Social entrepreneurs use new approaches within the business world to help solve social problems. The term was first coined in 1980, but has entered the mainstream recently as the millennial generation permeates the business world. A recent survey found that around half of today’s Wharton Business School graduates who go on to start their own business will incorporate some form of social benefit as part of their model.
The importance millennials place on environmental, social and governance (ESG) factors is often reflected in company mission statements, as well as the allocation of their assets. ESG investments have increased by 33 percent since 2014. The United States is the country most accommodating to social entrepreneurs, followed by Canada and the United Kingdom.
In the past, social entrepreneurs were labeled as nonprofit “do-gooders,” but the for-profit model of business is becoming more prevalent. Some may start out using charitable contributions; however, some philanthropists — much like business investors — have become more vigilant about ensuring their donations yield measureable results.
Strong social entrepreneurial businesses often possess characteristics similar to other successful startups. They generally have a clear understanding of the market they want to serve and how to serve them. Social entrepreneurs not only exhibit passion, they tend to use their natural talents, expertise, skills and training to grow their business. One of these core competencies is to develop access to needed resources, with funding options ranging from traditional small business loans to crowdfunding.
What differentiates a social start-up from a normal business? One component is its measure for success. For example, say a company develops a new water pump used to help undeveloped countries better access water sources. The average company might measure its achievements in terms of revenues. A social business, however, might focus not just on revenues, but how well the pump is made, how it gets to the communities that need them and how community members are trained to install, use and benefit from the new product.
Today’s market for social businesses isn’t just for entrepreneurs; it’s also for socially conscious consumers. Socially and environmentally impactful products and services are becoming more common because they tap into a socially responsible feeling many consumers seek. Today, there are simply more opportunities to indulge and support that feeling.