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Social Entrepreneurship

MTF

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What are your thoughts about social entrepreneurship or incorporating a social or environmental impact in your business?

By a social enterprise I'm referring to a business model employed for example by Patagonia (prioritizing their mission over profits).

By incorporating a social/environmental impact I mean a company that, for example, donates $1 per one item sold or dedicates a portion of their revenue or profit to charitable causes (like companies participating in 1% For The Planet).

If anyone here runs such a business, I'm curious about your experiences. Why this model? What are the challenges and rewards of it?
 

DonTriumph

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I do not run a business under such model but I do know someone who does that.

I first heard that term from a professor who said they're social entrepreneurs running a bag manufacturing company. To help socially, they employ and train poor women and have them do creation of bags. This of course gives them jobs. They also use organic materials rather than chemicals to preserve the environment.

This doesn't come without a challenge though. Aside from market competition, the cost for running the business according to him is quite high, because they tend to be more inefficient and not streamlined, costing them more in the long run.

I do not have any news about that ever since today.

If "social entrepreneurship" is used loosely, then there are indeed companies running under the premise of helping others before profit.

Here in the Philippines, we have a toothpaste company called Happee. Happee employs disabled people so they get the jobs typical companies won't offer them. I do not know about it today, but so far the company is actually successful.

Why this business model? I do not really know, ... perhaps a reaction against "greed capitalism"?

Though their intentions are noble, I think it's kinda redundant. I think entrepreneurship in itself is founded in social responsibility. It's always a two-way process for everybody. You can't thrive as an entrepreneur if you don't give value to people.

But sometimes, companies put a lot of pressure to their employees and environment for the sake of doing business. To the eyes of the consumer, they won't see it (or they're the last to see it). To the employees, working for here is hell - though they sometimes have no choice. I think this is what MJ refers as "overcapitalism".

"Social entrepreneurship" is in some ways similar to MJ's "fiduciary capitalism".

But social entrepreneurs must still keep a close look at their profits, of course!
 

ZF Lee

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What are your thoughts about social entrepreneurship or incorporating a social or environmental impact in your business?

By a social enterprise I'm referring to a business model employed for example by Patagonia (prioritizing their mission over profits).

By incorporating a social/environmental impact I mean a company that, for example, donates $1 per one item sold or dedicates a portion of their revenue or profit to charitable causes (like companies participating in 1% For The Planet).

If anyone here runs such a business, I'm curious about your experiences. Why this model? What are the challenges and rewards of it?
I took a course on it last semester.

We looked through lots of social enterprises (SEs). Grameen Bank, Barefoot College, Kiva, are some that come to my mind.

Now, what you have just described on incorporating a social/environmental impact is not strictly what an SE does. Regular profit-driven corporations sometimes deploy a separate branch in the name of corporate responsibility and sustainability, so that their consumers feel that they are less of a money-grabber (ahem).

In other words, the leaders won't have 100% focus on 'saving the dolphins'-their core operations are still profit-making enterprises. But as long as the goodwill stuff helps them, publicity wise, yup.

In my class, we've also discussed the possibility of corporations teaming up with SEs, and then ripping them off of their tech and then selling it COMMERCIALLY. I've never heard of it happen, but not impossible, as most SEs are generally poorly run and legally insecure.

By legally insecure, for instance, most countries do not have legal provisions such as tax exemptions SPECIFICALLY for social enterprises. There's still a lot of legal mix-up on profits earned (taxed commercially?) vs charity and community benefit.

A pure SE would use 100% of the profits to fund the business, development and all, and only allocate salaries for staff and founder. It is not a wealth tool.

For SEs serving impoverished folks, let's say Aravind Eye Centre in India (offers free or reduced-cost eye reatment for poor folks), they might have 2-tier customer models:

Ordinary customers
They pay for the products full market price. Aravind center does charge customers who can afford it the regular price.

Beneficiaries
These are the poor folks you are helping in the first place.
You have a dilemma here.

