Originally published on Huffington Post Impact.
In the past few years, the social enterprise space has evolved rapidly from a concept that required explanation to a trend everyone is eager to join. Business schools have drastically increased their social entrepreneurship course and club offerings, and many businesses and startups can get away with calling themselves a social enterprise. While grateful for the rise in people and businesses caring about making a positive social impact, I’m concerned that an over-emphasis on business solutions overshadows the need to address root causes of societal problems.
Social enterprises can become easily distracted building and managing their business instead of focusing on the problem they are trying to solve — even if the solution involves running a healthy business. A strong business model and management-style is critical to success, and I proclaim their value to a sustainable social enterprise as much as the next person. Yet, a social entrepreneur can run the most transparent, well-managed, profitable social enterprise in the world, and still not be solving the social problem their business is founded upon.
In fact, they could potentially be causing more harm than good (TOMS Shoes being the easy target, high-profile example of this kind of criticism). It doesn’t matter how great a social entrepreneur’s business is if their approach to solving a social problem is off-base and if they are not actively working to reevaluate or adjust their theory of change to their cause’s evolving needs.
As we continue to grow as a movement, there are a few things we should remember in order to maintain a focus on the core mission of our work — positive social change.
We must remind ourselves and encourage our peers to look at the bigger picture to create sustainable and transformative change, not just short-term and/or misinformed impact. As non-profit leaders Bill Shore and Darrell Hammond write in an important Stanford Social Innovation Review article:
“The foundation on which many nonprofits are built is flawed and simplistic, focused on a symptom rather than the underlying set of problems, developed in isolation rather than as part of an integrated system, and organized to administer a narrowly tailored program or benefit rather than generate sustained, significant change for a person or community. As a result, change is incremental, not big or bold enough to make a lasting and transformative impact.”
To be truly impactful, social enterprises need to think about their cause and community holistically, and incorporate that understanding into their theory of change. This is where the tools and ethos of human-centered design can be powerful.
Policy and Business Change
Anthony Bugg-Levine, a pioneer in impact investing, wisely reminds us that social enterprises are “second-best solutions.” Social enterprises that provide access to clean drinking water, for example, only exist when government or the private sector fail to provide access to clean drinking water. One of the greatest aspects of social enterprises is that they offer a proof of concept for new business models and for solving problems from different angles, which government and business can later adopt. But if we forget to advocate for those changes at the policy level or encourage business to change, we are failing to create long-term, holistic impact.
If we ignore basic human rights and human dignity, we are also failing. As economist William Easterly argues in his critical new book The Tyranny of Experts:
“The cause of poverty is the absence of political and economic rights, the absence of a free political and economic system that would find the technical solutions to the poor’s problems. The dictator whom the experts expect will accomplish the technical fixes to technical problems is not the solution; he is the problem.”
When we don’t provide opportunities for what Easterly terms “spontaneous problem-solvers” in “free development,” and instead allow existing systems and institutions to stay the same and suppress justice, social enterprises–no matter how well-run as businesses–will not create real change.
As a sector, it’s our responsibility to not expect every last social enterprise to use non-donation revenue to solve social problems created by market failures. We need to continue offering grants to support overhead and programmatic costs that can’t be met by social enterprise-generated revenue, or we will undermine what could otherwise be an impactful theory of change. As Stanford lecturer Kathleen Janus writes in this Huffington Post piece: “Rather than focusing on helping those in need to apply the best practices of business to improve their lives, organizations will end up focusing on applying those practices to serve their own needs.”
Social entrepreneurs need to be as educated in socioeconomics as they are in business. And they need to care as much about human rights and policy as they do about management hacks. This is not to say that social entrepreneurs aren’t already knowledgeable about socioeconomics or vocal about social justice, or that they are not working with strong theories of change; many are laudably leading the charge. But as a movement, we need to remember to think beyond the business and to understand the systems at large we are hoping to impact. For lasting, transformative, positive social change, we can never remind ourselves enough that these things matter.