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Monday, 21 january 2019 | Redacción CEU
Transforming the exterior implies looking inside. The exponential development of technology, the new political and social reality, globalization and climate change are just some of the ingredients that have influenced the fact that, nowadays, our world advances at a dizzying pace. The change is becoming not only convenient, but imperative. Thanks to this context of transformation in which nothing is immutable, questions crop up in the business environment: <<are we doing things right?>> and <<what is the point of this?>>. The answers to these questions do not always translate into a change of mindset or even a different way of doing things. However, the more times these questions are asked, the more the discourse changes. Companies now talk about social responsibility, solidarity, environmental care,... Today, at The CEU IAM Business School, we analyze an alternative to the traditional business model: social entrepreneurship.
Social impact is a factor that increasingly influences the company activity, it is so significant that it could even be said that it is a value on the rise. The commitment of companies to the care and development of their environment is closely linked to the trust that consumers and investors place in them. Likewise, companies play a decisive role in the achievement of global goals as important as the Sustainable Development Goals (the descendant of the Millennium Development Goals). These are not all, but rather the main reasons why companies are beginning to worry about implementing social responsibility policies. In fact, there are companies that want to take a step further in this new context, they are called social enterprises. What does this type of entrepreneurship exactly consist of?
A business model which is similar but alternative
Social entrepreneurship consists of using a conventional business model with the aim of achieving a social purpose. Its goal is to bring about a change, to have a positive impact on the environment. But, isn't it possible for the activity of a traditional company to also benefit the whole society? What is the difference between social and commercial entrepreneurship?
A company based on a conventional model can also fulfill a social mission, for example, by fostering job creation in a population with a very high unemployment rate. However, although this is indeed a positive effect, it is not the one that drives or determines the company activity. This is an indirect consequence. Unlike commercial entrepreneurship, social entrepreneurship goes beyond the economic benefit of its promoters. Above all, it seeks to generate a benefit and a common value in society. It is an activity that, although it is promoted by the private sector, has an objective that has been traditionally linked to the public sector or the so-called third sector.
If this type of entrepreneurship is beginning to grow is due to different factors: the need to respond to the effects of the economic crisis, a greater social awareness, an environment which is more open to this type of business models and the bet on innovation. Regarding this last aspect, it should be noted that social entrepreneurship is also closely linked to technological development. The key lies in the fact that the numerous advances in technology make possible that these projects have greater scalability, connectivity, accessibility, speed in processes and level of transparency, so they can be successful.
Do social enterprises pursue profitability?
When entrepreneurs decide to start a project, they need to have a clear picture of why they want to do it and what their goal is. Among many other motivations, an entrepreneur can go after reputation, personal fulfillment, new opportunities and independence. However, when starting up a business, profitability undoubtedly plays the most significant role. It is true that there is some debate about what is and what is not a social enterprise, but there is a clear and decisive principle: a social enterprise does not seek profitability as its key goal, its primary objective is to have a positive social impact on a particular sphere.
Social enterprises can also pursue a specific economic profitability, but their fundamental mission is social. Enrichment is not a key goal, and it should not be its starter motor. If not, they would be a different type of company, since social businesses reinvest most of their surpluses. However, we cannot forget that in the place where these types of initiatives are born there are certain rules. What does it mean? These companies need to be competitive and economically sustainable, offer a quality service or product, have an adequate financing, reach a minimum size and face all kinds of challenges. In short, social enterprises need to be as good as any other company.
There are two fundamental challenges that today's social enterprises must face. First, establishing a legal framework that make possible its development and boost. In order to achieve this, it is essential to reach an agreement on the definition of this type of business model. The second challenge is to generate a greater awareness of the social mission of these companies. If consumers do not get to know the value of their work, they will probably opt for other alternatives that are cheaper and also better known.
At The CEU IAM Business School, we offer a training which is adapted to the requirements that are demanded by a business environment in continuous transformation. We believe that to lead this environment in permanent change is essential to maintain a strong commitment with ethics. In order to prepare the professionals who will have to take charge of the companies and make the future decisions in the business world, we have designed our Globla MBA. Ask for further information!