The good, the challenging and the potential of Social Enterprises
It is becoming ever more clear that we cannot continue with the “status quo” of the way we do business and how we run our economies. We urgently need to focus on overcoming the big global challenges that we as society are facing. We are experiencing a ‘polycrisis’, a global situation characterized by the simultaneous occurrence of several fundamental crises and breakdowns: The climate crisis, political and social polarization, increasing social and economic inequality, demographic change, global migration, and increasing mental health problems are just some examples that we are already facing today and that will continue to grow unless addressed. My business partner Pablo recently wrote an article about the challenges that progressive organizations are facing. With this piece, I would like to focus on a specific type of organization that has been developing innovative solutions to overcome some of these local and global challenges: Social Enterprises.
What are Social Enterprises and why are they needed?
Whilst definitions and interpretations of Social Entrepreneurship vary across the globe, I find the following definitions useful to get a good picture of what is important in this context:
“Business that puts people and planet first” (Global Alliance for Social Entrepreneurship)
“The primary goal of Social Entrepreneurship is to solve societal challenges. This is achieved through the continuous use of entrepreneurial means and results in new and innovative solutions. Steering and controlling mechanisms ensure that the social goals are realized both internally and externally.” (Social Entrepreneurship Network Germany — SEND e.V.)
SEND has furthermore defined 3 dimensions that Social Entrepreneurship unites:
- Societal: the main and explicit goal is to solve challenges that society is facing (social and/or ecological)
- Entrepreneurial: the use of entrepreneurial means (e.g. creating new solutions, products or services) to increase the organization’s impact, which is the ultimate goal and benchmark vs. organizational growth or profit increase in exclusively commercially-oriented organizations
- Governance: to ensure a positive social impact both internally and externally, the organization makes use of steering and controlling measures. Important aspects of this are the limited distribution of dividends, employee and stakeholder participation, transparency and accountability, more open decision-making processes and a shared leadership culture.
The areas that you can find Social Enterprises in are as diverse as the economy itself and the amount of Social Businesses continues to grow. They come in many shapes and legal forms, however, the main indicator is putting impact and societal challenges in the center of their business (incl. their purpose), whilst also making a living for the people that are part of the organization.
What challenges and opportunities do we see in the field and working with clients that consider themselves as Social Enterprises?
One of the challenges we both feel ourselves and see with other Social Enterprises is that playing in the field of Social Entrepreneurship requires a lot of resilience, “inner work” and being ok with the unknown. There often are no predefined or commonly accepted and available paths, regulations, standards (incl. legal), blueprints, resources etc.
It requires walking away from some of the “old” and commonly used paths, right into the unknown, which can feel like immersing oneself into the jungle and off the beaten tracks!
This means putting in a lot of extra effort to constantly innovate and doing this in a way that you can maintain this level of effort into the long-term whilst staying healthy and not burning out. Hence, why Social Entrepreneurship requires a lot of resilience.
It also requires having a really strong inner compass (aka purpose and vision) to guide you. And not to forget: Social Entrepreneurs are going these new paths and follow their purpose to increase societal impact whilst at the same time the mechanisms, nudges and temptations from the good old system are omnipresent and might even actively work against them (why not take a short cut on the good old beaten tracks and let go certain parts of your purpose — it can feel like a treaty with the devil). It is a constant struggle to stay true to yourself and your values whilst being continuously tempted and challenged by powerful mechanisms from our current economic and social system.
Another challenge we see is funding. We are aware that funding is a challenge for many entrepreneurs — in particular in phases of growth or when starting out or for people coming from groups in the minority amongst traditional entrepreneurs (women, non-white, LGBTQ, etc.) However, “conventional” enterprises and entrepreneurs often have a variety of funding mechanisms they can access, whilst Social Businesses and start-ups often face enormous additional challenges to access funding as there are far fewer publicly funded start-up and growth funding programs as well as private investors. Even when considering the sale of their own products and services on the market as a source of income, the challenge is that Social Enterprises usually want to reach less wealthy customers with their impact — such as disadvantaged groups of people — or provide common goods. Which is why they often develop different pricing models which often means the financial income is less than in “conventional” enterprises.
