Social entrepreneurship applies the principles and guidance used by start-up founders and entrepreneurs to a business that directly generates social change or impacts a social cause. A social entrepreneur is primarily motivated by a desire to alleviate some kind of systemic social or cultural problem.
In this article, we’ll dive deeper into what social entrepreneurship is, how it compares to regular entrepreneurship, and why it’s important. We’ll also offer some case studies to examine successful examples of social entrepreneurship.
Broadly speaking, social entrepreneurship is a new, innovative business venture that influences change. A social entrepreneur has a specific cause that they care about, and they develop a business model around making a positive impact. The main goal is to create lasting social change through business.
Some key areas of interest for social entrepreneurs include:
Social entrepreneurship can operate as a non-profit, for-profit, or hybrid business, depending on the business model that you prefer and the availability of funding.
Grameen Bank is perhaps the most commonly cited example of successful social entrepreneurship. Along with its founder, Muhammad Yunus, the Bangladesh-based microfinance organization won the Nobel Peace Prize in 2006.
Yunus understood that, due to predatory lending practices, people in poverty-stricken areas were unable to participate in their country’s economic systems. In an effort to build sustainable local economies, Grameen Bank provides small, collateral-free loans to people in rural communities who want to start their own business.
These microloans enable borrowers—many of whom are women—to use their skills to generate income and ideally become financially independent. With more capital flowing through these communities, local economies are able to grow. On the business side, thanks to the success of the loan structure, Grameen Bank has expanded their reach with over 2,500 branches.
Like entrepreneurs, social entrepreneurs aim to create a sustainable business with staying power. However, whereas an entrepreneur’s goal is to maximize profits, a social entrepreneur’s number one concern is impact. Most other differences between the two types of entrepreneurship derive from that focal point.
Here’s a side-by-side comparison of the two:
|Objective||Build a sustainable business||Build a sustainable and socially impactful business|
|Focus||Individual consumers||Social groups|
|Link to social issues||Indirect||Direct|
|Competition/collaboration||Competitive with related businesses||Collaborative with related businesses|
|Success||Based on sustainable profits||Based on sustainable social impact|
It’s important to note that a business can be concerned with and contribute to social causes without being a social-entrepreneurial venture. Social responsibility is when a business adopts policies that positively impact society, often guided by ethics. For example, a company may donate to charitable organizations or offset their carbon emissions to mitigate environmental harm.
Social entrepreneurship works within the structures of the business world to influence social change. It’s largely associated with progress, development, and innovation. Much like start-up entrepreneurs are disruptors, social entrepreneurs disrupt the status quo of systemic inequality.
As a concept, social entrepreneurship is not new. For example, some experts may consider Florence Nightingale, who created the first nursing school in 1860 and thus reformed the health care industry, to be a social entrepreneur.
However, the term “social entrepreneurship” has only gained popularity in more recent times. As people and scholars continue to examine social entrepreneurship, we’ll learn more about how different approaches impact society and continue to develop best practices. In the meantime, social entrepreneurs are constantly reworking their business models so that they can meet their main goal of affecting social change.
TOMS is an example of real-time social-entrepreneurial iteration.
In 2006, TOMS popularized the one-for-one model that many social-entrepreneurial businesses later replicated. For every pair of shoes they sold, the company would donate a pair to a person in need.
This straightforward strategy seemed to both support their ability to run a successful business by selling a product to people who could afford it and directly impact change in communities where there was a need by providing new shoes. However, over time, experts realized that simply donating shoes wasn’t promoting sustainable change—and it may have actually hurt communities if the shoe donations were disrupting local shoe businesses.
In response, TOMS adapted their giving model a few times over the years. Currently, they reserve a portion of their profits for grassroots goods, partnering with community organizations and providing cash grants to support sustainable change.
And other businesses have learned from TOMS’ experience. For example, with Warby Parker’s one-for-one program, for every pair of eyeglasses sold, the company sponsors eye exams and affordable eyewear for people in need.
A social cause is at the heart of every social entrepreneur’s business vision, and many social-entrepreneurial businesses begin with that cause.
Often, the first step toward social entrepreneurship is recognizing a problem in society and having a desire to solve that problem. As social entrepreneurs learn more about the mechanisms that perpetuate the problem, they’ll be able to build a business model that directly corrects those mechanisms.
Learning about the social cause that inspires you and the ins and outs of launching a business is one key step toward becoming a social entrepreneur. Dive deeper into the business practices that guide social entrepreneurship with the Business Strategies for A Better World Specialization from the University of Pennsylvania's Wharton School of Business. Over four courses, you’ll learn how to apply effective business strategies to solve real-world problems.
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