Putting social value creation into the centre of business

Where the business entrepreneur may use social responsibility as a means to make a profit, the social entrepreneur uses market methods and makes money as a means to meet social goals for the benefit of society.

 

The motto of the New York-based social business, Greyston Bakery, which hires people who are long-term unemployed, former addicts or criminals, makes the distinction between means and ends clear: ‘We don’t hire people to bake brownies. We bake brownies to hire people’. All profits are reinvested in daycare centers, health clinics and minority councelling via its Greyston Foundation.

 

Whether a profit should be reinvested or not has, however, led to a heated debate among experts and practitioners in the field. For some it is crucial that all or a part of the profit is reinvested – they do not believe in personal gain from activities with a social purpose. Others are more pragmatic and argue that it is the way they make their money which is central, not how they spend their surplus – they believe that it is OK to cash in on the profit and focus on the social outcome of their business efforts.

 

Putting social value creation at the centre of its business is precisely why the Indian Aravind Eye Care Hospital – a bottom-of-the-pyramid institute which treats more than 2.5 million patients a year to eliminate needless blindness through comprehensive eye care services that restore sight – measures value by its ability to restore sight rather than by dollar-denominated value. But because it is a financially self-supported company, operating with an annual budget of $13 million (2008-9), it can do 60% of its work for free or significantly subsidized for low-income families.

Because some social entrepreneurs are driven by a profit motive as well as their desire to address social issues, there is an increasing definitional overlap between traditional business entrepreneurs and social entrepreneurs. It will become gradually harder to distinguish the two from each other, because social entrepreneurship is becoming more of a mindset around blended value creation than a specific category of start-up companies. This definitional overlap will in time make it more difficult to cling to the either/or differentiation of the two entrepreneurship categories, and it may arguably be reinforced by the entry of an increasing number of socially oriented business school students who want to combine market and meaning.

 

As director of Schwab Foundation for Social Entrepreneurship, Mirjam Schöning explains: ‘Many business school students have been exposed to the subject, and so we see a new generation of social entrepreneurs taking a business approach to social value creation. Witnessing the recent collapse of capitalism in its current form has only accelerated the need for a new aspirational model.’