1. The scale of social enterprises varies globally
Bangladesh has the powerhouses of Brac and Grameen. “It’s the home of microfinance and Brac’s social enterprises have operated since the 1970s,” explains Emily Darko, a researcher at the Overseas Development Institute. For other countries social enterprise is a less developed area. It is a relatively new term in Ghana, for example, but there is a growing number of start-ups and intermediaries and support organisations are emerging.
2. Social enterprise is about impacts
Positive impacts can be seen in a number of ways: in what a social enterprise produces or sells, for example, or by the way it does business. “Most of our work is agricultural so we are particularly interested in enterprises that go out of their way to include marginalised farmers,” says Clare Clifton, Christian Aid’s inclusive market development project manager.
3. Social enterprise can help reach the grassroots
Social and environmental enterprises are best positioned to understand what local problems are, and the best ways to solve them. They are also flexible and nimble in their approaches so their impact is long-lasting.
4. Skills development and employment-generating enterprises are growing
In the Philippines – the so-called call centre capital of the world – employers tend to recruit over-qualified young people with college degrees. With continued growth of the sector, demand remains high for new workers, who do not have to have degrees. Bart Edes, director of the poverty reduction, gender and social development division at the Asian Development Bank, says that one social enterprise, Bagosphere, is providing skills-training for disadvantaged young people to work in the call centre industry.
5. Enterprise can benefit the poorest
Some people are so poor that joining a large social enterprise is not really an option; Clifton says another approach is to build a social enterprise around their needs: “We have had good experiences working with very marginalised communities in Zimbabwe, where we asked them to tell us their vision for their community’s future – this included growing and selling a profitable product. Our work with them and an export company resulted in the first Fairtrade-certified hibiscus being exported from Zimbabwe.”
6. More governments are supporting social enterprise
The governments of South Korea and Singapore encourage the work of social enterprises as they recognise these organisations can fill gaps left in the provision of social services. The Singapore social and family development ministry also offers tips on how to start a social enterprise.
7. Reporting is essential
Social enterprises should be held to the same standards as NGOs for impact measurement, and to the same standards as corporations in measuring their financial performance. With the right tools, the cost of doing this can be minimised.“We have developed a methodology to assess both the financial and social performance of a project,” says Nicolas Hazard, chairman of Le Comptoir de l’Innovation and vice chairman of Groupe SOS. “CDI Ratings is based on 600 criteria gathered from field experts and aims at being time-effective, and therefore cost-effective.”
8. But expectations must be sensible
If social enterprises are to devote more time and resources to impact assessments, they won’t be able to compete with the private sector. Paula Woodman, social enterprise adviser for the British Council, says that there are two options: give social enterprises advantages, such as tax incentives, over private companies to make this worthwhile or require businesses to also complete impact assessments. Aviva is proposing the latter model for the biggest global companies.
9. Global charities can help social enterprise get started
There are many areas that NGOs know well and for which they can give expert advice: impact measurement, community engagement and engagement with people on low incomes or with little political voice. They can also help with supply chains, producers and consumers. For example, Filipino NGO Gawad Kalinga provides an incubation space for social enterprises in their communities.
10. NGOs can also bridge risk gaps
It can be difficult for a new social enterprise to attract capital, be it impact investment or more general investment. Nicola Jowell, programme director of MPhil in inclusive innovation at the University of Cape Town’s Graduate School of Business, says that international charities can help by providing that initial, risky investment, and help startup social enterprises gain traction and create value, proving their attractiveness for further investment.
11. But charities might have to become social enterprises in the future
As countries like Bangladesh move towards middle-income status, and with aid money drying out, charities will have to convert to social enterprises in order to address challenges in human development. Tamara Hasan Abed, senior director of enterprises at Brac, warns: “Charities will do well to change mindset and become more entrepreneurial sooner rather than later.”
Read the full Q&A here.