Given my interest in both business and social issues, I have been exploring the varying definitions of social enterprise and social entrepreneurship.

Antonio Meloto, the founder of Philippines-based NGO Gawad Kalinga, recently spoke to a group of students at London Business School and discussed some social enterprise success stories his organization has helped create. For Gawad Kalinga, social enterprise means fostering businesses that are socially and environmentally responsible, as well as profitable. Meloto spoke about how companies should seek optimal profit as opposed to maximum profit. He put forward a vision of business where the primary purpose is the common good. No doubt this vision will be compelling for many people, and it’s great that Meloto and his team have been able to recruit and train a large number of young entrepreneurs that share such a vision; the impact on the Philippines has clearly been very positive.

But I’m left questioning whether this vision of a more caring form of capitalism – one that aims for broad societal welfare as much as it does shareholder profits – is realistic. Is this approach really sustainable in the big, bad world of business? Is it scalable beyond a micro level? I worry that social enterprise is being heralded as a panacea for economic, social and environmental problems when in reality it only works in some very specific cases. These sorts of questions have also been floated in a core MBA class I’m taking this term called Business, Government, and Society. As we examine topics such as competition, regulation, and corporate responsibility, we are struggling to square the circle that results when you combine unbridled capitalism with a genuine desire to do good.

There is another meaning of social enterprise that I find a bit more troubling. Much of the commentary that lauds social entrepreneurship seems resigned to the fact that governments can no longer afford to administer programs. Social enterprise is presented as an alternative way to deliver programs and solve societal challenges such as homelessness, a lack of healthcare, or environmental disaster. This approach posits that private-sector entities can use their entrepreneurial spirit to do more good than government can. I worry about social enterprise, sustainable business, and corporate philanthropy supplanting the role of the state. In my opinion, this is a dangerous path for two reasons.

First, this approach ignores the democratic benefits of governments and civil society. I’m the first to admit the public sector and civil society could benefit form a little private sector thinking. Many government bureaucracies and most NGOs are bloated, inefficient, and have failed to adopt some of the improvements in management practice that the private sector has benefited from over the last 50 years. But injecting a little business efficiency into government is not the same as replacing government with business when it comes to administering services. Governments are elected and accountable to the public and civil society organisations are governed by their membership; both are open to all but the same cannot be said about corporations.

Second, and more importantly, resolutely concluding that governments can no longer afford to administer the services we expect of them means accepting that existing taxation policy cannot be changed and that the unbelievable disparity between rich and poor is here to stay. The truth is that the state’s ability to build affordable housing, fund healthcare services, take care of an ageing population, or regulate environmental law relies on public policy decisions we make collectively. Rather than throw our hands up and turn to business to solve the problems we’ve created, why not sit down and see if it still might be possible to do it ourselves, together?

2 Responses to “Exploring the concept of social enterprise”

  1. avatar David Floyd says:

    I think social enterprise as a part-replacement for government is primarily a UK phenomenon (although there are other countries where it might play a role in services that government has never had the resources to deliver in the first place).

    The reality, as opposed to the rhetoric, in the UK is that government still pays for services delivered by social enterprises but the expectation is that a more enterprising approach will make services cheaper and (in theory) better.

    This definitely has its pros and cons. I agree with you with the public sector and civil society could benefit from reducing inefficient bureaucratic practices – whether that’s ‘private sector thinking’ or just good management is another question.

    The danger, though is that UK governments’ interest in getting social enterprises to deliver public services is less about that and more about creating a set-up where organised labour is weaker, wages are lower and jobs are less secure – which increases social inequality.

    On your initial challenge: “we are struggling to square the circle that results when you combine unbridled capitalism with a genuine desire to do good.”

    I think the vast majority of people working within our economy do that – in the sense of hoping that the job they do makes a positive difference to other people’s lives as well as enabling them to earn a living. And there’s very few jobs I can think of that have no positive social value whatsoever.

    The problem (or a problem) with social enterprise as a panacea is that (in many cases) it suggests you can significantly improve social situations and tackle social problems, without challenging economic power structures in any way. I like that as an idea but I’m not sure that it’s likely to work.

    • avatar Rachel Chan says:

      I too have misgivings about the term ‘social enterprises’. Not all doing good and doing well enterprises are ‘social enterprises’. I run a consultancy to promote creativity, innovation and sustainability. But we are not a social enterprise. And I do think that only a handful of so-called social enterprises can be sustainable and scalable in the real world. I am afraid all the hype about social enterprises is an over reaction to the problems of unbridled capitalism. The concept also has a political motive, with governments trying to abduct their responsibilities by coating the inconvenient truth in the social enterprise sugar pill. In other parts of Western Europe, I understand that the term social enterprises is losing traction. The Hub, for example, has dropped references to social enterprises in its revamped website.

      Responsible education institutes should refrain from joining the hype. What business schools should advocate are organisations cherishing a meaningful purpose other than profit maximisation – and not some romantic (and unproven) notion of social enterprises.