Last week, the Open Innovation Club held its first workshop of 2015 at Impact Hub. Co organized with CALSO, the workshop tackled the emerging topic of social entrepreneurship and its future development.
In today’s context of growing social inequalities, social innovation practices need to be spread in order to significantly reduce social challenges. Along with traditional philanthropy and corporate social responsibility actions, the social entrepreneurship sector has shown to be very efficient when it comes to sustainably contribute to social change. Social entrepreneurs and innovators have proven that in many fields – health, seniors, employment, housing, etc. – sustainable ventures can have a great social impact.
What is social entrepreneurship?
First, let’s start by what social entrepreneurship is not. It is not Corporate Social Responsibility (CSR) and it is not a new word for non-profit companies. In fact, social entrepreneurship sits right between the two. As Nicolas Hazard, President of CALSO and Vice-Chairman of GROUPE SOS, put it: “social entrepreneurship is about making the world a better place by maximizing both profits and social impact”.
Why is everyone talking about it?
We hear a lot about social entrepreneurship, various companies claiming that they are doing more for the community than just making money out of it. Where does it stem from?
It seems like there was a shift right after the subprime mortgage crisis of 2007. Suddenly, consumers realized that there were very few investment products available if they wanted to have a positive social impact while having a financial return as well.
Following this shift, companies started to communicate about their social initiatives (like Patagonia or Lush) and a new generation of truly social enterprises emerged. TOMS is a perfect example of what social business models can achieve. Giving one pair of shoes for free to impoverished children for every pair of shoes bought does not seem like the best equation to be profitable. But as Barbara Krause, Senior Corporate Finance Attorney, Social Venture Attorney, and Entrepreneur explained “when you have a social startup that is worth 25 million dollars then people look at you differently. Yes, it is possible to have a social mandate and make money.”
Who is benefitting from social entrepreneurship?
Virtually, society as a whole benefits from social entrepreneurship, but unlike every other for-profit business, social enterprises target underserved communities. Underserved communities encompass different realities and different situations depending on whether we are talking about a developing or developed country. In developing countries, underserved communities more or less equal poor people. In developed countries, underserved communities mean excluded people, but they may not all be poor. It’s easier to define poverty in developing countries that’s why it may be more complicated to create a social company in developed countries. It really comes down to the notion of accessibility: accessibility to water in Rajasthan, accessibility to public transportation or simply lodging in the Bay Area.
What are the different legal frameworks for creating a social enterprise?
We all know that a non-profit organization has a strong social impact but it is not the only structure that allows it. New hybrid legal forms such as Benefit-Corporation or B-Corp and L3C allow the companies to focus on social impact while still being a for-profit organization. “The new Hybrid corporations were created to enable social entrepreneurs to keep the social mandate of their company when they raise money”, explained Neetal Parekh, Social Innovation Blogger at innov8social and Chief Development Officer at Thinktomi.
Beyond these definitions and explanations, discussions during the workshop helped to flesh out some key takeaway.
Sooner is always better than later
The sooner a company envisions the social impact of its business, the more efficient it will be. To avoid losing money, time and consistency, companies should build their business model with a social purpose from the beginning. For instance, it means that a company can choose to go for a social legal structure. Therefore, even if the company is acquired, the company’s social purposes will be protected.
Need for a globalized social ecosystem
One of the challenges for the social entrepreneurs is the lack of a global social entrepreneurship ecosystem. There is no equivalent of the World Trade Organization for example. Every social entrepreneurship initiative has to start over when entering a new country.
However, Nicolas Hazard hopes to challenge this status quo and that is why he launched CALSO in San Francisco. As he put it:
“If we go to Silicon Valley and succeed there, it will be easier to succeed everywhere else. I believe in the power of the Silicon Valley!”
“We created a dedicated social enterprise to develop activities in the U.S., convinced that Silicon Valley’s creative spirit and collaboration with American organizations will foster the development of social innovation around the world.”
For more info about the Open Innovation Club, contact Patrick Consorti