Business Ethics and Corporate Social Responsibility RSS

Running the Gauntlet of Social Entrepreneurship

Curto, M.

 

Publisher: IESE

Original document: El emprendimiento social: Estructura organizativa, retos y perspectivas de futuro

Year: 2012

Language: Spanish

  • icoPrint
  • icoDownload Spanish
  • icoFeedback
  • icoShare
In Europe alone, socially minded businesses provide jobs for 11 million people and account for 10 percent of all companies -- proof that the social entrepreneurship model that emerged in the 1980s has taken solid root.

With governments finding it increasingly hard to address, never mind eradicate, the manifold problems blighting communities, more and more professionals will be needed to channel their energies into business projects that give something back to society.

But changing the world, or at least a small part of it, is no easy task. Social entrepreneurs confront numerous challenges in implementing initiatives, as Marta Curto reports in a study published by the "la Caixa" Chair of Corporate Social Responsibility and Corporate Governance at IESE.

An Obstacle Course
One of the main challenges is funding. In times of deep recession, getting the funds needed to start a project is no easy feat, especially with competition for funds within the sector on the rise.

To address this problem, the European Commission is seeking to bolster the financial resources of socially minded businesses in the European Union through the creation of Social Entrepreneurship Funds.

If the European Council and the European Parliament approve the proposal, it could be launched by late 2012.

But finding financing is not the only obstacle facing social entrepreneurs. They also encounter serious difficulties in luring and training talent, adapting to the business environment, building a culture of professionalism and promoting their initiatives.

Generating Social Value
Curto recommends that before launching a social business, entrepreneurs should have a very clear idea of how they will organize the company.

There are three basic questions that must be addressed from the outset: how to create a network that generates social value, how to establish strong relationships with your target customers and how to obtain the necessary resources.

Entrepreneurs must also decide whether to charge a fee for the service they deliver. Although many entrepreneurs are reluctant to charge people of limited means for their service, it can actually be beneficial to have paying customers, as it raises their involvement and commitment to the project.

At the same time, entrepreneurs must be clear on their company's governance structure. They need to decide whether the executive board should be made up primarily of shareholders or stakeholders, i.e., the people most closely involved in the project.

One effective compromise is to create a hybrid between a traditional money-making business and a not-for-profit organization.

Most importantly, entrepreneurs must never lose sight of the fact that the project's main purpose is to benefit the target community.

Curto cites three social organizations as models to emulate: the Grameen Bank, the microcredit bank founded by Nobel prize winner Muhammad Yunus; Sekem, an institution that promotes human development in Egypt; and Mondragón, the Spanish Basque region's leading business group and the seventh largest in Spain.

Tapping Outside Funding
As it is difficult to obtain financing, social entrepreneurs must keep costs down to the minimum, be as efficient as possible and diligently pursue all funding avenues for the project.

To access credit, the entrepreneur can resort to traditional loans and subsidies and, provided it's a not-for-profit company, donations.

Fortunately, a growing number of organizations, such as Ashoka (which has a branch in Spain), Echoing Green, Skoll Foundation, Schwab Foundation and UnLtd, provide help through grants, awards and financing to social entrepreneurs.

Curto analyzes the case of Ashoka, the world's largest promoter of socially minded initiatives.

Founded in 1980 by an American named Bill Drayton, Ashoka evaluates several key criteria in choosing which entrepreneurs to incorporate into its network around the world.

In short, the ideal candidate must be creative, entrepreneurial and ethical, have a novel idea and the project must have an impact on a broad geographical area.

Good Health
While social entrepreneurship may be on the rise, there remains room for progress in the sector.

One unresolved issue is how to define precisely what social entrepreneurship actually means, so as to avoid potential confusion or ambiguity in the future. This can only be achieved with continued research into the field.

Also, it's worth remembering that social entrepreneurship is not just about the entrepreneur, but rather a broader process in which many different stakeholders take part.

Despite the gauntlet of obstacles it has and continues to face, social entrepreneurship has grown by leaps and bounds since its inception.

Much of this success has been thanks to the growing influence of tried-and-tested business methods and marketing techniques, which have helped boost efficiency and make these companies more attractive places to work.

Top >

 
<