I was quite surprised to read this statement from Penelope Trunk, founder of Brazen Careerist today. Let’s skip the fact that it’s really stupid to assume a company’s corporate citizenship level simply by looking at a single factor (the presence of a ‘green initiative’) and jump straight into the comment about social entrepreneurship.
The heart of her argument is in this post. The general idea makes sense: You can no longer separate the world into the “non-profit do-gooders” and the “for-profit money-grubbers”. This is an obvious oversimplification, but as we know, the world is rarely that black and white. A commenter gave a great example about Nike vs. Tom’s Shoes.
Nike vs. Tom’s Shoes
Nike does a lot of good work for the world. In fact, one of my favourite development campaigns is from Nike: The Girl Effect (make sure to check it out if you haven’t already!). Tom’s Shoes on the other hand, was founded on the “one for one” premise.
Do you see the difference? It’s in the authenticity; it’s in the priorities. Even if you don’t see a difference, I think it’s quite harsh to say one of them is stupid. I think a much more interesting evaluation would be to see what percentage of a company’s revenues (or products/services) are fed back into making the world a better place vs. the shareholder’s pockets. Perhaps that’s a better approach?
Profit isn’t the Top Priority
At the end of the day, the key distinction is that for a social enterprise, money/profit is seen as a means- not the end. The resources acquired are used to enrich the lives of yourself and others.
If you think Social Entrepreneurship is stupid, I’d love to know why. :)
Update (17/12/09): A well-written comment by @AkhilaK who blogs at Justice for All
To be honest, it’s been a few weeks I’m reading your blog, seeing Guy Kawasaki’s talk, reading a few stuff online about social entrepreneurship etc… And I can’t get a clear view of what it is. When you say “profit is a means not an end”, I’ve seen that in my first business course, in a well-known article from Peter Drucker “Purpose of a Business”. So in the end, if you consider that business are organizations, people together accomplishing something of value for the society (there is no business without customers, labor, land etc), and that in today’s world profit is just a means for somekind of darwinist selection, only the best (profitable) organizations survive etc, then what really makes the difference?
Or maybe Drucker is just a moralist and the reality is different from its theory… :)
@Briac – Thanks for the comment!
I would say that the key difference in a social enterprise is where the priorities / core values lie. In a typical business (and rightfully so) the objective is to increase shareholder value. In a social enterprise, the objective is to be sustainable (which usually means making a profit!) in order to achieve your social objectives.
Thus, ‘doing good’ is more of a core objective rather than a byproduct. You mentioned customers, labour, land, etc. – which is a byproduct of any enterprise profit/non-profit/social.
Example: If I produce widgets for $5 and people are willing to pay $25 for them. That’s good business. However, would I be willing to sell (or see it as donating part of your profits) the same widget for $10 (and lose $10 of profit) to less fortunate people?
Or, like the Tom’s Shoes model, for each widget I sell, I give one away and still make $15 profit. It all depends what your objectives are.
If my priority is to increase shareholder value, I certainly shouldn’t sacrifice my profits. However, if my objective is to make sure the product is getting into as many hands as possible while being sustainable that’s more like a social enterprise.
This comment is already long as it is, but you’ve given me an idea for another post! Stay tuned!
I enjoyed both the Post and the quick explanation.
Briac, I would suggest you look up Rosabeth Kanter. She is encouraging Social Enterprises and has documented the benefits of being a sustainable business. She even shows how during the recent economic crises most of these “Super Corps” (also the name of her recent book) as she calls them survived due to the fact that they are “sustainable”.
See you soon gentlemen.
@Hadi – Thanks for the information. I’m actually looking for books to read during the holidays. I may have to put Super Corps on the list!
Another one on the topic that has been recommended is Creating a World Without Poverty by Muhammad Yunus who created the concept of microcredit and founded the Grameen Bank.
I would have lent you Super Corp but i’m planning to read it on the flight to Lebanon! :P I’ll let you know when i’m back; if you haven’t read it your more than welcome to borrow my copy.
I get it, core values, I guess that’s a good definition. So we’re not talking about core purpose then (by this I mean not our ideology but what do we create as a business)? Could you be a social enterprise if you sale widgets, considering that it has no “social impact” in itself but you can transform part of your profit into valuable social action (i.e widget sales -> money -> charity)? Does your mission statement have to be “Producing widget to give away as much widgets as we can for the widget-needy”? Or else, to be a Social enterprise you have to have a social purpose (ie “We produce shelters”)
When Google says its mission is to “make the world a better place”, does that make Google a Social enterprise by definition?
If the article idea you got is to write a definition of Social Entrepreneurship, kudos in advance! :)
@Briac – Sounds like you’re going back to products (widgets or shelters). Again, I’m referring more to an ideology. Let me try to break down your points to clarify:
1) widget sales -> money -> charity (if the ultimate goal is to give away the money to charity and not shareholders, then I would consider it a social enterprise whether the widgets are candies or shelters. The product itself is not what makes you a social enterprise.
2) Google’s mission is not to “make the world a better place” last I checked? Google’s mission is to: “organize the world’s information and make it universally accessible and useful”. BUT- they’re a great example of an enterprise doing amazing work in social development:
Google.org – Part of Google’s initial vision was to “contribute significant resources, including 1% of Google’s equity and profits in some form, as well as employee time, to address some of the world’s most urgent problems”
As you know, just 1% of Google’s equity/profits is huge. That 1% could potentially accomplish much more than a social enterprise or a non-profit could. But again, this is the distinction between an enterprise (with an amazing social conscience!) vs. a true social enterprise.
Since this is an emerging field, there are a few definitions floating around, but the core ideas are the same. My article idea is to look at this at a more micro/personal level, which is something people may be able to relate to better.