Give the stuff to them free, and your organization becomes a charity lol. And yes, many charities claim that they are SEs when they are actually NOT, and vice versa.

Give stuff to them for a higher price, and they cannot pay you.

So you reduce the price, but for the potentially lost sales revenue, you can draw some money from the ordinary customers who pay the higher, regular price.

Also, you could offset that lost sales revenue by making up for it in volume.
By volume, I mean by recruiting the beneficiaries, the poor folks themselves to help your cause. You train them up with new skills, and they go sell your products to their kin or folks of the same feather.
Barefoot college does this.

Links:
Aravind Eye Care System
https://www.aravind.org/content/aravindmediapdffiles/journalcasestudies/AravindEyeHospital_HBRCase.pdf
Barefoot College
 

ZF Lee

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In my class, we've also discussed the possibility of corporations teaming up with SEs, and then ripping them off of their tech and then selling it COMMERCIALLY. I've never heard of it happen, but not impossible, as most SEs are generally poorly run and legally insecure.
Now here's the interesting thing about social enterprises.

Unlike regular enterprises, they will gladly share everything about their business on the public media.

Even finances.

Here's Kiva, an online crowdfunding platform that helps fund small businesses for the rural poor worldwide. They have annual reports from 2011 to 2017 as if they were a listed company.

Finances | Kiva

Go spend some time and have a look at their reports.

You might find it a lot more better to support a social enterprise rather than a charity that relies on donations, because they are willing to show that they don't have anything to hide.

Accountability. Not just for the folks they help, but also with the public support.

Not to be political, but Trump was quite right that donations put forth for the green movement were wasted. And you cannot exactly go and call out the charities on wasted funds, investigate them and break in like the SEC might do with a Ponzi scheme. The public backlash and social justice aside, you might be surprised at how poorly charities track their data. They might not even know whether they might have enough dough to keep the lights on the next month.
 

MTF

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Here in the Philippines, we have a toothpaste company called Happee. Happee employs disabled people so they get the jobs typical companies won't offer them. I do not know about it today, but so far the company is actually successful.
As far as I remember @Carol Jones also hires disabled people, so in a way she runs a social enterprise, too.

Now, what you have just described on incorporating a social/environmental impact is not strictly what an SE does. Regular profit-driven corporations sometimes deploy a separate branch in the name of corporate responsibility and sustainability, so that their consumers feel that they are less of a money-grabber (ahem).
Yeah, that's why I didn't use the word "corporate social responsibility" because it's often just a sneaky attempt at positive PR.

A pure SE would use 100% of the profits to fund the business, development and all, and only allocate salaries for staff and founder. It is not a wealth tool.
I actually think that a business that isn't a pure social enterprise is more sustainable, and thus, can help more. In the end, the more money a business makes, the more it can dedicate to its other goals. A business that focuses too much on the other goals should probably become a non-profit. Patagonia is a good example of a strong social business that supports a lot of causes while at the same time being one of the best companies in their industry.
 

ZF Lee

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I actually think that a business that isn't a pure social enterprise is more sustainable, and thus, can help more. In the end, the more money a business makes, the more it can dedicate to its other goals. A business that focuses too much on the other goals should probably become a non-profit. Patagonia is a good example of a strong social business that supports a lot of causes while at the same time being one of the best companies in their industry.
On sustainability, I agree as well.

Most of the social enterprises I see end up becoming a 'life's work' for older founders, or else dismantled or turned into something else as the years go by.

The social enterprise's mission is to tackle a social problem, which in a nutshell would fall under any of the Sustainability goals.



Unlike regular enterprises, they will gladly share everything about their business on the public media.
This is also for another purpose.

The social problem at hand is usually very hard to solve. I mean, who wants to spend time and money doing shit that doesn't make them rich lol? Not even government, to a certain extent.

So by putting out your 'blueprint', it becomes easier for those following after you to copy and paste the business model, serve in the same field or region, and ultimately, many hands finish the job.

