Social enterprises are moving mainstream

January 29, 2016

 

for social entreprises, the sky is the limit

 

For a long time, our economic system was split in two sectors and two purposes: the private sector, aiming at providing goods and services to the public, and to make a profit for its owners, and the social sector, which, through governmental agencies and NGO’s, addressed problems in society. There was a clear line between them and their purposes would not mix.

However, this division was unsatisfying to some, as they felt that there should be a better way of doing things. The idea of combining the efficiency of business with the purpose of social started floating around; more and more people wanted to do good while doing well. Little by little this novel concept started to take hold, and eventually the idea of the social enterprise started to spread: companies that were meant to make a profit, but that had as their mission to address a social or environmental issue.

 

Until recently, however, for-profit social enterprises were seen as a curiosity; as they tried to bridge that gap between NGO’s and businesses, they were trapped in the middle. Seen with suspicion by investors and philanthropists alike, and with the public at large mostly unaware of the existence of such entities, they remained on the fringes.

But in the last decade or so a lot has changed. Several factors have converged to create the perfect storm for the emergence of a new way of doing business, and companies both new and old are embracing it. Social impact has moved from concept to buzz word to the core of what many businesses are doing.
 
Mindset shift
This trend is translating a shift in our collective mindset, and our perception of what is important. After the financial collapse of 2008, more and more people have turned away from the mentality of “more is better”, especially when talking about money.

The unchecked greed that ruled the financial system pre-crisis, and the carelessness with which people in positions of power dealt with the lives of millions, highlighted to many that a systemic change was needed; more and more people realised that capitalism needed to be re-shaped, and many have chosen to hack it by creating companies that are more balanced and in tune with other elements of society.

To give an additional boost to this shift, we are about to witness the biggest wealth transfer in history, with conservative estimates pointing to a staggering $30 trillion changing hands in the next three decades. This money will mostly fall into the hands of Millenials, a generation that has contributed remarkably to the change of mentality towards more conscious and sustainable business models.
 
Millenial change
For all the jokes that are levelled at this generation, they have been an enormous catalyst for change. Using the internet as a tool to disseminate information and exchange experiences, Millenials have a perspective over both local and global issues that is unprecedented. And this wealth of information has fuelled a desire for change.

Trapped in the aftermath of a devastating depression, in a world of fewer (and worse) job opportunities and growing inequality, Millenials have taken the opportunity to effect real change in the world.
It’s no coincidence that Greece and Spain, which have very high rates of youth unemployment, or the UK, which adopted very severe austerity measures, have become hotspots for social entrepreneurship: in the face of growing needs, both social and personal, they have taken upon themselves to be the change.
 
Moment of truth
As the trend grows, more mainstream companies are also catching up with it. The rise of the B Corps (Benefit Corporations, that must address social or environmental outcomes as part of their mission) is an example of how this new way of doing business is leaving the margins. Many established companies have also embarked in corporate impact venturing, using their investment arms to finance projects with sustainability and impact at their core.

This is coupled with the rise of impact investment, which also had, until recently, been at the fringes; presenting a solid track record of results, impact investment funds have been attracting more and more “traditional” investors, which are increasingly looking for a more meaningful way to invest. And as financing takes a more active role in the field, there are increasing opportunities for all those on both sides of the fence: both financial and social innovation are built on hybrid and flexible structures, that foster collaboration and cooperation.

With a bigger focus on the field, and more money pouring into it, this is a moment of truth for social enterprises. People want to do the right thing; given the option, they will buy a product or service that they know has a positive impact in society. The challenge now is to create compelling offers that will capture people’s imaginations. This is a make or break point: the momentum is on their side, so social enterprises must seize it and fulfil their promise of a better way of doing business and helping society.

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