What is social entrepreneurship?
Social entrepreneurship can be defined in many different ways and who is entitled to call themselves ‘social entrepreneurs’ is the subject of intense discussion. We believe that it is important to recognise that this is an area in continuous development, with great variation among the companies and individuals involved.
To Ferd, a social entrepreneur is a person who consciously tackles a demanding social problem and finds a new solution to it. These social entrepreneurs are driven by a desire to generate tangible social results and organise their activities to achieve long term sustainability. Business-orientated social entrepreneurs generate their own income through the sale of products and services rather than relying on grants and donations.
The aim of FSE (Ferd Social Entrepreneurs) is to help create measurable social results by investing in social entrepreneurs and supporting their market. We look for social entrepreneurs with a business model which, in addition to producing excellent social results, is also capable of producing profits in the long term. This is because economic sustainability is the best way to ensure scalability of social results. Companies are then able to reinvest their profits to develop their products or services further, thereby reaching more people who will benefit from their solution.
Social entrepreneurship and profits
The scepticism that social entrepreneurs often encounter is often related to whether or not social entrepreneurs are viable as commercial operators and private suppliers in a Nordic welfare sector that is predominantly publicly financed. Should a social entrepreneur be allowed to generate profits? And is it possible to be committed to producing social results and still distribute dividends to shareholders? At Ferd, we believe that this is possible [for more mature companies], but that both social effects and the company’s double bottom line have to be well documented.
Norway is historically used to organisations and companies with social aims that seek funding through grants and donations and and that are heavily reliant on the public sector or private foundations. The challenge of this model is that these companies become dependent on the goodwill of their donors – both private and public – in order to maintain or increase their activities. In terms of the needs of the ‘social market’, it is easy to see that donations are never sufficient. This is a challenge for many impact driven organisations, both large and small, including Save the Children, the Church City Mission, the Red Cross, the Salvation Army, Youth against Violence (Ungdom mod vold), Right to Play and many others. They spend a great deal of time and money trying to obtain more funding because they are passionate about their social mandate.
Social business entrepreneurs are just as passionate about helping their target group. But they want to manage their own activities, independently of the goodwill of donors and uncertain pay-outs of annual grants. Social entrepreneurs typically pursue new business models that generate income from the sale of products and services to both the public and private sectors. The strength of such a model is that companies are able to grow in tandem with what the market is willing to pay for those goods and services. The weakness is that these markets can be unused to paying for social goods and therefore have a low level of willingness to pay. The target groups with whom these entrepreneurs are working often are unable to pay, or the paying customer is often different from the end user, hence it is necessary to to be very specific in recognising where the social effect is generated, who benefitsand who are willing to pay for it. This way of thinking can also be found in many established impact driven organisations which can be very entrepreneurial in their launch of new initiatives.
‘Social entrepreneurship is entrepreneurship carried out for societal benefit. Social entrepreneurs are every bit as innovative, disciplined and driven as business entrepreneurs, but their ventures focus on solving entrenched social problems: poverty, environmental degradation, lack of access to healthcare, inadequate education and more. Just as entrepreneurship helps advance economic progress, so social entrepreneurship moves humanity in the direction of a more peaceful, prosperous and sustainable world.’ Jeff Skoll, Skoll Foundation (and founder of eBay)
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