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Social Entrepreneurship - What it is and what it isn’t




What is a Social Entrepreneur? 

Most people know what an entrepreneur is because of the increased awareness of startup culture and global calls for constant innovation that have spread in the past few decades. Social entrepreneurship is a similarly rapidly growing subset of entrepreneurship focused on implementing innovative solutions to social problems.

If that definition sounds vague, it is because it is. Since the field has been budding so recently, the term Social Entrepreneurship refers to many things. It is easier to explain what Social Entrepreneurship isn’t than what it is, so let’s start there:


Difference between a For-Profit and a Social Enterprise

The main difference between a solely for-profit organization vs a social company comes down to the fundamental motive behind the growth and operation of the organization. Simply put, a for-profit company exists to make a profit while a social company exists to make an impact.

An operational difference (connected to the motives I mentioned) would be how each type reinvests its profits. A for-profit company reinvests most of its profits for the continued growth of the company while a social organization allocates a significant part of its profits into fixing the social cause it is trying to solve. Unlike for-profit companies that might donate money as part of a CSR (Corporate Social Responsibility) program, a social organization’s connection to the problem they are trying to solve is baked into the organization’s business model.


A (famous) example of a Social Company

An example of a social company would be a pioneer in the field - TOMS. TOMS mainly sells footwear; however, they spearheaded the buy one give one business model in which for every product a customer buys, a pair of shoes of the same model would be given to the most vulnerable free of cost.





Difference between a Nonprofit and a Social Enterprise

There is a common misconception that a social enterprise is a nonprofit; however, this is not necessarily the case. Braveen Kumar from Shopify lists several different models social entrepreneurs can adopt:


  • Nonprofit: A tax-exempt, non-business entity that invests excess funds back into the mission.

  • Co-operative: A business organized by and for its members. Credit unions and community grocery stores are some examples of co-ops.

  • Social purpose business: These businesses start on the foundation of addressing a social mission.

  • Social firm: Social firms employ those in the community who need jobs, such as at-risk youth.

  • Socially responsible business: These companies support social missions as a part of their day-to-day business operations.

  • For-profit. Perhaps the vaguest category, these businesses are profit-first but donate funds, raise awareness, or otherwise support causes.

Essentially, a social enterprise can be a nonprofit that invests all excess funds back into the organization or it could be a company that generates a modest profit selling a sustainable product at an affordable rate.


Difference between a Sustainable Business and a Social Enterprise

A sustainable business is based on a model or product that creates a strong ecosystem of demand for the product in the future. Many social enterprises are sustainable ventures as their mission often improves the community they are in, increasing demand and creating a stronger economy in the long term. However, there are sustainable companies that would not be considered a social enterprise. For example, Tesla is a for-profit company that innovated a commercial electric vehicle and created the economy for electric vehicles today - therefore it is a sustainable business. Additionally, Tesla’s main product, an all-electric vehicle, can be argued to help the environment as well. However, Tesla wouldn't be considered a social enterprise because its main motive is profit, not for the environment.



Conclusion

In conclusion, regardless of the diverse models and methods adopted, the unifying aspiration of a social entrepreneur remains constant: to catalyze positive change and improve the world. Whether through innovative business structures, like TOMS' buy-one-give-one model, or various organizational models ranging from nonprofits to for-profits with a social mission, the essence of social entrepreneurship lies in its commitment to making a meaningful impact. This dynamic and evolving landscape not only challenges traditional notions of profit-driven ventures but also invites entrepreneurs to reimagine success by intertwining their business endeavors with a purpose-driven pursuit of global betterment.


 

Did you know that social entrepreneurship and philanthropy are something even high schoolers can get involved in?

Philanthropy Kids is a social organization that works with high schoolers through its Impact Factory programs to inspire and develop the next generation of social entrepreneurs.

For more information click here.


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