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August 13, 2014

A social distraction

Last week’s Senscot bulletin highlighted the growing tensions arising from the continued lack of an unequivocal definition of social enterprise in the face of ever more private enterprises claiming to have a social mission but nonetheless lacking in some of important features of a social enterprise. Interesting article from Pamela Hartigan of Oxford’s Said Business School, arguing that all this faffing about trying to find a definition is a complete distraction.



Pamela Hartigan

Why social entrepreneurship has become a distraction: it’s mainstream capitalism that needs to change

The first time I heard the term “social entrepreneur” I thought it referred to business people who liked to party.  That was about twenty years ago, when the term was just beginning to surface, said to have been coined byBill Drayton, founder of Ashoka.  Ashoka was the first entity that identified and supported such individuals – innovators with a “bold idea” aimed at changing a system that was at the root of a major social or environmental problem.

Twenty years ago I fell in love with “social entrepreneurship”, its promise, and most of all, the stories of the champions that practiced this approach.   They didn’t take “it can’t be done” as a deterrent – in fact, as one of them described to me, “’it’s impossible’ is our clarion call to action”.   As the first Managing Director of the Schwab Foundation for Social Entrepreneurship, an entity supported by World Economic Forum’s founder Klaus Schwab and his wife, Hilde, I spent eight years identifying, celebrating and supporting such individuals, providing them with opportunities to enter the coveted corporate enclave that is the annual meeting of the WEF at Davos – which in turn gave them access to networks of power they had never been able to tap. Many of these social entrepreneurs formed strong and lasting relationships with members of the corporate C suite, heads of philanthropic foundations and the media leaders that attend Davos.  It was difficult not to become infected with the bug of “social entrepreneurship”.

The Schwab Foundation certainly was not the only social entrepreneurship organization on the scene.  A host of other organizations were created at around the same time, including Echoing Green, the Skoll Foundation, the Omidyar Network, Acumen, Mulago, to name just a few. These were primarily based in the USA, but the UK quickly followed suit along with countries on the European continent, Asia, Latin America, Africa and Australia.  Governments, led by the UK, embraced “social enterprise” as the “third way” – income-generating charities that did not depend wholly on public coffers but dealt with the increasing number of social problems that defied government solutions.

My main concern about this viewpoint is that it stripped the notion of innovation and systems change – the essence of social entrepreneurial endeavour – right out of the approach.  In the UK and those countries that have followed, social enterprises have become part of the “social enterprise industrial complex”,  sub-contractors to government and feeding into a dysfunctional system.  But that is for another blog.

The point is, all of a sudden, social entrepreneurship was everywhere and everyone wanted to be one.  But there was one question that was raised at every national and international gathering of social entrepreneurs.  As former President Bill Clinton noted in a speech about the challenge of school reform “Nearly every problem has been solved by someone somewhere.  The frustration is that we can’t seem to replicate [those solutions] anywhere else.”    Why is it that the only system-changing approach that has managed to go to scale is microfinance?  Yet we forget that it took 30 years and an estimated US$20 billion in subsidies from major foundations and individual philanthropists to transform microfinance from an undefined effort sitting between philanthropy, aid and the market, to something much closer to mainstream investing.

This begs the question as to whether the only way social entrepreneurship will scale is by becoming part of the mainstream market system.   As someone who is now working in a business school environment, this idea carries significant weight.

I do believe that transformational systems change will never be achieved on a massive scale by non-profit organizations or even by well-meaning “hybrids”.  I very much


Which needs fixing first?

believe that the way forward is through business. And so I have come to feel increasingly uncomfortable with the term “social entrepreneurship” and its main actor, the “social entrepreneur”.

But the reason is not because I have bought into the notion that capitalism as we now practice it is the solution – but because I firmly believe that every entrepreneur has to be a “social entrepreneur”.  The way business has operated in the last 50 years must be disrupted because we will not survive as a society or a planet if we do not tear down the walls that compartmentalise economic, social and environmental activity.  That is why I am now working in business schools.  The way we approach business education has to change.

There is no doubt that the term “social entrepreneurship” served its purpose at one point in time, mainly because we needed to highlight what type of entrepreneurial practice we were referring to – but today it only serves to further dichotomise entrepreneurial practice into the “social” and the “commercial” (“non-social”?).   It creates a false separation between “this is where we make money, and this is where we do good”.  And that is EXACTLY what is wrong with capitalism today.

It is hard for us who have been born and raised under capitalism and the large corporation to reflect on the fact that it was only relatively recently – not many centuries ago – that humankind finally began to achieve a surplus, something more than the necessities for survival.

The central precept of all early corporations that began to take shape around the 16th century was that even though they were chartered as private entities and possessed special privileges and monopoly rights, they were still expected to carry out activities with a public purpose. That has changed and needs to be revisited if the world is to advance.


Yep, maybe it is

There is no doubt that the modern corporation as we know it today has empowered individual genius and bestowed great social benefits.  Yet it has also done social harm. Many of the ills of modern life – non-sustainable levels of personal and institutional debt, toxic air and water, workplace injury, loss of livelihoods for communities, political bribery – can be traced to corporate lack of responsibility to one or more constituencies.  This is not intentional.  No one wants to cause poverty, pollution, disease, unemployment and corruption.  Rather, they want to make profits. But in that pursuit, they may find anti-social behaviour pays. To achieve profits in the short term, corporations exact a “social and environmental price” and that price is high and rising.

The key to sustainable capitalism is reasonable profits as opposed to maximizing profits.  In the current system, a segment of society is trying to maximize profits without concern for the impact on the well being of the society as a whole, while another segment of social organizations have to deal with the fall out.  The system is not working.

Fortunately, there are a growing number of people, particularly among the young, who embrace the notion of “entrepreneurship for society” rather than commercial or social entrepreneurship.   They are not waiting until they are 50 years old when they have “made their money” and can “give back”.  I am optimistic that through the new breed young professionals, we can go back to the future and base our economies on activities that uphold social and environmental goals without eschewing financial sustainability.