In relation to that, the “currency” Social Businesses are trading with is impact — not profit — which comes with a whole lot of difficulties: Profit margins are usually less (vs. “conventional businesses”) which makes them not only less interesting to funders and investors but often also for talent attraction and retention (as they might not be able to pay “competitive” salaries or other benefits that companies in the “conventional” business sector can offer). Additionally, it is far more difficult to measure impact (vs. profit) and therefore Social Enterprises often struggle to convey the value they are bringing to society and the environment.
Now, let’s look at some of the positive developments and opportunities around Social Enterprises: We do see that more and more Social Enterprises are out there and have increasingly been getting attention by a more general public. We also see that there is a trend of alliances being shaped in between some of them and that there are various opportunities for Social Entrepreneurs to connect to and exchange with each other through networks and platforms (for not being alone in this big systemic shift of how to do business differently).
These networks can be found locally (e.g. in Berlin: Social Economy Berlin), across Germany (e.g. SEND e.V.), across Europe (e.g. Euclid network), on a global level (e.g. Ashoka) or even in the shape of multi-stakeholder coalitions (e.g. Schwab Foundation’s Global Alliance for Social Entrepreneurship). Next to providing an excellent support system to Social Entrepreneurs and Businesses, this contributes to eventually reaching a critical mass that can be a tipping point for the new “normal” of how we do business in the future.
Additionally, there is a trend that more and more governments are supporting Social Entrepreneurship through specific funding programs, the provision of fit-for-purpose legal structures (e.g. to enable steward-ownership) and other resources as part of their activities as they also realize the importance of them for a sustainable, innovative and healthy economy. Still, this remains far less than the support provided to startups and traditional business, but the dial is shifting.
What are we experiencing ourselves and what have we learned?
We have seen and learned ourselves how valuable it can be to proactively build resources and mechanisms to help you and your team(s) to stay true to your purpose. Be it in your day-to-day activities or when scaling your team to reach your goals and increase your impact.
For this, we believe it is of great value to focus on what is called “inner work”: be it on your own consciousness and challenging beliefs you are facing, or on a team culture and collective level. We found that implementing and nurturing certain practices, routines and attitudes can be supportive in strengthening both your resiliency and sustainable impact.
For this, you can ask yourself:
- Do we as a team have a clear and commonly shared purpose and vision?
- What are we doing to develop and strengthen our capabilities on an individual, team and organizational level to be ok with a high level of complexity and uncertainty (for a BANI world and context)?
- How and in which context do we question our own status quo on a regular basis?
- What habits do we need to unlearn as they are not useful any longer?
- Am I / are we seeing our path as a process? How much do we enjoy the process (vs. only being happy when achieving the predefined goal)?
- How often and where do we celebrate our successes and our failures (and what we learned from both)?
- How do we know if we are having the impact and results we set out to have? How can we measure and communicate this?
- What kind of culture is needed for us as a Social Business? How is this different from what we have experienced in other traditional companies or contexts?
- Do we have an honest and empathetic conflict and feedback culture and psychological safety within your teams? What (else) can we do to nurture it?
- How can I and we strengthen our connections and exchange with like-minded people (to not feel alone in this)? Could it be useful to create a support-group within our organization or across peers or join an existing network or community?
- How well are we taking care of our mental, spiritual and physical health? Is there anything else we need to feel healthy?
- How often do I ask for guidance and support? Is there anything I might need to increase my own or our team’s resilience (e.g. through regular coaching sessions, mentoring, someone to support you as a facilitator through transformation processes)?
We use those and other questions both in the work with clients but also to guide our own path as we consider Purpose+Motion a Social Enterprise and aim to become a fully regenerative business.
Based on this, we set ourselves objectives and check and refine them on a regular basis (briefly every week in our weekly alignment meetings and in more depth during our quarterly strategy meetings). We also take time and space for any “inner work” that arises and give priority to that — as we have experienced that this is the foundation of our relationship and always enables our work vs. “slowing us down” — be it as part of our “tensions” we look at in our weekly alignment meeting, in our monthly team coaching session or as needed a spontaneous meeting for anything that requires our attention. We are doing all of this to consciously be aware of if and when we feel like we are getting close to “signing a deal with the devil” and taking the easy path back towards the old and destructive system — and then be able to counteract and ask for support as needed.
Lastly, I want to highlight how much we love to work and partner with, learn from and through, and strengthen Social Businesses on their paths. If you feel like you might need support and are curious to explore what this can look like — or just want to grab a coffee (virtual or in person) to exchange, I would be super happy to hear from you 💌.