In the end, the more money a business makes, the more it can dedicate to its other goals. A business that focuses too much on the other goals should probably become a non-profit.
Speaking of goals, here's another dilemma for social enterprises:

'Who do I serve? How do I know that I'm winning?'

Let's say you start a social enterprise that empowers abused women economically by offering them job training.

However, these are ABUSED WOMEN.

Abused women would definitely have mental issues.

So do you set aside some crucial resources to factor in this need for mental help? Or just focus stubbornly on what you first set out to do, which is economic empowerment?

This is not much different from MJ's saying that you plan to do X in business, only to end up selling Z.

That is why it is important to have PARTNERS whom you can give the job away to. They can be conventional enterprises, other social enterprises or charities. I thought about this during my course after browsing through Vigilante's Licensing Game thread.

NOTE: In our SE course, we divided ourselves into different groups representing each of the sustainability goals, and did business plans solving a problem in that area. Plenty of great ideas came out of it.

My group did a project plan on providing clean water filters for villagers of the Musi River in India, whose river was heavily polluted by the urban sewage coming from the nearby city of Mumbai, Hyderabad. We found little done to help the folks, not even government. So, it was actually a good plan that could become a real-life project.

EDIT: I was actually wondering why social enterprises haven't been discussed actively yet here. I'll throw in more nuggets in here on what I have learned here. Consider social enterprise as a new Wild West for business lol.
 

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MJ DeMarco

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What are your thoughts about social entrepreneurship or incorporating a social or environmental impact in your business?
I love it.

Not only does it add value skew to your product/offer, it also adds meaning and purpose for the entrepreneur, as well as your potential customers. Win, win. If I sold my publishing company/forum/etc, this would be on the forefront of my mind, probably in the plant-based sector.
 

Sheens

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Thank you for the great thread, following! Goal has been set to report back relevant experience in running this type of business.

My current plan development has a global market and the social enterprise aspect present from conception. It is not a 501c3 model, though developing that subsidiary could help reach even more people!

It follows the rough outline that as profit from selling is realized, a portion of products or profits are to be given away. Inherently consumable, there is also a need to focus environmentally.

The niche has competition with SE. This is now an entry barrier and presents the opportunity to do it even better!
 
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ZF Lee

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EDIT: I was actually wondering why social enterprises haven't been discussed actively yet here. I'll throw in more nuggets in here on what I have learned here.
Alright, as promised, I'll throw another nugget here for food for thought.

ON VOLUNTEERS


As we all know, hiring a team or workforce can be a very costly affair, profit-based enterprise or not.

For social enterprises relying on training and hiring beneficiaries (the poor folks your enterprise helps) to further their work, there is still a skills gap between the 'official workers' and them.

You do not simply expect to train African rural folks to maintain a Wordpress site, pitch to social investors or attend Ashoka conferences, speaking before collaborators in English.

That may come 5-10 years down the line, but just not today.

You may remember that in Vig's thread, as long as the employees see that they aren't taking 100% of the ham home, they ain't gonna be happy working for you forever.

MJ has also said that some of the few occupations that people love to be in are only so because they have a degree of autonomy over their work.

Besides, there are many other things that you cannot expect your beneficiaries to give you:
  • Tech knowledge, if you are working on stuff like water filters or solar cookers. Most of the folks might be mentally challenged or illiterate.
  • Proper documentation to formulate formal training materials on paper. No, teaching by oral tradition ain't gonna work
  • Government liaison. I have mentioned that my project concerning Musi River had poor help from the government. We are talking about a corrupt, deadlock party that is too slow to move stuff forward. Most beneficiaries would be exhausted and have given up by the time you set boots on the ground. You'd have to represent them before the bureaucrats.
...and much more

So, you deploy volunteers. There are many places for it.

I considered one of these potential partner companies for the Musi River biz project. It offers a source of volunteers, who are mostly professionals who are 'looking for a place to leave an impact' - which they can't do in their corporate prisons, ahem.

About Sankalp | Volunteering In India | Volunteer With NGO Programs For Free

Now, here's the rub.

