Social Entrepreneurs: Transformers of Business and Society

By Dan Butts and Mike Whitty

Social entrepreneurs are not content just to give a fish or teach how to fish. They will not rest until they have revolutionized the fishing industry.

Bill Drayton, CEO, chair and founder of Ashoka, a global nonprofit organization devoted to developing the profession of social entrepreneurship

Social entrepreneurs combine street pragmatism with professional skill, visionary insights with pragmatism, and ethical fiber with tactical thrust. They see opportunities where other only see empty buildings, unemployable people and unvalued resources. Radical thinking is what makes social entrepreneurs different from simply “good people.” They make markets work for people, not the other way around, and gain strength from a wide network of alliances…

John Catford, Tactics of Hope: How Social Entrepreneurs Are Changing Our World, xv

Size, ownership, and accountability are the main issues. Smaller enterprises, with local roots and equitable ownership of productive assets, combined with democratic regulation are essential for socially just, efficient, and sustainable enterprises.

Alternatives to Economic Globalization: A Better World is Possible, 296

***

Neoliberal markets and the dominant global business model have failed huge numbers of people worldwide, particularly the 900 million desperately poor who can’t afford to pay market rates for life-sustaining goods and services. The truly indigent lack decent housing. Adequate food and clean water are a luxury. Affordable health care services are all-too-often nowhere to be found, especially in remote rural areas in many parts of Africa, Asia, the Middle East, and Latin America.

The deregulated, profit-driven corporate economy and federal governments have also failed to address the breakdown of bridges, levees, and essential public infrastructures while bearing considerable responsibility for rapidly deteriorating ecosystems, accelerating climate-related disasters, and growing social and economic inequalities in highly developed nations, such as the United States, the richest and most powerful nation in human history.

The good news is that social entrepreneurs are giving desperately needy people throughout the world hopeful alternatives to these interlocking crises by boldly developing new and sustainable business models for the 21st century. Social entrepreneurs are creating lasting social and environmental value with their central goal of long-term investment in innovative solutions to pressing social problems for the many rather than the corporate “quick fix” of short-term financial wealth for the few.

With their limited resources social entrepreneurs are skilled at attracting partners and collaborating with others. They are also highly attuned to the needs and values of those being served and the communities in which they operate. Leading social entrepreneurs are changemakers, role models, and mass recruiters who empower local activists to channel their dreams, talents, and passions into concrete and transformative actions.

Social entrepreneurs see the possibilities rather than the problems created by rapid change. They are both visionaries and tough-minded realists committed to practical solutions to serious social problems. They are notable for their unflagging passion and persistence despite great obstacles. They are flexible and unafraid of failure.

Social entrepreneurs are the driving force of civil society which counterbalances the excesses of business and the failures of government to serve the disenfranchised and protect our threatened planet.

As Ashoka founder and CEO Bill Drayton writes: the fundamental challenge for successful social entrepreneurs is to convince potential funders that their basic vision is both important and viable. A critical part of the Ashoka strategy is to encourage for-profit finance firms to enter the social financial services business. The single most important source of these new investment opportunities flows from the business/social “hybrid value-added chain” (HVAC) work.

A good many social entrepreneurs working toward this goal have found powerful leverage in reconnecting business with the newly entrepreneurial/ competitive citizen sector through new value added chains involved in design, production, distribution, servicing, and parallel supports including finance. This competitive dynamic is key to the jujitsu that allows Ashoka, a small force, to set in motion so large and irreversible an historical change.

One area where the HVAC principle is working is with small farmers who don’t have access to drip irrigation equipment (to promote water conservation). The piping and irrigation firms’ costs are too high for the poor rural economy, and the companies don’t understand or trust the small farmers or their environment.

Over the past decade in Mexico, a partnership between Amanco (the leading piping company in Latin America), Ashoka, and local citizen groups who have mastered the relevant skills to help poor rural farmers earn much more, more securely (Drayton, 21-23).

In their important book – The Power of Unreasonable People: How Social Entrepreneurs Create Markets That Change the World, John Elkington and Pamela Hartigan see leading social enterprises being built from three innovative business models – the “leveraged nonprofit” (model 1), the “hybrid nonprofit” (model 2), and the “social business” (model 3).

All pursue social or environmental ends that the markets have largely or totally failed to address, and they use different means to do so. They sometimes adopt unique leadership, management, and fund-raising styles, each with its own meaning and lessons for people working in mainstream organizations in the public, private, or civil society sectors.

Leveraged nonprofit enterprises (model 1) deliver public goods to the most economically vulnerable who do not have access to, or are unable to afford, the service provided – such as health, education, safe drinking water, housing, and the like.

An example is Barefoot College, an Indian organization that has had a huge impact on defining and driving what founder Bunker Roy calls the “barefoot” approach to development. Barefoot College was created in 1972 by a group of students from top Indian universities under Roy’s leadership. Based in Tilonia, Rajasthan, it was built around the Ghandian concept of the village as a self-reliant unit.

