Social Enterprise - Purpose Or Result

Some time last month i shared a presentation on Social Enterprises and Entrepreneurship, during that presentation, a friend asked if not all organisations are social enterprises because ultimately they are solving a certain problem in society especially through providing jobs for people. We deliberated a bit but i can say, she was not satisfied hence i have decided to write this article and dig deeper in addressing her thought process.

It actually is a fact that any company operating in any country, if paying its taxes and operating within the stipulated country regulations will be adding onto the economic development of the nation. Also if it is employing people regardless of the conditions, it is adding on to the job creation market. I hope you managed to pick up the fact that i used the phrase " regardless of the conditions", on this part i refer specifically to the conditions of work. We do know that at times due to desperation, one is forced to work in work conditions that are compromised not because they want but because they have no other way of fending for either themselves or their families. So take note of the fact that jobs may be created by some companies but these jobs may not necessarily be in true sense benefiting the employee but rather the employer.

A key factor of distinguishing a Social Enterprise and any other organisation is the purpose of the existence of that organisation. When one starts an organisation, they have a reason for doing so and usually it is because they have seen that there is something needed in the market and they want to fill that void. It then goes back to what is it that they have discovered is lacking, is it a need or a want? Is it something that is bound to be very profitable or not? Referring back to the need , what type of a need will it be, a Social need or a business need? All those questions are part of starting an organisation and deriving the purpose of the business. Social Enterprises differ in how they identify the social needs, recognise opportunities and in how they acquire their resources.

The main purpose of Social Enterprises is to do some good whilst addressing a social problem or meeting an unmet social need. People who start Social Enterprises (SEs) have a level of understanding of the different social problems within their communities or at a larger scale. There are three levels of understanding of social problems,( ref Lanteri Social Business Models 2020)

1. Social bricoleurs- these have intimate knowledge and understanding of the local conditions in which they exists, as a result they decide to tackle local scale issues and activate local resources to address the issues.

2. Social Constructionists - These have a general alertness of social needs wherever they are even as outsiders in communities, they look at broad market failures that relate to social needs and strive to bring structured and scalable solutions.

3. Social Engineers - these look at social systemic failures , identifying unsatisfactory institutions and thereby their understanding brings paradigm changing initiatives.

As a result when the founders of an organisation have that type of understanding when they look at social issues, their purpose of starting an organisation or of producing something is to initially address that before anything else. We however, need to understand that for any initiative to scale or to be sustainable it therefore needs to have the resources to do so and these are inclusive of financial resources. As a result , we then end up with Social Businesses that are profit making and yet their main existence is to cater for a social need. To make sure that this is not lost in existence with the growth of the SE, the organisation has impact measurements as part of their Key Result Areas which are a part of the DNA of the organisation . Just like any organisation measures its profit and loss and whether its meeting its objectives as an organisation an SE does the same with the main objectives being its impact measurement, to see if it is actually meeting the objectives of its existence. The difference with an ordinary organisation is then clearly shown in that with any other organisation, its existence may be to reach far and wide providing a certain service or selling a certain product making it very profitable. It however manages to employ a lot of people in the process of making money which is a good thing. Job creation was however, never its purpose of existence such that you may find that if there is an alternative, it can actually be done away with. The company is running a good business which then results in good things happening. With SEs its the opposite, a company does good things and ends up having good business which lead to sustaining its existence.

I am going to bring in a little controversy but i can not write this article and not mention a glaring example to most people. When the legendary Prof Muhammad Yunus started the Grammen Bank, his purpose was to help the marginalised in his community who did not have the ability to do conventional banking. They had no access but a little start up capital in their projects could change their lives or little loans to send their children to school could actually change generations future. He started that bank and started providing loans in such a way that it was easy for these people to repay without feeling much strain.

“If you can run a bank, lend money and get it back, cover all your costs and make a profit and get people out of poverty. what else do you want ?" -Prof Muhammed Yunus

Fast forward to the many Micro finance institutions that are now in existence world wide especially in the Global South, they are still catering for the unbanked and almost the same target market however, they are milking these people off. Its like its a crime to be marginalised but need assistance. Founders have realised that the majority of the people in the rural areas and poor urban areas are actually unbanked but still need assistance here and there. It is a need in existence but no longer looked at as a social need but a business opportunity thus these Micro-finances are opened , cater for the same marginalised people but actually offer them very high interest rates resulting in most even loosing the small assets they had to these micro finance organisations. They are nor getting people out of poverty but sinking them deeper in it. Their purpose of existence is profit making and not providing banks and relief for the marginalised and unbanked. Their objectives are financial and have nothing to do with social although some green wash their existence ( a topic for another day). They have no impact indicators in their day to day running of the business hence one tends to wonder how then are they tracing the impact they say they provide if they actually have no way of measuring it or are not putting it in their strategy development. The purpose of existence of an SE should be clear in tracking and the impact indicators should be there such that the direction of how the organisation moves, its strategy is determined by those impact indicators.

As a result an SE, uses a Social Business Model Canvas, whilst an ordinary business uses an ordinary Business Model Canvas. The Social Business Model Canvas includes the issues that relate to the Beneficiaries of the SE, it looks at the social and environmental costs and benefits too of the SE.These are not issues which organisation that are formed with no purpose to address those specifically look at. However, some organisations have decided to pivot and start considering some of the effects they have on the social and environmental surroundings in which they operate. Although they are not SEs as their purpose of existence to begin with was not social or environmentally oriented, they have decided to consider these in their day to day operations and thus are taking the route of BCorp Certification. This is a new term which i have not used in my previous writing and will need its own article to explain it. What i can say for now is that, it is a good thing which some For Profit organisations have decided to take. It makes it possible for organisations to keep doing their day to day however through adjusting some of their policies, believes and objectives so that they also work hand in hand with SEs and NGOs towards the achievement of the Sustainable Development Goal ( SDGs).

I trust the article has shed in more light on the distinction between the ordinary For Profit organisation and a Social Enterprise. Till next time.......