Although we may have many varying definitions of social enterprise around the world, they all share a basic purpose: to operate a business that creates a blended-value outcome. They seek both financial success and social impact. It’s a business venture addressing a social, cultural or environmental issue!
If we can begin by agreeing on that basic premise, and if we can agree that social enterprises are created to contribute to healthy local economies and communities, then we should be able to agree that social enterprise is not just about the object, it’s about the activity it generates. It’s all about the impact; it’s viewing social enterprise as a means. It’s a verb not a noun!
Just like any other system, in order to amplify the impact of social enterprise we need to engineer and create a nourishing and encouraging environment; social enterprise needs a supportive ecosystem.
The success of the traditional private sector business model and the traditional non-profit/charity model has come about because of a myriad of services, resources and policies supporting their development and success. For example, there is the Small Business Act in US, and in Canada there are services like Small Business BC. Financing is dominated by private sector economic ROI, government provides tax credits, campuses offer commerce and MBA programs, and the stock markets exist purely for investors based on financial return on investment. For non-profits, their supporting ecosystem includes specific charity law, tax credits for donations, various non-profit corporate models, training opportunities, and many other infrastructure elements in their arena. Both sectors, for-profit and non-profit, in fact, have an entire ecosystem of support.
Full spectrum of supports needed for social enterprise
These two traditional sectors’ ecosystems are designed to provide a full spectrum of supports to help them through the process of planning, launch, and growth. Their accomplishments are a testament to the need and the power of the multiple components of an infrastructure that supports them. But there still remain many unresolved and growing economic, social and cultural problems. We believe social enterprise, with appropriate development supports, effective policies and a community of practice can successfully complement the for-profit and non-profit sectors and further our efforts to address many of these complex challenges.
This emerging blended-value social enterprise sector, somehow integrating the purely mission focus of non-profits and the purely financial model of business, is beginning to define and construct, to engineer, its own particular system of support for its development, growth and success – the social enterprise ecosystem!
Learning from the other sectors, as well as realizing our different realities and goals, social enterprise initiatives and discussions have identified a five-part model of support: increase business acumen; provide access to capital; enhance market opportunities; demonstrate impact; and build an engaged community. All of these “pieces” must be integrated, and must have an engaged multi-sector process of effective policy and practices, and must encompass and comprehend the unique blended-value proposition.
The components may seem to be separate pieces, but they have to be understood as part of a system, a living, integrated ecosystem. The author and physicist Fritjof Capra has stated it so well in all of his work on ecosystems: “This is not a model based on the individual parts, but it is a system, it is a series of relationships.”
Let’s take a quick look at each piece of this puzzle
Increase Business Acumen
Many social enterprises are developed from the passion of organizations or individuals wanting to solve a critical and complex social, environmental or cultural issue. These founders may know the social issues really well, but often to not possess the required business planning nor the required entrepreneurial capacity. A system of learning and skills development focused on blended-value business planning and practice is an essential foundational component of the ecosystem. This includes support for idea exploration, business planning, incubation, and technical assistance that promote the business skills and practices through the entire development and scaling of the social enterprise sector.
Provide Access to Capital
Traditional financing is specific to economic return on investment. With a blended-value ROI, an invigorated and growing field of social finance is emerging, but it needs continued development and encouragement. Blended-value businesses are entwined with the emerging social finance space. They have a specific set of needs along the development path from feasibility, business planning, launch, start-up, and growth, including grants, loans, investment, patient capital and equity.
Enhance Market Opportunities
The business development resources will build the supply side, but potential success of the social enterprise sector also requires a market demand dimension. Building markets requires quality products and services with the attached marketing and sales. This is encouraged further when the purchasing evaluation and decisions include a consideration of the social component of the purchase. Increasing attention to the inclusion of a social component to all purchasing will lead to more demand; more demand will build the sector and push more businesses to a blended-value proposition.
A blended ROI requires mapping, networking, and research on the collective social and financial impact of social enterprises. We have many anecdotal examples and stories, but it is now critical to aggregate and share the value. We need aggregated sector-wide evidence if we wish to influence public policy, social purchasing practices, and tell the full story. The evolving field of blended-value ROI requires measuring both financial success and social impact, which needs continued creative research, analysis and reporting models.
Build an Engaged Community
As stated above, a supportive infrastructure and ecosystem is more than the individual parts working in their individual areas; it is a living, engaged system. To achieve this requires actively leading, facilitating and participating in multi-sector activities. It is an intentional and focused effort on realizing the need for and the development of relationships and connections across public policymakers, trainers, investors, purchasers, and the frontline entrepreneurs. The practice includes an entire array of activities: the informal conversation; organized meetings and conferences; online engagement; physical and facilitated hubs; supply chain and business relationships; policy efforts, and on and on. It requires focused and effective engagement in the ideas, policy and practice of engineering the social enterprise ecosystem.
What’s your role in this process?
Each component of the system requires participation by the private, public and non-profit sectors. No sector works alone. Collectively, we need to work on skills development, financing, purchasing, research and engagement.
How do we include a social value evaluation when we purchase? Is social enterprise a curriculum choice in our MBA or SME training programs? Are the existing government business investment schemes available to social enterprise investors? Do we offer social investors the same incentives we offer private equity investors? Are we creating platforms and opportunities for engagement? These and many other questions are the basis for the actions required to build the new social enterprise ecosystem.
We’re beginning down this road, but we have a long way to go. In the next two articles in this series we hope to contribute to furthering our knowledge of some best practices and who is involved in generating the social enterprise ecosystem process. In the next article we will look at some of the international trends in social enterprise ecosystem development. And then leading up to the Social Enterprise World Forum in October, we will engage you in a dialogue on how we can act together to create a supportive social enterprise ecosystem.
We welcome your comments and ideas and contributions to this dialogue. Watch for a soon to be launched online discussion group.
David LePage is the Team Manager at Enterprising Non-Profits, enp, supporting the development and growth of social enterprises. He has been blending practice and policy in the nonprofit arena for over 35 years. David is a member of the Social Enterprise Council of Canada (SECC), the Policy Council of the Canadian Community Economic Development Network (CCEDNet), the Social Enterprise World Forum Collaboration, the Board of the Social Enterprise Alliance (North America) and the BC based Partners for Social Impact.
Kelly Ramirez is the CEO of SVPRI, a leading social enterprise support organization. She is co-founder of Buy with Heart, the first online marketplace for social enterprise in the US. Previously, she directed the Social Enterprise Initiative at the William Davidson Institute (WDI) and was an adjunct lecturer in Social Entrepreneurship at the University of Michigan’s Ross School of Business. Previously, Kelly worked as a political analyst for the U.S. State Department’s Foreign Service, an election monitor for the OSCE, and served as a Peace Corps volunteer in Slovakia. She was named a 2011 Woman to Watch by the Providence Business News.
Suzanne Smith, MBA (Dallas, Texas) is a serial social entrepreneur and bridges many disciplines, including serving on the National Board of the Social Enterprise Alliance, coaching nonprofits as Managing Director of Social Impact Architects, and Co-Founder of Flywheel: Social Enterprise Hub, and educating future leaders as Adjunct Professor at the University of North Texas. She holds an MBA from Duke University, where she was a CASE (Center for the Advancement of Social Entrepreneurship) Scholar and continues to serve as a Research Fellow.