations, though, nonprofits are bound by duty and often by law to use the income they generate to address issues relating to their mission. Non-profits may focus on specific issues, such as the treatment of a rare disease or their missions may be a bit more general and focused on broad categories such as social impact, early childhood education, women’s health, and cancer research.

Co-operative (Co-op)

People who come together to address a specific need often form co-operative groups, or co-ops. These member-owned and operated enterprises usually focus on basic needs like housing or groceries. According to the International Co-operative Alliance, co-ops are “autonomous association[s] of persons united voluntarily to meet their common economic, social needs and cultural needs and aspirations through a jointly owned and democratically controlled enterprise.” In most places, co-ops have their own special legal specifications and requirements, and they can operate on either a non-profit or for-profit basis. In most cases, non-members cannot participate in the co-op, but a quick application process is usually all that’s required to join. Members may be required to pay a membership fee to cover operational expenses and they may also be required to perform certain duties to keep the co-op up and running.

Social Enterprise

Businesses that operate according to a specific social or charitable mission are known as social enterprises. These businesses are often backed by a non-profit organization and may exist to further that organization’s goal and opportunity. For example, a charity that focuses on the health and well-being of senior citizens may start a weekly craft fair that allows seniors to sell carpentry projects, embroidery or baked goods as a way of generating some income.

Social enterprises typically focus on providing a job skills training opportunity program for marginalized or vulnerable people and may use proceeds from the business to pay salaries to populations supported by the non-profit organization or to fund the non-profit’s efforts as a means of supplementing income through donations. Social enterprises can also address inequality or injustice; one example of this is the casinos operated by indigenous tribes in North American communities who have been displaced from their ancestral lands by colonial governments.

Social Purpose Business

Some businesses founded to both generate profit and affect some sort of change for the good of the general public or a specific group of people in need of assistance. An organization that strives to strike an ideal balance between for-profit organizations and non-profit programs is known as a social purpose business. Social entrepreneurs who follow this route believe that the pursuit of financial gain doesn’t have to be at odds with ethical, conscience-focused action. These kinds of businesses tend to attract impact investors. Impact investing operates much like any traditional business investment or venture capital effort, only with the added concern of generating social good. An impact investor will want to ensure that their investment goes toward a business model that’s not only likely to succeed but also likely to succeed in its mission of affecting positive change.