Why is it good to be a social entrepreneur?

So much has been written about social entrepreneurship that this seems a very strange question to ask. Isn’t it crystal clear that being a social entrepreneur is the next best thing after the invention of the wheel? But while our universe is brimming over with definitions of what it is and what not, the juice is in the implementation – and in the reason why to embark on this journey in the first place.
Recently, the Impact Hub Munich posted an inspiring video and asked the community to share what they are really passionate about. Impact Hub is a global network of collaborators and social enterprises that strive to make a positive impact in the world. The video itself was produced by a group of German companies that call themselves “Die Wegbereiter” (“the trailblazers”) and share the mission to live entrepreneurship in a way that fits future generations. Obviously, they hit a nerve among the community: The answers were all about making your passion your profession, enabling fair communities, considering yourself part of the planet, being co-creative, making the change (instead of just talking about it) and living zero waste. So you could say that being a social entrepreneur is following your passion and your values while taking responsibility for what you inherit to the generations to come. Correct?

The changing spirit of entrepreneurship
Interestingly, the spirit of age has changed quite a bit since the early days of social entrepreneurship. If you ask those who started 25 years ago with innovative ways to solve a social problem, they will tell you that “social enterprise” as a term didn’t even exist back then. They just did what they thought was the right thing to do. They had no role models except for their inner navigators. They faced numerous stone walls and yet prevailed. Of course, many things have changed since then and social entrepreneurship is a much better known concept today. But even those who started just recently sometimes still struggle with the ambiguous way that social enterprises are perceived in the public. Is a social entrepreneur allowed to pay salaries in-line with the market? Is it o.k. to invest in marketing, fundraising and PR, to the same degree that traditional companies do? Is it legitimate to build a brand, to become profitable, even though you do something “social”? Some decide to skip the social enterprise label entirely because it makes them “sit between two stools” – somewhere between the business and the welfare spheres. For others, it’s the most natural thing on planet earth to integrate entrepreneurship with the common good, so why add the prefix “social” to the endeavor at all? Obviously, the spirit of how to do entrepreneurship has come a long way in the past 25 years. But long enough?

Maybe it’s more about HOW you put your goals into practice and WHAT exactly you pursue. The following statement about the nature of social entrepreneurs, though pretty extensive, hints to this understanding:

“Social entrepreneurs share some come common traits including:
An unwavering belief in the innate capacity of all people to contribute meaningfully to economic and social development / A driving passion to make that happen / A practical but innovative stance to a social problem, often using market principles and forces, coupled with dogged determination, that allows them to break away from constraints imposed by ideology or field of discipline, and pushes them to take risks that others wouldn’t dare / A zeal to measure and monitor their impact: entrepreneurs have high standards, particularly in relation to their own organization’s efforts and in response to the communities with which they engage; data, both quantitative and qualitative, are their key tools, guiding continuous feedback and improvement / A healthy impatience – social entrepreneurs cannot sit back and wait for change to happen – they are the change drivers.”
Schwab Foundation

Do you identify with the traits mentioned above? Are you a driver of change? Which changes exactly do you pursue? And are you ready to live them, to be a shining example for the things that you so passionately promote? One seasoned investor in social enterprises is known for saying that “before social transformation comes personal transformation”. Of course, you can debate what’s first, the hen or the egg, but no doubt your motive will be the guiding star when navigating in rough seas for your mission. So why precisely is it good to be a social entrepreneur?

The big picture of global challenges

In September 2015, the United Nations issued the new Sustainable Development Goals (SDGs) for the year 2030. If you look at this highly ambitious agenda, it definitely sound like a good and important endeavour:

Sustainable Development Goals

Source: United Nations,
http://www.un.org/sustainabledevelopment/sustainable-development-goals/

Who wouldn’t like to see poverty and hunger erased, health services and education available for everyone, all genders at eye level with the same rights and opportunities, climate and species preserved, a harmonious relationship with nature, and so on? But when considering the huge deficit for financing these goals, it becomes pretty obvious that this mission can’t be left to public authorities alone. In 2015, the World Economic Forum and the OECD illustrated the funding needs for making the SDGs become reality:

“Up to $4.5 trillion per year in investment will be required in developing countries between 2015 and 2030, which compared with current investment levels leaves an annual investment gap in sectors critical to the SDGs of around $3.1 trillion”
World Economic Forum, OECD

These are enormous amounts to be mobilized, mainly from the private sector, since public budgets are rather constrained. But how?

Sometimes, numbers make it easier to grasp the real scope of a problem. And the challenges are not restricted to the developing world alone. A 2015 study by FASE, McKinsey and Ashoka, for example, highlights the extent of social problems that Germany will have to face in the future: To fully tackle the lack of affordable housing, the increase in lifestyle diseases, the shortage of care for the elderly, and long-term unemployment, investments of nearly EUR 50 billion will be required by 2025 to address these four areas alone. But even if we assume that the entire capital would be available for the good cause: Who is going to create the innovative social and environmental products and services? Who will implement new business models that effectively and efficiently tackle the world’s problems? And who will be bold enough “to take risks that others wouldn’t dare” and “break away from constraints imposed by ideology or field of discipline”, as Schwab Foundation described it so impressively?

In 2011, the European Commission launched the “Social Business Initiative” to identify actions that make a real difference and improve the situation on the ground for social enterprises. This is based on the belief that they are important drivers of change who contribute to “meeting the Europe 2020 targets for employment, innovation, climate change and energy sustainability, education and social inclusion”. This year, the European Commission put again its money where its mouth is: a call for proposals was issued in the first half of 2016 to overcome the barriers in the market for social finance. The goal: enough capital for social enterprises to thrive and live up to their missions. Hopefully, this initiative will bear fruit, inspire more governments and organizations and create real improvement in the conditions for all the makers of change out there.

So, after all, it’s maybe less a question of “is it good to be a social entrepreneur”. The issue is whether you have enough passion and courage to follow your mission, no matter which obstacles may emerge on your way. And if you are ready to constantly challenge which impact you really achieve on people and planet.

Links and resources

About the author:

Christina MöhrleChristina Möhrle started her own shop as a freelance writer and journalist in 2012 to specifically promote social entrepreneurship and impact investing. Since 2014 she additionally takes care of FASE’s communications, papers and blogs. After 15 years as a manager in investor relations, structured finance and venture capital, helping to build the social finance ecosystem has become Christina’s passion and profession.

This blogpost is presented by FASE in collaboration with Siemens Stiftung and it’s part of a series of Blogposts, Webinars and Website content that we will provide on our website within the next weeks and months.

We will cover the following topics:

  • Why using a self-sustaining business model?
  • Testing your idea in the market
  • Getting the business plan ready
  • Approaching investors
  • FASEThe Financing Agency for Social Entrepreneurship GmbH (FASE) is an Ashoka initiative and supports selected social enterprises in raising growth capital. FASE identifies investors and financiers of the entire spectrum ranging from private investors, family offices, foundations, social investors and banks. FASE puts an emphasis on building hybrid deals combining several investors with different financing components. www.fa-se.eu

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