Sunday, April 24, 2016

Relook at Social Entrepreneurship

I would call a social enterprise a company with a triple bottom line: social, environmental (or ecological) and financial. It needs to serve a social need, and it needs to be both environmentally and financially sustainable.

You see this diagram in many books talking about social entrepreneurship. The definition of a social enterprise today is very vague, and many even argue if there is a need to have such a definition.

It is already not easy to run a "social enterprise" but I do find many people interested in this field. Across the world, social enterprise is the buzzword to get the support from various governments. But when you do look into the various business models, there is so much grey areas where the organization operates.


In Singapore, the NTUC is considered a social enterprise. They run an insurance company, supermarkets and various other commercial enterprises. National Trade Union Congress in Singapore is a politically backed company after the Singapore Association of Trade Unions (SATU) collapsed in 1963 following the government's detention of its leaders during Operation Coldstore and its subsequent official deregistration on 13 November 1963, leaving the NTUC as the sole trade union centre.

As most of the leaders in NTUC are members from the PAP party, NTUC's operations is closely seen as PAP's operations and hence it is much supported by the government to run social enterprises which has lower cost services.

However, I do not really see NTUC Fairprice having lower cost of food. NTUC Foodfare seemed to charge a much higher price for food with some of the similar chain stores found in other foodcourts, And the one in AMK hub especially has similar foods that costs even more than Orchard Road.

With NTUC considered as a social enterprise in Singapore, Singapore can declare themselves to have one of the largest social enterprises in the world.

With such a broad definition of social enterprises, it is hard not to identify yourself or not identify yourself as a social enterprise in Singapore.

Ways you can call your business a social enterprise.

If you hire elderlies or disabled (due to wage subsidy from government), you can consider yourself a social enterprise as you employ the marginalized.

If you hire the marginalized such as ex-offenders, (due to wage subsidy from government), you can consider yourself a social enterprise.

If you use recycled or sustainable products, you can consider yourself a social enterprise.

If you carry out activities which benefit a certain group of NGOs, like doing some pro-bono work for a VWO, you can consider yourself a social enterprise.

If you donate part of your profits to charity, you can consider yourself a social enterprise.

If you sell sustainable fashion, you can consider yourself a social enterprise.

If you run (paid) courses for the marginalized, you can consider yourself a social enterprise.

If you build products that some marginalized people can use, you can consider yourself a social enterprise.

The list goes on...

So eventually, if you register with the Social Enterprise Association (Which seems rather dormant), you can consider yourself a social enterprise.


So why is this good (or bad)?

I feel that generally, when everything is a Social Enterprise, it can hardly demand differentiation. 

I would argue locksmiths, plumbers or electricians are social entrepreneurs as well as they do serve social need. What about Hybrid Taxi Drivers? Ooooh, they are sooo Green, and they sometimes transport the needy.

The Social Enterprises which creates a big social impact may now find it more difficult to differentiate themselves from the "greenwash" or "whiteswash" social enterprises, and people may not really care otherwise.


Are social enterprises even needed then?

I personally feel that commercial enterprises that primarily focus on profits or interested in the needs of the shareholders is simply wrong. The whole capitalism has warped our sense of reality that we praise businesses that are doing something good.

I really want to discourage students who are interested starting businesses today to start social enterprises if all they want to do is to sell things to the poor.

"Bottom of the Pyramid" 

I really hate this concept of looking at "the poor" as a market to sell things to. The poor does not need low cost pop corn, potato chips or soda... They do not need LCD TVs or other non essentials. 

I really cringe when some of the young entrepreneurs decide to raise funds to make products to target "the poor" after reading the book...

There are needs and wants. If you can find a solution to allow the poor access a need, like lower cost healthy food, sustainable energy, clean water, etc. And if you find a financial model and a distribution model which allows them to buy these needs, great! You are doing good while running a business.

This however may seem to be a fairytale. I'm trying to bring low cost solar kits to rural communities and for them to afford, you need a fantastic logistic model which is efficient and low cost, you need to cut out the middle man and connect to the end users directly, you need to have a low profit margin. All of which most people who you may seek finance from will definitely not fund you.

Most "Impact Investors" -- unfortunately -- are still looking for a profit margin. If they provide the risk capital, they want returns (20% ROI)? And this means your retail price has to be 20% more, an amount which the beneficiaries and target audience may not afford.

In my opinion, there is not really a good place for social enterprises as the corporations are already doing CSR, and the charities are trying to make income. With the confusing definition, people may not even tell the difference between companies and social enterprises.

If you want to create real social impact, stop trying to sell things to "the poor" and think of them as a "Market". With more needs available to them, they may not save enough money to acquire assets which they need to get out of poverty. 

If you are running a social enterprise, make sure you can create positive social change, real social impact, instead of just running a business, pretending to do good.

-- Robin Low

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