Social enterprises are a growing force in the global economy and a fierce catalyst for social change. One third of startups globally have social good as their core mission. In the United Kingdom, the startup rate for social enterprises is three times that of mainstream small and medium-sized enterprises (SMEs).
Social businesses focus on providing market-driven solutions that address a social, economic or environmental problem. One Good Thing, for example, sells high-end gifts made from recycled material while empowering the livelihoods of artisans that have made them; Alterna is a non-profit accelerator for social businesses in Guatemala; and MUrgency is an online platform in India that connects people who need emergency medical help with the closest doctor, ambulance, paramedic, nurse or hospital emergency room in 15 cities. Conversations with the founders of these companies and insights from a few others provide an outlook into the future of this space.
The fact is, most social enterprises will stay small, but still nimble
Despite the growth in number of social enterprises over the last few decades, like any new business, scaling is difficult. Social impact management consultant Lynn Thurston believes that moving forward, the call for scaling social businesses will lessen as governments and investors acknowledge that many enterprises will simply remain small, or niche.
How does “not-scaling” affect the competitiveness of a business? It means the company cannot reduce the price of its products without losing revenue. Although there is a notable shift in consumer mindset as they increasingly demand companies to be socially responsible, the decrease in disposable income during economic slowdowns reduces the inclination to buy social products, says Michael Cooke, co-founder of One Good Thing.
“For example, everyone will support the idea of a fairly traded t-shirt where part of the proceeds goes back to the community in which it is made, but when times are tough and there is a choice to be made between that t-shirt and the much cheaper, mass-produced alternative, people will still opt for the quick satisfaction of a bargain” explains Cooke. “It means that the job of social enterprises will be to highlight the additional value in the socio-environmental benefit that justifies the extra cost.”
In emerging markets like India, scaling may not be an issue: “With over a billion people facing diverse issues, India has become a hotbed for social entrepreneurship,” says Sweta Mangal, co-founder and director of MUrgency. “With an estimated two million social enterprises, India has enough socio-economic challenges that require attention, and investors are coming forward to help scale innovation in the social sector.”
More corporations will enter the social impact space
“More companies will enter the social impact space as environmental pressure on their industry intensifies. For example, the global movement to ban or limit single-use plastics, along with China’s recent decision to no longer accept plastic waste, will generate new products and unleash more aggressive clean-up efforts,” says Thurston.
Michael shares the same view: “We will see a lot more activity from bigger companies because of the positive response that initiatives such as the Adidas UltraBoost trainers made from ocean plastic, and the Sky News ‘Ocean Rescue’ campaign. Long may this trend continue because it is these companies that ultimately have the clout to make the big changes.”