Charities also use volunteers.

But charities aren't pressured to show social impact or a good financial record in the annual reports. Remember how I said that a good social enterprise must be next to 100% transparent and accountable?

And most charities are service-based, often downgrading their services to be pretty rudimentary enough to rope in lowly-skilled folks to do 'enough'.

That is why you see soup kitchens using 80% youths and students- lowly trained. Anyone can stir a vat of food or haul packed meals. I've been there, so I know. No different than the general hiring demographic for McDonalds.

But for social enterprises that do products, they need to have consistency in their initial designing, testing and marketing of products.

The key people, the founding team, cannot do everything. So, to an extent, they might use volunteers to do a lot of heavy lifting.

You will need to find a means to have them stay longer, until you at least have enough funds to hire full-time folks or lock on a partnership.

To solve this problem, I'll sum up the academic stuff I learned into these questions:
  1. What is the task needing volunteers? Can it be broken down into easier mini-tasks?
  2. Where are you getting volunteers? Are they from a fixed location (e.g. a university or church)? Is it scattered?
  3. Can you find out their top motive for joining? Can you align your social enterprise's goals with theirs?
For instance, we'll use the Sankalp volunteers prospect: corporate slave who wants to leave an impact.

He might be disgruntled with corporate, but most likely, he'll have saved enough to pay his bills, saving the enterprise some dough. He'll also have skills, maybe let's say, engineering.

Thus, we have:

Skills from workplace + passion to leave impact - attraction for monetary gain = potential volunteer prospect

Here's another nugget to chew on for thought:

Consider that many Millennials are preferring to live minimalistically, ala Slowlane scrimping, in favour of doing their passion. And many of them do look to help make people happier, namely the disadvantaged.

Minimalistic or Slowlane living: live on the cheap, doesn't impose money demands on social enterprise
Passion: Travels to expand experience, uses or expands skills to help people, finds more autonomy

Hence, social enterprises can do the opposite of profit-based enterprises: they turn these folks into volunteers or even full-time employees, in contrast with the average business using Slowlaners as a regular source of consumers.

4. How do you retain the volunteers? Can you have them come on a regular season, e.g. every summer?

On the back of my head, you can have:

  • personal team leaders who give continuous feedback in teams of 3-5 (took a bit of Michael Masterson's recommendations for brainstorming from Ready, Fire, Aim lol)
  • certificates (young students need these for their CV)
  • public features online and in global events
 

Sheens

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But for social enterprises that do products, they need to have consistency in their initial designing, testing and marketing of products.
Is the consistency you are referring to in this case to enable any volunteer, from any place, at any time, to perform a similar action?

I see how the consistency lends itself back to the transparency in the company and aligning goals and roles within the SE with those helping its success. I may need more help with defining the consistency if I am off track here!
 

ZF Lee

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Is the consistency you are referring to in this case to enable any volunteer, from any place, at any time, to perform a similar action?

I see how the consistency lends itself back to the transparency in the company and aligning goals and roles within the SE with those helping its success. I may need more help with defining the consistency if I am off track here!
Yes, as best as you can.

Find volunteers with a similar purpose, attitude and skill set.

Pick your volunteer providers carefully.

When the volunteers eventually leave, you can get new ones who can get up to speed with the work already done.

Let's say a rural project for building wells, you want to get people who have been plumbers, civil engineers and contractors.

Teenagers and 2nd Year engineering students may have the drive to do stuff, but the skills gap is too wide.

Your social enterprise might suffer trying to train them up unless you have been there for a few years, and have some full-time folks to take the challenge of training them.

When one batch of professional volunteers leave, you want folks of a similar ability to fill in for them. For instance, if you roped in a small-town engineer to do the job, putting in a corporate civil engineer that only has experience with mega-skyscrapers isn't exactly going to be smooth. You'd get someone similar as the first guy.

No much different than hiring, but you have to pay 2X attention as to where you are getting them from than the regular 9-5ers.
 
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