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What is Social Entrepreneurship?
Written by: Victoria Yu
Victoria is a business writer with a mission to help guide new entrepreneurs through starting and running their successful businesses.
Edited by: David Lepeska
David has been writing and learning about business, finance and globalization for a quarter-century, starting with a small New York consulting firm in the 1990s.
Updated on March 14, 2023
What is Social Entrepreneurship?
You may have heard the term “social entrepreneur”, which has gained popularity in recent years. But what does it mean, exactly? And how is social entrepreneurship different from being a normal entrepreneur or running a nonprofit?
Lucky for you, this guide lays out all the details to help you decide whether social entrepreneurship is right for you and your business.
A social entrepreneur is someone who “pursues novel applications that have the potential to solve community-based problems,” according to Investopedia. Essentially, a social entrepreneur’s ventures are focused on solving social issues, such as providing heat or water for a community, funding low-income families, or ending animal testing.
Any profits a social entrepreneurial venture makes are secondary to the business’s impact on society. The venture uses its revenues to support activities that further a specific social agenda or objective. The company can still make money and pay profits to owners, but the business must fund the social purpose.
Some define social entrepreneurship more narrowly. Mohammed Yunus, founder of Yunus Social Business, actually coined the term social business. For him it’s a business with a social cause that’s financially self-sustaining and pays no dividends to shareholders. For the most part, all revenues beyond cost are used to advance the social cause.
If you view social entrepreneurship as a new and trendy business idea, you’d be mostly right. Social entrepreneurship has been around for about 40 years, so it’s still developing and evolving.
The term was coined in 1980 by Bill Drayton, founder and CEO of Ashoka. In an interview, he explained that after visiting India and seeing the kindness and persistence of the locals, he hoped to help bridge the income gap between India and America.
In his own words, “a very small investment will allow a great social entrepreneur to quit her job and work full time to launch her idea and organization.” Rather than intruding upon communities he didn’t know, Drayton founded Ashoka to empower the locals best positioned to change their society and connect them to like-minded individuals. These people became known as social entrepreneurs.
Most shoe and glasses companies that promote a “buy one give one” model, like Toms Shoes, are social entrepreneurial ventures. And as consumers become more conscious about social and civic issues, social entrepreneurship has gained traction among investors and consumers.
How is Social Entrepreneurship Different from…
Social entrepreneurship is a subcategory of entrepreneurship focused on doing good. Legally, there’s no distinction between the two. A social entrepreneur is just as creative, independent, and determined as any other entrepreneur, if not more so, but also seeks to fix some social problem.
Philanthropists also contribute to social welfare, but generally do so by donating to a nonprofit or creating their own organization, such as the Bill and Melinda Gates Foundation. A social entrepreneur, meanwhile, focuses their entire business on a charitable or social cause from the get-go. Aid is embedded within their business practices, which do not prioritize profit and revenue.
Though both focus on providing social benefits, a nonprofit usually relies on sponsor donations and volunteers to accomplish charitable tasks and must recycle all of its profits back into its business. A social entrepreneurial venture generates revenue via sales, like any other business.
Some social business ventures are nonprofits, while some social entrepreneurs aim to help society while generating a profit.
Examples of Social Entrepreneurship
Patagonia’s core values are to build the best product, cause no unnecessary harm, use business to protect nature, and not be bound by convention. They closely study their own apparel business to identify sources of environmental harm, adapt their business practices, and share their knowledge with other retailers.
Ashoka is a nonprofit organization that connects and supports social entrepreneurs. They believe that everyone can positively change the world and use their network to organize funding and support for other social entrepreneurs.
Lush cosmetics champions ethical consumerism through organic, cruelty-free, and packaging-free products. They also invest and donate to support human and animal rights, ethical agriculture, and grassroots organizations.
Grameen Bank, founded by Mohammed Yunus in Bangladesh, is a bank established to make microloans without requiring collateral. The bank, as Yunus’s social business definition requires, is self-sustaining with no profits.
These are popular international examples, but many social entrepreneurs work only within their community. Next time you drive around your neighborhood, look for local organizations like daycare centers and microfinancing institutions to find social entrepreneurs near you.
How Can I Become a Social Entrepreneur?
If there’s a social issue close to your heart, you can step up and drive change by starting your own business with a social agenda. Again, there’s no legal distinction between a social entrepreneurial venture and a normal business, so all you have to do is keep your goal in mind as you organize and launch.
As your business grows, just be sure your actions maintain the core vision of your brand — if you lose sight of your social goals and act inauthentically, you’ll likely drive away your customers. If you’re unsure how to start, check out Step By Step’s guide to starting your own business.
A social entrepreneur is an entrepreneur whose business aims to address a social ill. They might focus on a pressing issue in their own community or a major concern abroad, and these businesses tend to use innovation to do good.
Social entrepreneurial businesses are likely more common than you think and can be started by anyone for any good cause. Do you have an idea for a way to help your community?
As long as you follow your mission, you and your social venture have a good chance of improving people’s lives – and maybe even making the world a better place.
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