How not to be a social entrepreneur

These days everybody wants to be a social entrepreneur. That’s awesome, but as long as you don’t pretend to be one. Every business is not a social enterprise… because if it was then we don’t need to have a separate name called ‘Social Enterprise’ in the first place now would we?

At a recent conference on social entrepreneurship, a popular Lankan businessman said, “I don’t know what social entrepreneurship is, and I don’t care about the definitions, but I believe I’m a social entrepreneur.”

Well, if you don’t know about something, the first thing you should do is study about it. (Read more about the Theory of Social Enterprise by Eranda Ginige).Sometimes it helps to understand the opposite of something in order to get a better understanding of the subject. So here are three entrepreneurs who are not social:

1.I give employment to people, so I’m a social entrepreneur 

Just because you give employment to a few people or a lot of people that doesn’t make you a social entrepreneur. If so,then weapons manufacturers, oil companies, tobacco companies, Bangladeshi sweatshops, Foxconn, the Lankan Parliament are all social enterprises. Most companies employ people not because they want to create employment, but because they need labour. It’s hilarious how CEOs say things like “we put our people first, we value our people, our people are our biggest asset” when in fact HR is accounted as a liability on the balance sheets. 

Isn’t it fascinating how some companies win HR awards when the first thing they do is laying-off their staff as the first response to a financial loss or a business restructuring; or are constantly looking for ways to automate their business processes to reduce labour costs; or are holding their workers’ educational certificates in custody to prevent them from leaving for better prospects!Don’t kid yourself by saying you want what’s best for your people.

And then you have social enterprises that are essentially created to give employment to certain groups of people. Single-mothers, elderly people, disabled people, ex-prisoners, marginalised communities, former combatants, refugees, people of extreme poverty etc. It’s beyond a simple employer-employee contract. The purpose of the business is to create a sustainable, equitable, income source for a specific group of people in need. 

A social business often has built-in systems to educate its people, skill and up-skill them, improve their living standards andbuild confidenceto gain financial independence. They are often paid higher salaries than the market rates or a living-wage because the purpose is not profit-maximisation for its shareholders, but to create better lives for the target group.

I know what you’re thinking “but what will happen to the employees if a company cease to employ them?” That’s an insinuating argument I usually get as the last cry. My response is “Wouldn’t you replace your staff if there was a cheaper alternative?” It usually drives the message straight to the cerebrum. 

Firstly, a successful company will not do such a thing because it’s suicide. They need the labour to function and they need more labour for business growth.You need to stop thinking that you are doing a special favour to your people by employing them; unless the whole purpose of your business’ existence is to create prosperity for your people. There’s a big difference between the two.

2.I give microfinance to the poor, so I’m a social entrepreneur

Professor MuhammedYunus the pioneer of microcredit started the “Grameen Bank” (Bank of the Villagers) with the single purpose of lifting the poorest-of-the-poor Bangladeshis out of poverty. Grameen Bank is one of the world’s largest Social Enterprises both in terms of impact and income.Its business model was designed based on real needs of the people at the bottom-most level of the society, especially women. 

Initially scorned as an unviable idea, Grameen Bank’s unprecedented success led to an entirely new global industry. And then came the loan sharks. Seeing the high interest rates, high repayment rates and the large market base, all the profit-hungry finance companies and private banks started their own microcredit products and subsidiaries. But they lacked the one essential thing which made Grameen Bank a social enterprise, the socialpurpose!

Microfinance is has become asocial menace in Sri Lanka. While Grameen Bank wants to take people out of poverty, most Lankan microfinance companies want to mint money out of the poor. It’s reasonable to doubt whether the top management of most of these companies understand the social-economic principles of microfinance. Their sales staff are given impractical targets to lend. Having no proper training, experience or empathy on working with poor rural women, they somehow force credit on the poor, and then force them to pay the unbearable interest every month. They don’t build the values, they don’t build trust, they don’t build the support system, and worst of all they don’t serve the real needs of the Lankan poor. 

As a result of this menacemany people have stopped their microenterprises altogether and are doing hard labour work for a daily wage just to pay back the interest. Some women commit suicide after falling deep into this debt trap. There is nothing social about most Lankan microfinancecompanies.

(Yes, I know about the allegations against Prof.Yunus, but he has been proven innocent on all accounts thus far. It is obvious that the Bangladeshi Government’s actions against ProfYunus are politically motivated.)

3.I have won social enterprise awards, so I’m a social entrepreneur 

True social entrepreneurs become so after having a profound understanding (Insight) about social and environmental problems around them. They are not some naïve do-gooders nor are they the traditional opportunity-grabbing entrepreneurs. Instead they are well aware of the social-environmental problem they want to address. They are driven by a relentless desire to prove a sustainable business solution (Impact) to those problems. They design a business model which not only assures their business sustainability but also their own personal wellbeing (Income). (Read more about Insight-Impact-Income: Personal Triple Bottom Line by ErandaGinige.)

Social entrepreneurs are well aware of the modern concepts of sustainability and they are open to quickly learn from others from around the world. Having a serious understanding about social and environmental problems often make them change their lifestyle and purchase habits to be ethical, responsible and environmental-friendly. And they strive to make each and every aspect of their enterprise “good”. Just because they do good, they don’t waste water, energy and other resources, mistreat employees, con their customers, make vulgar advertisements, sell products in plastic, bribe government officials, or dodge taxes.

I see many people who do something good and then use it for personal benefit. Worst of all, I now see some narcissists abusing social entrepreneurship and promoting themselves as social entrepreneurs. They do it for awards, fellowships, foreign trips, TV interviews and especially for the money. It’s repulsive to see some commercial businesses and pretending to be social enterprises just to tap into impact investment. 

Don’t get me wrong, I’m not saying people should not seek and be given due credit. But I’ve seen those award winners simply retract from continuing and scaling their social impact after getting the award.Social Entrepreneurship is fundamentally about solving social-environmental problems through sustainable business approach. You do it because you want to make a serious impact.

Social enterprises are most certainly the future of business. It’s the only practical solution we have on the table to make a better world through business. We don’t have time for games. If you want to be a social entrepreneur please do so for the right reasons. 

Links: Personal Triple Bottom Line:http://www.sustainablebrands.com/news_and_views/leadership/eranda_ginige/personal_triple_bottom_line_insight_impact_income

Theory of Social Enterprise: https://www.linkedin.com/pulse/theory-social-enterprise-eranda-ginige

(The author is the Founder of Social Enterprise Lanka. You can reach him [email protected].)