As development challenges become more complex, with donor governments cutting aid budgets, there is an urgent need for innovation within international development. The idea that social enterprises could fill the gaps left by traditional development has gained much credence recently. What are social enterprises exactly? What issues regarding international development could they solve and what challenges do they face? Here is what several experts think about all these questions.
How would you define a social enterprise?
“A social enterprise is a type of business that is not primarily based on economic gain. It emphasizes social value by seeking to contribute to the wellbeing of its employees and their social, cultural and environmental contexts. Profit is secondary to social enterprise but is essential for the sustainability of the venture.”
“A social enterprise can be defined as a business that seeks to maximize profits while maximizing benefits to society and the environment. It has specific social objectives of principally using its profits to fund social programs rather than fund pay-outs to shareholders.”
“In summary, a social enterprise is an enterprise whose business model pursues both commercial and social objectives in a reinforcing and complementary manner but with the overall objective of solving a social challenge in a sustainable manner.”
What issues arising in international development could social enterprises solve? Can you share some examples?
“One example is a marginalized, impoverished community of people affected by leprosy in an isolated, mountainous area of China. Through an established process of building social enterprises, a vibrant and successful honey production business has been set-up. After a period of two years, the social enterprise was able to bring in regular income and has delivered significant social change. Results have included capacity building, the establishment of over 200 beehives, increased self-confidence and social integration, female participation, income generated by the sale of honey through retailers and online stores and village engagement and ownership of the social enterprise.”
“Social enterprises are great at tackling environmental issues, health issues, creating ethical jobs and providing quality education services. One example, Two Fingers Brewing, makes great beer and donates all of its profits to prostate cancer initiatives. It is a very tasty social enterprise that exists to battle cancer.”
“Microfinance is a great example of a social enterprise that bolsters sustainability at the community level. Communities have access to borrowing funds within their community-based groups that they use to start or sustain small micro-enterprises thus they become more financially stable. Secondly, income generation is a commonly used social enterprise model that meets the basic needs of societies.”
What are the challenges faced by social enterprises in international development?
“Social enterprises are normally faced with a number of challenges. I will describe two that are critical to their growth. The first is capitalization: social problems are multifaceted and cannot be solved by one single approach. Unfortunately, however, social enterprises can only address the problems from one angle/approach. In this way, a social enterprise does not have the resource outlay it requires to address all the facets of the problem. Second is the mission drift: several social enterprises start with a genuine cause to which they are committed. Over time, demands by funders and the constituents may cause the enterprise to drift towards causes that are more likely to attract funding.”
“Attracting investors may be hampered by the perception that social enterprises are more non-profit than profit-oriented and therefore not likely to make a reasonable return. Social value is not easily measured and can make it difficult to communicate the bottom line to investors, donors or the community at large.”
How do you see the future for social enterprises in international development?
“To my mind, social enterprises have a huge role to play in international development. When a social enterprise is facilitated in a manner that is respectful of the NGO or community, it is a wonderful mechanism to address international development issues. Both the process and the outcomes can deliver social change and financial sustainability, and with a greater level of sustainability than the more traditional development programmes.”
“This is the main trend in international development. Businesses can no longer be based purely on economics. Social value is an imperative now more than ever before. Businesses that operate differently will not survive. Social enterprise has even penetrated traditional practices such as accounting and audit where financial reporting expected supposed to be socially responsible.”
See more than 250 job opportunities in social enterprises available on DevelopmentAid here.