By applying traditional but informal educational processes to manage, control, and own technologies designed to meet basic needs, the college helps illiterate or semiliterate poor people in rural areas learn to use these technologies without relying on outside paper-qualified experts. All staff at the college take a living wage, not a market wage – and the maximum living wage is $100 a month.

Barefoot College provides abundant evidence of the capacity of ordinary people to identify, analyze, and solve their own problems. It has trained barefoot doctors, teachers, engineers, architects, designers, metal workers, IT specialists, and communicators. Barefoot engineers have solar-electrified the college: indeed, it is still the only fully solar-electrified college in India. Barefoot solar engineers, many of them illiterate women, have solar-electrified thousands of houses in eight Indian states (Elkington & Hartigan, 31-35).

Hybrid nonprofit ventures (model 2) are the most experimental such as a homeless shelter starting businesses to train and employ their residents. Hybrids have the potential to reach new levels of social or environmental value creation. They are able to recover a portion of their costs through the sale of goods and services, in the process often discovering new markets.

Rubicon Programs, founded in 1973, was the first multi-service agency in the United States to link a real job with decent housing and a support system to sustain homeless or otherwise disadvantaged people who are trying to make positive changes in their lives.

Under Rick Aubry’s leadership, Rubicon has incorporated mainstream business principles into its practice and built two highly successful social enterprises: Rubicon Landscape Services, which generates annual revenues of more than $4 million, and Rubicon Bakery, one of the San Francisco Bay Area’s leading bakeries, with annual sales of $2 million. Employees are primarily people with little or no work history who are trying to overcome the challenges of poverty, homelessness, and/or mental health disabilities (ibid., 37-39).

Social business ventures (model 3), particularly in the United States, is the model of choice for most environmental entrepreneurs largely due to the more obvious market opportunities for ecofriendly products and services (see Co-op America’s National Green Pages; www.coopamerica.org).

The entrepreneur sets up the venture as a business with the specific mission to drive transformational social and/or environmental change. Profits are generated, but the principal aim is not to maximize financial returns for shareholders but instead to financially benefit low-income groups and to grow the social venture by reinvestment, enabling it to reach and serve more people.

Currently, the most prominent social businesses tend to be found in the area of microfinance, including Grameen Bank and BRAC in Bangladesh (see profiles below), SKS Microfinance and Basix in India, and Accion and Finca in the United States (Drayton, 42-44).

Profiles of Changemakers

Wilford Welch, in his inspiring book – The Tactics of Hope: How Social Entrepreneurs Are Changing Our World – identifies successful visionaries who are initiating large-scale improvements in the critical areas described below as well as in “Human Rights and Social Justice” and “The Environment and the Restoration of a Sustainable Planet.”

Health. The Children’s Health Association, which began In Brazil in 1991, has so far reached 20,000 people, breaking a vicious cycle of poor health, poverty, and social exclusion. Founder Dr. Vera Cordeiro, who in 2005 was recognized as “The Most Influential Woman of Brazil in the Health Area,” believes that the greatest systemic treatment is not a particular medicine for a particular illness, but rather a holistic approach to patients’ overall health concerns, employment status and family needs.

Vera has recruited an enormous network of volunteers, physicians, psychologists, teachers and community leaders to offer their expertise in one aspect of the 5-point program of health, housing, income, education and citizenship (Welch, 34).

Education. John Wood, former Microsoft executive, founded Room to Read in 1998 to publish local books, fill libraries, and construct new schools in the Himalayan Mountains. Rooms to Read’s accomplishments include building over 400 schools, self-publishing 250 local language children’s titles, representing over 2 million books, and funding for over 4,000 long-term girls’ scholarships.

Woods is committed to implementing an innovative and expansive growth model that will provide 10 million children in Asia and Africa the enduring opportunity of reading and learning by the year 2020 (ibid., 64-70).

Fair Trade. Priya Haji is the cofounder and CEO of World of Good, a for-profit company that distributes in over 1000 retail stores throughout the United States handcrafted products made by artisans in developing countries. Of World of Good profits, 10 % goes to its nonprofit foundation, which seeks to improve the standard of living of the artisans.

World of Good, which supports 5,680 artisans, with nearly 23,000 dependents and 142 artist groups in 34 countries, has sold over 1 million handicrafts since 2004 (ibid., 107-110).

Disaster Relief and Rehabilitation. Tim Williamson, a former Wall Street stockbroker, in 2002 created The Idea Village, the prominent nonprofit engine for entrepreneurship in the city of New Orleans, developing a database of over 600 local entrepreneurial businesses that collectively employed more than 3,000 people and generated $150 million in revenue.

