Is Social Entrepreneurship The Future Of Business Philanthropy?

Social entrepreneurship is a versatile and beneficial activity.  We live in a world full of opportunity and progress – and enormous social challenges.

If you have an entrepreneurial and progressive spirit and use the opportunities available to offer new solutions for the positive development of our society, then you are a social entrepreneurship.

The concept of social entrepreneurship has developed into a major international trend in recent years. This is based on the growing conviction that the most sustainable social-added value can be achieved with an entrepreneurial approach.

Social enterprises solve social or environmental problems using entrepreneurial means. By definition, their goal is to create benefits for society and return the profits to society.

So it’s not about making as much profit as possible, but rather about giving something back to society. This can happen in very different ways and in many different areas.

For example, by social enterprises combating child poverty, creating educational programs for the disadvantaged, or protecting nature. You want to achieve a certain impact – social enterprises need to work in an impact-oriented manner, apart from high financial profits.

What Defines Social Entrepreneurship And Its Distinctive Objectives?

The primary goal of social entrepreneurship is to solve social challenges. This is achieved through the continuous use of entrepreneurial resources and results in new and innovative solutions. Steering and controlling mechanisms ensure that social goals are implemented internally and externally.

The social entrepreneurial idea is not necessarily new, but the highly innovative approach with which this idea is pursued today certainly is. It is precisely this innovative approach that the term entrepreneurship generally stands for.

The dazzling trend term from the USA describes an innovation-driven entrepreneurial spirit and is also becoming more and more established in the modern world.

There is now a lot of literature, research, and entire courses on the topic in this country. The idea of social entrepreneurship arises from the combination of innovative spirit and social value creation.

You are an entrepreneur if you have developed or further innovatively developed a business model. In the same way, social entrepreneurs can also be distinguished from social entrepreneurs.

A social business is the social enterprise that you run as a social entrepreneur. In English-speaking countries, the overarching term social enterprise is often used.

The word enterprise is similar to the term organization, so it includes any type of company, including those that do not work with a business structure but with a non-profit structure.

There are other forms of entrepreneurship. An entrepreneur in residence, for example, is an “entrepreneur in residence”, i.e. in the company itself.

How Can Businesses Align Profitability With Social And Environmental Impact?

When asking what a social enterprise is, the aspect of why should also be discussed: Why a company at all? And why not an association, foundation, or social agency?

Hundreds of thousands of people in the modern world are now organizing themselves in these forms of joint work to get involved in society on a voluntary or full-time basis.

There are several reasons for that. For example, an association must be founded by several people (at least seven), and it must have certain bodies (the board), all of whom can influence decisions.

The board is personally liable. With an entrepreneurial legal form, these restrictions do not apply; liability is limited (depending on the legal form). In addition, companies can access financing better – in many cases, a bank does not give money to a club as quickly as to a company.

External investors can also more easily enter a company and acquire shares. That doesn’t work with a club.

An important point, because many social enterprises want to grow with their innovative business models: open up new locations, scale their programs, and develop new products or services – and for this they need money.

It also makes it easier for companies to operate in the market – for example, to commission suppliers or to invoice customers. Since a large part of our society is based on a market economy, it is easier for a company to operate within this system.

But that doesn’t mean that social enterprises only finance themselves through the sale of products or services. In reality, many types of financing mix, ranging from donations to investments, grants, public money, and sales.

What Are Examples Of Successful Social Entrepreneurial Ventures?

Social enterprises or social economy enterprises are part of the total number of social enterprises.

They usually refer to employment and education providers, welfare organizations, and other entrepreneurial initiatives that work with disabled, job-seeking, or socially disadvantaged target groups. 

These can be, for example, workshops for the disabled, welfare providers such as the AWO, nursing services, or school authorities. Their main concern is to look after people and give them a chance at work and employment who have no chance in the regular job market.

In contrast to social enterprises according to the European definition, their business models are usually not innovative but have been tried and tested for years. They hardly change and don’t want to solve new problems.

Therefore, social entrepreneurship examples are ideal in this regard.

How Do Consumers And Investors Respond To Socially Conscious Businesses?

Consumers and investors react more to businesses that are concerned with social responsibility issues than other business and enterprise models. These businesses can both offer solutions to social problems and provide insight into future financial opportunities for investors.

Social business is confused with non-profit organizations such as foundations, associations and non-governmental organizations. A foundation is established to distribute the money of one or more grantees who aim to provide social benefits through their donations.

The Foundation is not a social business, it is not financially self-sufficient, it does not normally generate any income through business activities and it does not have an owner as in a social business. 

According to the laws of many countries, foundations and non-profit organizations are managed by boards of directors within the framework of the principles set by the state.

When a foundation donates to a traditional nonprofit organization, the money is used to establish or support philanthropic programs that are hoped to provide some benefit to that community.

However, in all cases the money is quickly spent and the non-governmental organization often has to apply for a new grant to continue its work.

What Role Do Impact Metrics And Sustainability Goals Play In Social Entrepreneurship?

Impact metrics and sustainability targets are very important factors in social entrepreneurship projects.

These dynamics are very important and effective for social entrepreneurship. Social entrepreneurs are not just income or profit-oriented projects. Their focus not only on financial success impacts their impact metrics and sustainability goals for their performance.

Different legal structures can be used in social businesses. There are two basic principles here. What makes an organization a social business is not its legal structure, but its activities.

Short-term and future financing opportunities and income opportunities have a significant impact on the structure to be chosen.

The criteria to be considered when deciding on the legal structure for social business can be listed as follows:

1 – Personal responsibility,

2 – Ownership,

3 – Short and long term financing,

4 – Management,

5 – Profit distribution

Sole proprietorships or unincorporated partnerships are directly responsible for legal activities and any debts. If the organization makes a loss, it is the individuals’ responsibility to find the money to pay the credit institutions.

The fact that the enterprise has a separate legal structure from the partners will relieve the members from personal liability in case of financial damages caused by the enterprise or if the enterprise is subject to financial losses. 

However, if the management and partners act negligently or deliberately, this protection may be lost. Generally, social enterprises that intend to operate long-term will use a legal structure that gives limited liability to partners/members.

I wrote about social entrepreneurship. Because it was a topic that needed attention. If you have any questions or want to ask about social entrepreneurship, you can write or comment. See you in the next post,

Anil UZUN