What is a social business – is it the same as a social enterprise?

Abridged excerpt from book “51 Questions on Social Entrepreneurship“.

What is a Social Business?

A social business is one that is completely committed to achieving a social objective, so while not operating at a loss, it also doesn’t hand out dividends beyond initial investments made to the company.

Professor Yunus specifically defines two types of social businesses: Type I and Type II.

Type I Social Business

According to Professor Yunus, a Type I social business is focused on social objectives. It either produces a product or delivers a service targeted to the poor or to addressing a pressing problem. The yogurt is the result of a joint venture between Yunus’ Grameen Bank and the multinational brand Danone.

Multiple iterations of the yogurt were tested to maximize nutrients while ensuring the cost was low enough (for example, it was originally sold at 5 Bangladeshi Taka, around $0.07 US, to ensure that the ventures met Yunus’ vision of a true social business).

Type II Social Business

Type II social businesses can adopt a profit-maximizing, dividend-generating model, as long as they are owned by the poor and disadvantaged. The profits can be returned to the owners or employees through dividends or indirect benefits.

The most famous example of a Type II social business is the Grameen Bank itself because it is owned by the disadvantaged borrowers of the bank, who are mostly women.

 

image of "51 Questions on Social Entrepreneurship"

This is an abridged excerpt from the book, “51 Questions on Social Entrepreneurship” by Neetal Parekh. You can learn more and buy the entire book—which is told as a story of three aspiring social entrepreneurs and which dives into key aspects of social entrepreneurship including defining the space, legal structures, securing funding, and measuring impact at 51questions.com

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What do you have to do to become a social enterprise?

Abridged excerpt from book “51 Questions on Social Entrepreneurship“.

What do you have to do to become a social enterprise?

Depending on the country you are in, you don’t have to do anything to become a social enterprise. In many places, the term is used very broadly. But if you do self-identify as a social enterprise, be ready to be challenged on your mission, how you measure and assess impact, and how you remain a viable enterprise.

In certain places, like South Korea, a social enterprise is defined by the government. An organization (nonprofit or for-profit) must register with the government in order to use the term social enterprise. So depending on where you are incorporating, it’s a good idea to check local and federal laws to learn about any specific implications for using the term.

The benefits of embracing the term social enterprise include finding like-minded people and entrepreneurs who can help you achieve your goals and be a support system as you navigate through common questions such as legal formation, fundraising, impact measurement, and so on. It takes a village to impact a village—so everyone has a role to play. Additionally, identifying as a social enterprise may connect you with your target market: conscious and informed consumers who are looking to “vote” for companies they believe in with their purchases and patronage.

 

image of "51 Questions on Social Entrepreneurship"

This is an abridged excerpt from the book, “51 Questions on Social Entrepreneurship” by Neetal Parekh. You can learn more and buy the entire book—which is told as a story of three aspiring social entrepreneurs and which dives into key aspects of social entrepreneurship including defining the space, legal structures, securing funding, and measuring impact at 51questions.com

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What is an informed consumer—how can I create impact through what I buy (LOHAS) ?

Abridged excerpt from book “51 Questions on Social Entrepreneurship“.

Informed Consumer – LOHAS

With the shifts in the workforce and a broader shift in creative problem-solving, we are also entering the age of the informed consumer. That’s someone who creates individual impact through his or her purchases and collectively can impact entire industries.

There is actually a name for this buying market,: it is Lifestyles of Health and Sustainability, also known as LOHAS. If you can believe it, LOHAS commands a $546 billion market globally! The LOHAS market, in turn, inspires founders to launch better mission-oriented ventures and companies to more effectively pursue sustainability and impact measures.

Okay, so whether you consider yourself a card-carrying member of the LOHAS community or are just getting started with adopting the mindset of ‘voting’ with your purchases, there are a few concrete ways you can become a more informed consumer.

1)  Check for seals and certifications

There are a growing number of seals and certifications that can denote a company’s commitment to impact. We talked about these earlier. They aren’t just a tool for social enterprises to stand out from the crowd; they’re also a way to help all of us as consumers decide (and vote) on products and services that align with our values.

2) Check if the company has an impact report

Another thing you can do to be a more informed consumer is to check if the company has an impact report.

Many companies are becoming more active in corporate social responsibility—CSR. This can involve releasing an annual report that accounts for their impact through various measures such as charitable giving, reduction of waste, and how their sustainability decisions impact the country’s supply chain.You can check the company website and also take a look at directories such as The Global Reporting Initiative (GRI)  and CSRWire.

 

image of "51 Questions on Social Entrepreneurship"

This is an abridged excerpt from the book, “51 Questions on Social Entrepreneurship” by Neetal Parekh. You can learn more and buy the entire book—which is told as a story of three aspiring social entrepreneurs and which dives into key aspects of social entrepreneurship including defining the space, legal structures, securing funding, and measuring impact at 51questions.com

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What exactly is social entrepreneurship?

Abridged excerpt from book “51 Questions on Social Entrepreneurship“.

What Exactly is Social Entrepreneurship?

Social entrepreneurship harnesses the power and potential of business and enterprise to create both impact and profit. The term social entrepreneurship is often also used to describe the problem-solving mindset of addressing local and global problems with a business approach of identifying specific markets and leveraging business and financial models to achieve success. In that broader definition, a nonprofit or government agency could take a social entrepreneurship approach to problem-solving. Social entrepreneurship sits under the umbrella of social innovation and it’s a force to reckon with.

History of “Social Entrepreneurship” as a Term

There’s a bit of historical background on social entrepreneurship. In 1980, Bill Drayton, who had been a school teacher in New York before going to Harvard and law school at Yale, founded the organization Ashoka. In doing so, he challenged the idea of how we create impact. As a result of his influence, we now think about business models differently. Mr. Drayton is often recognized for popularizing the term “social entrepreneur” in the U.S. in the 1970s.  Ashoka is now the largest network of social entrepreneurs globally. 

These days, it seems like everybody wants to call themselves a social entrepreneur. Generally, though, it is used to refer to entities (for-profit or nonprofit) that are using business models to create impact.

Social Innovation v. Social Entrepreneurship?

Many seem to use terms like social innovation and social entrepreneurship synonymously, and while there is a great deal of overlap, the terms have a slightly different connotation. Social innovation focuses more on what is being implemented, like a new technology or new process, to create impact. Social entrepreneurship focuses more on how it is being implemented, like with a business approach or leveraging a unique business model to create, grow, and scale both impact and revenue.

image of "51 Questions on Social Entrepreneurship"

This is an abridged excerpt from the book, “51 Questions on Social Entrepreneurship” by Neetal Parekh. You can learn more and buy the entire book—which is told as a story of three aspiring social entrepreneurs and which dives into key aspects of social entrepreneurship including defining the space, legal structures, securing funding, and measuring impact at 51questions.com

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