benmetz.org

September 23, 2009

Social Entrepreneurship 101

Filed under: projects, social economy 101 — benmetz @ 10:21 am

I almost forgot I wrote this…  Some nine months or more ago Susan Mackenzie at Philanthropy UK asked me to write an article about social entrepreneurship for the Visa European guide to giving.  They posted me a printed copy this week.  So I dug around, found what I wrote and have posted it below.  It’s very much a “101” article for budding philanthropists but I think it’s nicely formed and worth sticking up here.

Visa article for Philanthropy UK

Social entrepreneurship – what’s all this then?

Heading into the 21st century we are seeing the term ‘social entrepreneurship’ used increasingly to describe all manner of activities with some form of social or environmental benefit.

What does it mean to be a social entrepreneur?

Wikipedia defines social entrepreneurship as “the work of a social entrepreneur.  A social entrepreneur is someone who recognises a social problem and uses entrepreneurial principles to organise, create, and manage a venture to make social [or environmental] change. Whereas business entrepreneurs typically measure performance in profit and return, social entrepreneurs assess their success in terms of the impact they have on society. While social entrepreneurs often work through nonprofits and citizen groups, many work in the private and governmental sectors.”

Like business entrepreneurs, social entrepreneurs are driven, ambitious people.  But social entrepreneurs are different.  They measure their success in number of lives improved, environment conserved and wellbeing generated.

Social entrepreneurs can be found in urban and rural locations, throughout the four corners of the world and working in every field and disciple imaginable.  From Victoria Hale who is developing new and affordable medicines for neglected diseases to Willy Foote who is transforming financing structures for fair-trade and organic producers in the developing world, social entrepreneurs use business acumen to tackle some of the world’s most intractable problems.

The Social Economy

Social Entrepreneurs are different from social enterprises.  Social Enterprises are legally incorporated organisations with a social and/or environmental mission that trade to fulfil their objectives.  They are often, but not always, founded and run by social entrepreneurs but the point to make here is that they are not mutually inclusive – social entrepreneurs do not always run social enterprises and social enterprises are not always run by social entrepreneurs.

The social economy in Europe varies in form and scale between each constituent country.  In addition to charities and voluntary/volunteer organisations many countries have histories of co-operative and mutual activity. Arguably the term social entrepreneur can be used to describe the work of the key historical figure Robert Owen, founder of the modern cooperative movement.  Some countries, such as France and the UK, have created new legal structures, policy instruments and financial mechanisms to stimulate the growth of the social economy.  Across Europe the social economy seems to be emerging from the traditional campaigning and charities worlds as a response to increasing commercialisation and globalisation.

Global and local

Social entrepreneurs and social enterprises can be found working at the micro level, perhaps in a particular local community and with turnovers in just the hundreds or thousands of pounds.  Equally they can be found working on globally important issues, impacting millions of lives across multiple continents and with turnovers in the tens of millions of pounds (sterling).

For instance social entrepreneur Willy Foote, who founded Root Capital, negotiates fixed price forward contracts with global fair-trade and organic purchasers such as Starbucks and Whole Foods that then allows him to lend to producers in the developing world.  Over the last four years Root Capital has made $66.5 million of loans, across 26 countries, with a 99.5% repayment rate, impacting the lives of hundreds of thousands of rural producer families.  Willy’s plan is to get to the level of circa $50 million a year of lending at which point this new form of lending will ‘pop’ onto the radar of the major banks, opening a new market to them by proving its viability.  In this way Willy aims to provide rural producers with access to the billions of dollars investment the banks can bring rather than the millions of investment Root Capital can provide. www.rootcapital.org

At the other end of the spectrum and by no means less important is Eric Samuel. Eric founded his initiative, Community Food Enterprise, in 2002, to improve the health of residents in some of the most deprived areas in East London.  Eric is recognised as leading the way in the UK in confronting food poverty and food access issues in the London Borough of Newham and surrounding area.  Through promoting healthy eating through schools and community facilities, providing fresh fruit and vegetables as well as healthy cooked meals, and by training community food workers Eric has impacted on the lives of tens of thousands of individuals.  Eric is stimulating an important change in the fabric of his community, one where understanding and importance is placed on the need for healthy eating for the health of the individual and that of the community.  As a consequence, through training programmes he runs and through word of mouth, his work is beginning have an impact throughout the UK.  www.community-food-enterprise.org.uk

There are no Global or Europe wide data sets that can give us a sense of the scale of this phenomenon.  Indeed the blurred nature of what might be classed as socially entrepreneurial activity would make this task difficult, if not impossible.  It is, however, somewhat easier to measure trading activity and thus get a sense of the scale of social entrepreneurship, by measuring social enterprise activity.  This is something the UK Government decided to do in 2006.  The former Government Department of Trade and Industry found 55,000 trading social enterprises in the UK turning over £27 billion, or 1.3% of the total turnover of all businesses with employees and with a contribution to Gross Domestic Product estimated to be £8.4 billion.

Clearly social entrepreneurship and social enterprise is not a flash in the pan.  There is something happening at the interface of business and society and it looks like a structural adjustment that is here to stay.

What’s the future for social entrepreneurship?

As social and environmental problems increase in number and severity the role of the social entrepreneur is becoming more important.  An aging population in the developed world will see pressure placed on Governments to innovate and deliver efficient, value for money health and care services.  By 2030 more than 50% of the population of Japan will be over 65 years old significantly decreasing the Governments tax base while increasing overall health and care costs.

The 2006 Stern Review on the Economics of Climate Change shows the effects of climate change costing between 5 and 20% of World Gross Domestic Product.  And as insurance claims from extreme weather events and rising sea levels outpace increases in GDP pressure will mount to devise new ways to climate change.

These kind of demographic and economic changes provide huge opportunities for individuals and organisations that place social return over financial return.  Who better to rise to these challenges than the social entrepreneur on the cutting edge of innovation and using commercial acumen within a not-for-profit structure?  Could it be that the days of the business entrepreneur are numbered and the days of the social entrepreneur are in the ascendant?

How to get involved in Social Entrepreneurship

As social and environmental pressures increase, business entrepreneurs and professionals from across the commercial world are starting to explore the world of social entrepreneurship, by becoming practitioners, funders and volunteers.  They are as likely to get involved in an initiative local to where they live as they are to focus on a field or sector where they have a particular expertise.  Bankers are starting to look at new ways of allocating capital to civil society, Hedge Fund managers are practising arbitrage to drive down the cost of anti-retroviral drugs, Management Consultants are transforming local community organisations into sustainable social enterprises.  These people are changing the world.  You too can change the world.

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