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Social entrepreneurship hasn’t yet reached its full potential

Ideas to change the world. April 9, 2018 Category: FeaturedLongPurpose


This is a guest post by strategist and consultant Megan McFadden.
The field of social entrepreneurship continues to rise.

Coined in the early 1980s — most commonly attributed to Ashoka founder, Bill Drayton — the term “social entrepreneur” may still experience debate on exact definition (as reported early in Generocity’s March coverage) but there’s no question of its growing influence here in Philadelphia, the United States and around the world.

Social entrepreneurs, a breed of change agents, differentiate from entrepreneurs in a significant area: value proposition. While entrepreneurs prioritize profits, social entrepreneurs prioritize large-scale, transformational change.

As described in the seminal Stanford Social Innovation Review essay, “Social Entrepreneurship: The Case for Definition,” “what distinguishes social entrepreneurship is the primacy of social benefit” as social entrepreneurs identify an “impact-driven mission” then build a viable for-profit or nonprofit venture to achieve that mission.

As the old “profit verse purpose” binary blends, new and creative models emerge to address our greatest 21st-century challenges as opportunities.

In Philadelphia, enterprises such as Lia Diagnostics, Wash Cycle Laundry and The Common Market model new solutions around sustainability, recidivism and local food. Across the United States — from San Francisco to New Orleans, Cincinnati to West Virginia’s Coal Country — a group of “new revivalists” (including Philadelphia’s own Margaret Berger Bradley) are solving for investor’s implicit racial and gender bias, creating solutions for working people and turning capital gains into community investments.

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The context for rising social entrepreneurship is often explained through the lens of our economic system failures.

The context for rising social entrepreneurship is often explained through the lens of our economic system failures.

For decades, the mainstream financial world has long held notions — ilk of Nobel Prize-winning economist, Milton Friedman — that business’ sole social responsibility is to increase profits. Everything else required to support a thriving society is the responsibility of government and philanthropy to fund, manage or fix — including the externalities or “externalized costs” of doing profitable business.

Think, for example, of Nestlé profiting $7.4 billion from water in 2016, some of which is pumped from Michigan for just $200 per year, as local Flint residents drink lead-poisoned water.

How the popularized economic theory has manifested at a systems level over time is evident. In the United States, 1 percent of Americans own 40 percent of the country’s wealth, a class divide that shows deeper inequities through the lens of race. By 2024, white households are projected to own 99 and 75 times more wealth than their Black and Latino counterparts, respectively.

And while the global market trades $5.1 trillion per day, a relatively small fraction of money goes to support critical areas of society such as clean water, equitable communities or our children’s education. (Philanthropy in the U.S., for example, sees $390 billion each year).

Government and philanthropy cannot be the only actors responsible for serving society — our economic system must be redesigned to play a role in the solution.

Fortunately, countless interdisciplinary leaders have been redesigning in the margins and on the edges for decades. Their pioneering efforts have created fertile soil for which social entrepreneurship has been able to take root and grow. Today, social entrepreneurs can:

  • Take relevant courses at 100+ universities or online with +Acumen
  • Raise funds on Indiegogo or from socially conscious angels at Investors’ Circle
  • Join accelerators such as Village Capital or Philly’s own Climate Ventures 2.0
  • Find local community at 90+ Impact Hub community centers around the world and leading programming at conferences like SOCAP and Skoll World Forum
  • Learn paths to economic independence with The Working World or how to build a local economy with BALLE (cofounded by our own Judy Wicks)
  • And become a certified B Corp, a global movement started right here in the Philadelphia region, to stay accountable to impact. (Tip: If you’re a Philadelphia-based business and haven’t already, take the Best for PHL challenge to see how you measure against this new standard of business.)

Indeed, while social entrepreneurship is maturing as a field, it is certainly not without its challenges. For individual social entrepreneurs and enterprises, talent and financial capital are often cited has hurdles (hint: capital is also not equitably managed or distributed).

For the field at large, impact measurement is a critical topic as the field must move from “intention” and storytelling to more rigorous impact ROI evaluation (akin to financial ROI evaluation).

Cultural challenges such as the “passion paradox” (entrepreneurs prioritizing short-term solutions to an issue they may not have proximity to themselves or fully understand) or the “heropreneur” mythology (idolizing a sole entrepreneurial individual as a silver bullet to a complex, systemic challenge) also stymie development of the field.

Arguably, the most important concern that’s emerged in recent years (and even debated in recent days), is whether social entrepreneurship has the ability to drive the long-term, sustainable systems change that the world needs most. Or, whether the field will mostly produce siloed social businesses that address symptoms of a problem verse the root cause — or worse, unintentionally create new problems.

Because our greatest challenges are embedded in many interconnected systems — cultural, economic, social, political, environmental — it’s increasingly clear that social entrepreneurs and enterprises cannot solve complex, systemic challenges alone.

The momentum of socially conscious enterprises continues to move toward the mainstream.

Rather, the most successful social entrepreneurs must effectively collaborate with all stakeholders — community leaders, funders, policymakers, activists, corporations, academics and more — and take a systems approach to create comprehensive solutions. A new term has even emerged to address this evolution: systems entrepreneur.

Regardless of the latest term name, the momentum of socially conscious enterprises continues to move toward the mainstream.

Millennials, soon to be the largest living generation, continue to find their voice and paths for action on impact. Wall Street touts “feel-good investing” as a new trend. Larry Fink, the CEO of BlackRock (managing $6.3 trillion in assets as the world’s largest asset manager), recently stated that BlackRock investees must understand and account for the impact their company has on the world.

And while social entrepreneurship offers great promise, its true test will be the ability to transcend old paradigms — harmful power structures, biases and behaviors — to truly forge a new, 21st-century pathway that leads to a thriving future for our planet and all people.

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