Social enterprise. Though it was most likely used in different context at the time, this particular combination of words has technically been in use since the early 1800s. It took two centuries for the concept to get buzzy, and it wasn’t until the waning days of the Great Recession that the idea really took hold in the business community. Now more than ever, social entrepreneurs, startups, nonprofits and corporations alike are launching ventures that provide solutions for deep social, cultural and/or environmental problems through commercial, revenue-generating business models.
All too often, social enterprise is confused with philanthropy. No doubt, philanthropic fibers course through the fabric of a social enterprise. Merely adopting intentions of doing some sort of social good is inherently philanthropic. Yet, in that same fabric, the threads of capitalism are just as prevalent.
Social enterprise isn’t charity. Nor is it created with the sole purpose of making its shareholders bundles of cash.
Ay, there’s the rub. Too much wiggle room. Nonprofits can launch a social enterprise, yet so can big banks and major corporations. At the core of it all, shouldn’t every business — from your niece’s lemonade stand, to Exelon, to the creative marketing startup your roommate launched in your basement — strive to have social impact?
Uh – yes, most definitely. This position – that every business should work toward positive social impact — is gaining traction in the business world. More importantly, it’s gaining traction in investment circles across industries. For a few years now, mainstream investors and impact investors alike have been touting the phrase “all investing is impact investing.” So why is this a crucial perspective in the overlying view of what social impact could be, right at the time when the concept is beginning to realize its potential in the public eye?
Because in a world where every business has a social mission, it’s incredibly and increasingly necessary to recognize businesses with models that are intrinsically social: they don’t have nonprofit arms, they don’t adopt the one-for-one model of giving back, they just simply cannot exist when the social element is removed from their business model. They will not be able to generate revenue without that social element.
These are not social enterprises
Companies like Better World Books. Founded in 2002, the online book retailer should not be considered a social enterprise under the new definition. The Indiana-based company scavenges books from college book drives and sells them online. Once a book is purchased, another book is donated by the company to a literacy program – sometimes a portion of the profit.
While the company is admirably transparent about disclosing fundraising information and donated or recycled book data on its website, it can most definitely exist without its social mission. It is doing social good by supporting literacy programs, but the social aspect to the model is auxiliary.
It’s the “buy one, give one” model, most notably adopted by Toms Shoes. While Toms Shoes founder Blake Mycoskie was an early example of what a social entrepreneur might look like, it’s since been determined by the business and advocacy communities that Mycoskie actually does not at all represent what social entrepreneurship should look like.
When it comes down to it, Toms Shoes is just a modern example of western colonialism.
“The fact is, Toms isn’t designed to build the economies of developing countries,” writes Fast Company’s Cheryl Davenport. “It’s designed to make western consumers feel good.”
Toms Shoes isn’t doing anything to foster economic development – it’s a company led by a privileged white guy from Santa Monica swooping into foreign communities to provide an arguably more-harmful-than-helpful solution.
“Once their free shoes wear out in a couple years, the children Toms ‘helped’ will be just as susceptible to the health and economic perils associated with bare feet as they were before,” Davenport writes.
Can Toms Shoes exist without donating shoes to children? Absolutely. At the end of the day, Toms is just another shoe manufacturer – with a questionable history of dark labor.
This is a social enterprise
SokoText is perhaps one of the most innovative social enterprises on the scene. Based out of Nairobi, Kenya, the startup is leveraging SMS technology to provide Nairobi’s impoverished communities with healthy foods. How? By targeting the city’s micro entrepreneurs (read: food stand vendors).
The owners of those produce kiosks sign up for the service and are able to aggregate bulk orders of their produce from bigger supply chains at wholesale prices via simple text messaging, bringing the price of fruit down 30% for the micro entrepreneurs, and placing fresh produce into the hands of the community. Simple, but effective.
Social good is the absolute keystone of SokoText. Without that social element, SokoText’s business model would crumble — and they wouldn’t exist within the newly redefined social enterprise ether at all.
It’s time for a new definition
Take a company like Toms Shoes and compare it to a company like SokoText. One of those businesses can only generate revenue by solving a social crisis on an infrastructural level, by organically stimulating economic development at the epicenter of an expanding food desert.
The other gives away cheap shoes.
Can we – as consumers, as advocates, as human beings – really place these two models within the context of the same definition? After two centuries, the time is ripe for the world to adopt a new, progressive definition of ‘social enterprise.’ It’s time to start recognizing and celebrating businesses solving real-world issues with truly innovative revenue-generating models.