Tuesday 18 August 2009

Social enterprise, a fusion of business and corporate responsibility

SOCIAL enterprise is a new term coined to describe a new breed of business where contributions towards the betterment of the society or conservation of the environment are the main aim.

However, different from the traditional not-for-profit organisations where funding comes mainly from support and contributions of donors, social enterprises are involved directly in business and generate funds from business.

The areas of business in which social enterprises are involved contribute directly towards their objectives of good cause, social improvements and sustainability.

For example, providing credit to the poor and needy in financing their business ventures remains the core purpose for many micro-credit entities.

In the area of sustainability, a number of social enterprises are involved in providing services to companies in assisting them to implement sustainable business practices.

Social enterprises re-invest the profits made into their operations or fund activities which support their core aims such as providing scholarships to poor students, educational activities or funding research and development.

By generating their own funding through business activities, social enterprises are more independent in terms of funding compared with not-for-profit organisations.

Given that business is full of risks; social enterprises carry different risk profiles compared to their not-for-profit cousins. They have to be run like any other business while at the same time need to ensure the broader ideals and objectives they pursue are achieved at the same time.

Having business dealings with companies which could be adversaries in the context of their ideals would be a delicate relationship to manage.

Due to the nature of social enterprises, it would not be a surprise at all for these kinds of entities to be founded by people who champion certain social and environmental causes.

The burning passion to see through that the pursued societal and environmental objectives are achieved would be the main motivator to get the social enterprise business cracking instead of the typical motive to generate profits.

The challenges for these promoters are that not only they must have the passion about their causes but they need to be good at certain skills or services so that the business of the social enterprise is viable.

So, big hearts and business acumen are among the success factors for social enterprise. In addition to that, having right business models and getting support from quality people would be important as well.

Given the complexity of issues facing the society and the importance of pursuing sustainability as an agenda, social enterprises are fast becoming the important component of our economy.

Due to its enterprising nature, a social enterprise has to create value for the customers it serves. This maximises the efficiency of funds employed for the enterprise, creates value to the economy and makes the surrounding environment a better place to live.

Should there be more support for social enterprise?

Well, for companies which are involved in businesses that create environmental problems, dealing with social enterprise which could help in implementing good business practices would be a compelling business proposition.

Not only they get services that they pay for, but the services are provided by people with high passion to get the best possible outcome from the job.
It would not be a surprise if there are tensions at the initial stage of the business relationship as both sides learn to overcome the general perception that sustainable business practice could be costly and businesses only care about profits.

However, if both parties are pursuing the same agenda in finding ways that is sustainable for both the environment and business, the initial hiccups could be overcome.

Some of us may also wish to see that social enterprises are given certain incentives and support by the government such as tax concessions and financial assistance. While the thought might be noble, the risks of the social enterprises slacking down due to the incentives should also be considered. Any assistance should be structured in a way that does not take away the entrepreneurial spirits from the enterprises.

Business in the distant future would see interactions between enterprises, government, not-for-profits and now social enterprises pursuing multiple objectives and interests.At the same time, the demand for more responsible behaviour from the corporate sector will definitely increase. It would be in the interest of everybody if social enterprises could play their role in meeting certain gaps that exist between the interest of our society and corporate interests.

Humans are entrepreneurial in nature and a social enterprise is another platform where the entrepreneurial spirit could be further nourished while the society can be served and our environment protected at the same time. Expect more of these enterprises soon.

This article was published in Financialdaily which could be read here:

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