Social Entrepreneurship: Where Are Its Borderlines?

Monday, April 4, 2011

Social entrepreneurship is a concept that emerged lately all-over the world, following the rise of both entrepreneurship and social responsibility, but what qualifies as social entrepreneurship? Do normal businesses generating employment suffice? Or does it have to be an NGO? How can an NGO insure sustainability?

Different definitions came up over the years trying to define the borders of social entrepreneurship as summarized by Mair and Marti (2005) ranging between NGOs and for profit businesses, ranging between the social angle being at the core of the operations of the company to limiting it to externalities companies could generate to society. The paper proposes a definition of social entrepreneurship as “a process involving the innovative use and combination of resources to pursue opportunities to catalyze social change and/or address social needs.” I believe the definition not to have solved the boundaries problem as the definition is loose enough to encompass companies, NGOs, and social movements. It also encompasses all range of social services under which we could name generating employment, fulfilling consumers demand, facilitating business services that most companies fall under anyway. So what is the value added we require from social entrepreneurship? Once again we face an unclear definition that leads to confusion when grants or support programs are offered to “social entrepreneurs.”

The paper gives three examples of social entrepreneurship being Grameen Bank in Bangladesh, Aravind Eye Hospital in India, and Sekem in Egypt. What is interesting to see is that the three fall under the umbrella of “for profit businesses” while generating a lot of value added to society like access to micro-financing, eye surgery at a fraction of its usual cost, or selling organic food. But how can we measure the value added to society to qualify as a “social venture”? Some efforts came up trying to create some “social returns” as a measurable element to be able to rate companies in terms of grant qualification, which is a good step towards being specific to what we mean by “social entrepreneurship.” Some PE funds even got specific towards that by requiring companies they invest in, not only to generate decent financial returns to shareholders (IRR), but also to generate social returns as they define their measurement based on a certain scale encompassing environmental returns, community returns.

Source: Fast Company (link opens in a new window)