In my last column I discussed the Occupy Wall Street protests and what their implications are for business ethics.
Since then I’ve been thinking a lot more about one of my favorite topics: social entrepreneurship.
What is social entrepreneurship? Put simply, it’s a term to describe business enterprises that are run with goals that extend to more than just making a profit.
A social entrepreneurial business aims to make money while also solving social problems, whether that’s climate change or pollution, high teen pregnancy rates, helping to save an endangered species or whatever. While most commonly it refers to not-for-profit organizations, what I want to focus on here is the concept of businesses which both make a profit and solve a social problem at the same time.
What has become increasingly clear these days is that every business ought to have a social entrepreneurial element – as business owners we do a lot to shape the economy, and as a result I believe we have a responsibility to lead the way in combating social and environmental problems.
In fact, it’s not only that business ought to have a social entrepreneurial aspect – it’s becoming increasingly clear that every business needs to do this. As the effects of climate change and the depletion of natural resources we have come to depend on heavily (most notably oil) ramp up, it’s obvious that business in general needs to find a way to survive long-term without destroying itself. We can’t keep enjoying golden eggs in the long run if we insist on killing the goose.
One of the first things you’ll notice when considering a social enterprise start-up is how difficult it is to come up with a viable idea.
Thinking of potentially profitable business ideas can be difficult enough on its own, but coming up with ideas for a business that will both turn a profit and help the wider community without having other negative impacts can seem difficult. This is largely due to the fact that many social and environmental problems are the result of market failures in the first place. They continue to exist because there appears to be no money in solving them.
As a result, social entrepreneurship requires you to think outside the box even more than usual.
One way to do this is to shift your thinking from ideas that focus on serving consumers, to ideas that serve business or government. For instance, imagine you were to develop a software program that automatically runs calculations which helps dirty factories improve their efficiency and reduce pollution. Companies that own factories benefit because they increase their productivity, and the environment benefits as a side effect.
It comes down to thinking of ways to harness market forces in order to create positive knock-on effects in society.
Likewise, most governments are interested in reducing dependency on dirty fuels in accordance with international treaties, as well as trying to combat a host of other social problems. The main problem here is that you only have one client, so investing in developing product ideas can be risky. That said, on the flipside, it’s relatively easy to figure out if there’s demand for your idea within a government.
Of course, there are plenty of options for social entrepreneurial ventures which serve consumers directly. Consider alcohol abuse as an example. Allen Carr has established the multi-million dollar Easyway brand selling effective information products for combating alcohol addiction, smoking addiction and a host of other problems.
You may already be running a successful enterprise (or more than one) but you’re struggling to think of a way to add a social element. You’d like to give something back to the community or help protect the environment, but you can’t think of any way your business could be relevant to the issues you care about.
The obvious option is to simply donate some of your revenue to charities you want to support. This is not exactly social entrepreneurship per se, but it has the same effect. And by letting your customers know you donate a percentage of your business’s earnings to a worthy cause, you can actually increase sales. People like to spend money with socially responsible companies, given the choice.
One attractive option is to donate a portion of your profits to microfinance organizations.
I’m fascinated by the potential of microfinance in poor countries – while direct aid is completely necessary in the short term, long term development can only be achieved in poor countries through economic development. Microfinance organizations help entrepreneurs in poor countries to fund growth of their businesses. That may be something as simple buying a new goat, or it might be something more complex like building a small dam. What seems like small chips to us in the developed world can be a game-changer for an entrepreneur in a poor country.
If you’re interested in this idea, I recommend taking a look at Kiva.
The Socially-Conscious Market
As I mentioned, there are still plenty of opportunities for selling directly to a consumer market as a social entrepreneur, because people are becoming a lot more socially conscious when they make purchasing decisions.
There’s now a market for environmentally friendly dishwashing products and detergents. There’s a market for more energy efficient light bulbs. There’s a market for products like fair trade coffee and fair trade clothing. This is driven partly by government regulation, but it’s also partly organic in the sense that consumers are beginning to demand environmentally neutral products.
The point is, just the fact that your enterprise has a positive social impact can, in itself, be your point of difference.
Notice a market where every company is hurting the environment? You may be able to capture a share of the market by offering an environmentally friendly alternative. The same applies to any market where most businesses are creating negative externalities (side effects of manufacturing, marketing, etc) as part of their daily procedure.
The only issue here is that a large number of people need to be aware of the problems. People won’t make socially conscious buying-decisions in a given market if they have no idea there are negative social consequences associated with how some businesses in that market operate.
Luckily, most of the biggest problems – things like climate change – are quite widely known and there are plenty of people willing to pay a premium for environmentally friendly products.
In fact, I would suggest these markets represent some of the most lucrative opportunities open to entrepreneurs. As more average people become aware of environmental and social problems, and governments across the globe try to take action to combat these problems, more opportunities are created for entrepreneurs on the cutting edge to make a profit while also making the world a better place.
Photo courtesy of Mr Kris on Flickr.