Opinion: Social entrepreneurship and responsible investments

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Photograph: Steph Mitcalf

Surprising for some, but not for others, social entrepreneurship is no longer about giving up the career of successful businessman to become a full-time saviour of the world. Half of social enterprises are making profit despite their recent starts. Ideas and enthusiasm for running a business which aims to benefit society are booming. According to a Santander report, there are around 70,000 social enterprises in the UK, with almost a half of them being younger than 5 years. Moreover, compared to conventional entrepreneurial startups, they seem to be better off – around 40% of them are achieving successful growth.

What make such concepts attractive? There are several reasons that we can come up with. The most obvious reason standing behind the roots of social enterprises is the sense that people should be making a contribution in tackling issues not only in our communities, but also globally. The poverty, wars, social inequality, environmental damages and human rights issues are, unfortunately, still a routine part of the global society. Governmental policies are turning to individual responsibility and focus on “creating opportunities” through supporting market environment, rather than directly investing into a public sector. This environment then not only creates opportunities for social businesses, that are in many cases “toxic” for traditional profit-focused companies, but also paradoxically boosting attractiveness of social initiatives as people are focussing more attention and applying pressure to companies to deal with such problems. Movement in this direction can create even better conditions for socially proactive entrepreneurs. For governments, big corporations and consumers, investments and cooperation with these companies are far more effective than sole support of non-profits and public bodies, as such organizations are not very sustainable and almost entirely dependent on subsidies and donations.

“Ciudad Saludable” began as an initiative to clean slums in Lima, Perú, by visiting homes and collecting waste for recycling. This service, normally undertaken by public sector and paid from government resources, became very successful and fully sustainable. Nowadays, the company not only provides employment for community, but also improves health and living conditions in the city. It gains revenue from regular payments from customers for collecting waste and partly from subsidies. Its impact and efficiency are much greater and costs much lower than if undertaken by public services. Such initiatives are also attractive for investors seeking for moderate profit and good reputation or feeling from supporting a good thing.

Despite the fact that there is still a long way to go for this sector, there is an interesting potential for expansion in these areas. They show another dimension of the free market power. If consumers will be more and more willing to “irrationally” invest into products that have only a partial value for themselves, but also a vast value for society and environment, market will be much more efficient in handling the negative effects of consumption and growth. It will enable the mechanism of growth to shift into the “public” sector. Companies will be able to handle problems that are still now waiting for government and NGO assistance, with greater speed and cost-efficiency. Apart from that, if shift towards the importance of self-actualisation continues, this will add even more excitement, passion and motivation for entrepreneurs, who are nowadays powered up by such needs. If all parts fit in well, the growth cycle will fire up and we can expect a completely new dimension to business.