The Relevance and Scope of Social Entrepreneurship in 2021 : A Brief Overview
As society’s problems grow, so does the need for social entrepreneurship. The COVID-19 pandemic has already increased the need and relevance of social entrepreneurship.
Most business models focus on maximizing profit, but when it comes to social entrepreneurship, profit is no longer the main center of attention. Social enterprises, or businesses with leaders that are deemed to be social entrepreneurs, focus on proactively affecting positive social change.
Social entrepreneurship benefits the world and its societies in many ways as businesses can help to lessen the burden of poverty, foster inclusion, promote institutional change, empower women, help protect the environment, and more.
Additionally, the majority of American consumers (64%) are more willing to pay higher prices for sustainable products, and 32% of the population (age 18 to 64) report that they are aware of social entrepreneurs. This means that businesses with value propositions that aid the common good are widely known and acknowledged for the good that they do.
What Makes a Business a Social Enterprise?
Social entrepreneurship is all about “recognizing and resourcefully pursuing opportunities to create social value.”
According to the Social Enterprise Alliance, there are three methods to determine if a business qualifies as a social entrepreneurship.
Does the business:
- Employ people who may otherwise not have access to mainstream jobs?
- Allocate a portion of profits to nonprofits that provide social needs?
- Create environmental or social impact by way of service or product offerings?
Social enterprises are not a new concept, but they do represent a growing sector. As impact investing and conscious consumerism grow in popularity, social enterprises meet the needs of society by filling in gaps.
The Various Types of Social Entrepreneurship
Social entrepreneurship is surely given to individual interpretations but Dr. Joe Johnson, the founder of Welfront and an entrepreneur who has studied the field for over two decades outlines the four main types of social entrepreneurships:
1. Community Social Entrepreneurship
This type focuses on a small geographical region and aims to serve the social needs within that community.
For example, these businesses could build a community center or employ the residents of a small town. In this setting, the entrepreneurs work closely and directly with individuals within the community to achieve long-term solutions. Since they are often on the ground and have personal connection to those they are serving, the change is immediately recognizable and felt.
Microfinance institutions are an example of this type of social entrepreneurship, providing their respective community members access to loans when they would otherwise be turned away by traditional banks.
2. Transformational Social Entrepreneurship
When businesses and governments fail to meet a need, a transformational social entrepreneur will step in to help. Over time, nonprofits may become transformational social enterprises. These businesses may coordinate and work alongside government bodies to create impact. For this reason, there are often immense regulations that they must abide by to continue driving change.
An example of this is the Startup Genome Project, which is stewarding innovation policy and providing research to governments.
3. Non-profit Social Entrepreneurship
Non-profit social entrepreneurs allow for profit to take the backseat and social well-being to dictate business decisions. The profit of these businesses is reinvested into the organization to grow and expand services. Although the results of nonprofits may take time to realize, there is often success in securing readily available funding and donations to keep this type of business alive.
4. Global Social Entrepreneurship
As opposed to a community social entrepreneur, global social entrepreneurs are geared towards creating impact on a global scale to meet major social needs. Many large charity organizations and businesses can be categorized in this group. For example, some global needs that these organizations may support include providing equal access to education and clean water.
A Changed World and the Need for Social Entrepreneurship
The impact of COVID-19 has brought many social enterprises to the forefront. Many traditional enterprises shifted their focus and have emerged as social enterprises to support the overall good and needs of the public during the pandemic, thereby blurring the lines and definition of what it means to be a social entrepreneur.
For example, manufacturers like Burton Snowboards and Ranger Creek Brewing paused their production of products in order to shift their output to deliver resources and equipment for PPE like plastic shields and hand sanitizer.
Furthermore, over the last decade, there’s been an increase in social entrepreneurship that can be attributed to several factors and natural growth. These include:
- A rise in the interest of social responsibility (due to government legislation, as well as customers’, employees’, and society’s interest in achieving sustainability)
- Increased connectivity around the world because of digital technologies
- A decrease in brand loyalty when mishaps or mistreatment is revealed
The buying power of the leading demographic in the U.S. workforce has also impacted how businesses operate. Millennials have a spending power of $170 billion per year, and it is this group that are most willing to align their personal values with how they choose to spend their money. 62% of millennials will work for less money if they are working for a company that is responsible, and 70% will pay more money for products that support their beliefs.
COVID-19 has proven that the world, its businesses, and people are fragile. According to the World Bank, over 100 million people will face extreme poverty because of the pandemic. Businesses have shuttered, and people have lost their jobs and loved ones. As such, social entrepreneurs have become like first responders who can align business endeavors with the goal to provide social assistance and protection for people whose needs aren’t being met.
The core values that social entrepreneurs live by can play a large role in re-establishing norms globally. These values include: empathy, resilience, community, and leadership. While social entrepreneurs must remain mindful of their profits in order to stay in business, they use these values to push forward change on small and large scales.