The Triumphs And Trials Of Social Entrepreneurship In The 21st Century

When someone utters the word ‘Capitalism’ today, the image that forms at the back of the head is generally a piteous one. It is the image of countless children slaving away their childhood in sweatshops or of the millions who see their earnings dwindle due to exorbitant prices for life saving medication. The list of such unfortunate scenarios has no end and yet capitalism survives – we wonder how?

Inequality is the glaring issue in each of these situations, so why not adopt a system that is built upon the philosophy that everyone is equal – Socialism. As many leaders of failed states would concur, it fails to provide enough impetus for an economy to keep accelerating. When the basic needs of the population are satisfied, the incentives to put in the extra effort and innovate remain low. Scholars describe this conflict with a very interesting choice of words – “Capitalism divides riches unequally while socialism divides poverty equally.”

So, are we restrained in choosing the lesser of the two evils? Thankfully, most modern economies do not operate in such a dichotomous nature; they operate on a spectrum. No economy is purely capitalist or socialist. Rather, governments intervene with social welfare systems tailored to meet the unique needs of their societies.

In the present day, most capitalist economies around the world have struggled to strike a balance between the two polarities. The unfortunate situations mentioned at the start are clear signs of the rising gap between the forces of capitalism and socialism. Enter social entrepreneurs, individuals who are willing to take the effort and risk in order to balance the scales. Here is a breakdown of what it means to be a social entrepreneur and what challenges one can expect in this field.

The Tenets Of Social Entrepreneurship

Social entrepreneurs are catalysts for positive change in a society. They attempt to address social issues like poverty, inequality, environmental degradation etc. through the means of their business ventures. Does that mean they turn a blind eye towards profitability? The short answer is ‘no’.?

For starters, people who forgo huge sums of money to bring change are certainly noble philanthropists, but they are definitely not social entrepreneurs. A social entrepreneur needs to be financially shrewd and turn profits, because that is the only way they can sustain their cause.

Profit motive of social enterprises also creates some confusion. When we consider that many businesses nowadays undertake CSR activities to create a positive impact on the society, the line between a social and a capitalist enterprise appears to be blurred. This obscurity can be resolved by a simple guiding principle - a capitalist enterprise aims to turn a profit, while creating change whereas a social enterprise aims to create change, while turning a profit.

To prevent intoxication with profits, many businesses have also adopted a dual bottom-line. It extends the traditional income statement to include the social impact of the business in addition to the fiscal performance. By displaying return on investment in both monetary and impact terms, companies will be better able to reconcile the two supposedly divergent forces.

Present State of Social Enterprises

Social entrepreneurship, while still in a nebulous stage, has taken giant leaps in the 21st century. As of 2024, there are more than 10 million social enterprises around the world, doing their best to guide the world to a better future. These enterprises have shown immense growth in size and scope, having already crossed the $2 Trillion mark in annual revenue. To put the numbers into context, the Semiconductor industry is yet to cross the $1 trillion mark.

On an aggregate level, one of the most significant impacts of social entrepreneurship is job creation. This segment of businesses employs close to 200 million people around the globe. While the number itself is huge, it is more remarkable because most of these jobs cater to the marginalized people in the society. In essence, social enterprises act as intermediaries between unemployment and the open labor market. Social enterprises are also some of the most inclusive workplaces. This fact is reflected in the promising data that says 1 in 2 social enterprises are led by women.

The ground that had already been covered in this area is certainly applause worthy. However, it rests upon the next generation of entrepreneurs to take it to new heights.

Challenges in Social Entrepreneurship

Like any business, social enterprises come with similar set of challenges, if not more. One of the challenges that turns out to be insurmountable for many social enterprises is scale. There are myriad reasons that cause this stunted growth, but the most significant one arises from their value chain structure. Where normal businesses primarily focus on providing value to the customer, social enterprises give equal weight in providing value to their suppliers or employees. Such bi-directional value chains are harder to manage and thus lead to drying up of investments in later stages. Growth in ESG and green funds is indeed a positive development for social entrepreneurs, however, getting funding for such startups is still an uphill task.

Business factors aside, characteristics internal to the entrepreneur can also be a pain point sometimes. While most entrepreneurs adopt a social impact ideology with the motivation to make life better for others, some go down this road with a feeling of self-centered altruism. These founders are more focused on taking the credit for change, rather than ensuring it. It eventually ends up harming the entire ecosystem. If everyone looks to become a founder, businesses at large lose out on talent diversity. This assertion does not take anything away from the amazing social entrepreneurs out there, rather it is a plea to celebrate the intrapreneurs who drive change from within.

Ultimately, the true measure of social entrepreneurship lies not only in overcoming challenges but in the enduring impact it creates, proving that purpose-driven ventures can indeed change the world.