Now, in the aftermath of Katrina, the Idea Village is helping to rebuild New Orleans, introducing an innovative approach to disaster relief that actively identifies and empowers entrepreneurs as the most fundamental pioneers of reconstruction.

The revitalization plan features the IV Business Relief Fund, the IDEAcorps, which brings together MBA students from Tulane University, community volunteers and professional consultants to assist local entrepreneurs, and the “IV 100” Entrepreneurs, a group of 100 companies, each with less than 50 jobs and $5 million in revenue, that the Idea Village identifies as the most promising entities for growth and expansion. Roughly 95% of the companies it has worked with since Katrina are still in business (ibid.,156-166).

Microcredit and the Grameen Bank

The Grameen Bank, which, along with its founder Muhammad Yunus, was awarded the Nobel Peace Prize in 2006, has been the model that has been copied by hundreds of other organizations around the world. The goal of microcredit institutions is to provide small loans, anywhere from $25 to $400 per loan, to poor individuals who do not qualify for loans from conventional banks requiring collateral.

Microcredit lending to the poor has achieved repayment rates that are nearly perfect all over the world, due to the strong core principles of incentive-based community trust. Women are often the recipients because they repay loans at nearly 100 % and have proven to be more committed to helping their children and general community.

In many rural communities, a borrower will buy a goat or a cow with the start-up loan and then sell the dairy from the animal at market prices, slowly making a profit over time to repay the loan, receive new funds and expand the business.

By 2005, the Grameen Bank had reached 60,000 villages in Bangladesh through microcredit loans while providing financial services to more than 6 millions poor farmers. In total, Grameen Bank had supplied over $5 billion in loans.

Most impressively, within 5 years of their first microloan, over half of the individuals receiving microloans from the Grameen Bank had crossed the poverty line. Today there are over 158 institutions in more than 40 countries utilizing the Grameen Bank microfinance model, which has become a major tool in the struggle to alleviate global poverty.

The World Bank estimates that there are over 7,000 microfinance institutions reducing poverty through microcredit financing worldwide (Welch, 87-88).

BRAC in Bangladesh

Fazle Abed founded BRAC – the former Bangladesh Rural Advancement Committee – to fight poverty, illiteracy, and child mortality and to support women’s health and development on a massive scale. His organization mobilizes the latent capacity of the poor to improve their own lives through self-organization.

The full-time staff of BRAC is over 45,000 and has helped 3.8 million poor women establish 100,000 village organizations. BRAC now has over 5 million members in more than 180,000 village organizations across Bangladesh.

BRAC’s health programs are reported to reach some 10 million people. The organization has pioneered oral rehydration therapy (for diarrheal disease), which played a major role in halving the country’s infant mortality rate. Another example of BRAC’s success was when it found that poor women were not profiting from rearing dairy cows, it improved the breed of cow and set up a modern dairy.

BRAC has helped change the global development paradigm from that of helping “needy beneficiaries” to encouraging villagers’, particularly women’s, self-development. This proves that profitable enterprises can be initiated that expand the opportunities for the poor (Elkington & Hartigan, 93-94, 105).

Ashoka – “Everyone a Changemaker”

Ashoka is the global association of the world’s leading social entrepreneurs – men and women with system-changing solutions that address the world’s most urgent social challenges.

Since its founding in 1980, Ashoka, the world's first and largest social entrepreneurship recruitment and sponsoring organization, has launched and provided key long-term support for more than 1750 leading social entrepreneurs in over 60 countries. It provides these “Ashoka Fellows” start-up stipends, professional services and a powerful global network of top social and business entrepreneurs. It also helps them spread their innovations globally.

Ashoka’s modest investments consistently yield extraordinary returns in every area of human need – from human rights to the environment, from economic development to youth empowerment. Five years after start-up launch, over 90 % of Ashoka Fellows have seen independent institutions replicate their innovations and over 50 % have already changed national policy

(Drayton, 2).

Each of Ashoka 400 leading social entrepreneurs has a powerful, proven, society-wide approach to getting society to do a far better job of helping all children and young people to learn and grow up successfully. Ashoka’s Youth Venture identifies and nurtures school or community youth leaders who recruit and develop Venturer teams and connect with allies and local Partners. Venturers’ initiatives include founding a newspaper, a program to help new immigrant youth, a peer-to-peer counseling service, or building a municipal skateboard park (ibid., 12-17).

Ashoka is also pursuing a new Social Investing Venture (SIV) program. The SIV program seeks out leading entrepreneurs anywhere in the world who are championing major structural change in social finance. It helps them get started and succeed and will work to enable them to share and collaborate with one another, with leading operating social entrepreneurs, and with thought leaders in the social investment field (ibid., 29).

Ashoka’s best estimate is that the citizen sector is halving the gap between its productivity level and that of business every 10 to 12 years… and it is generating jobs two and a half to three times as fast as business.

In 2008 with the global corporate-driven economy failing to meet the challenge of poverty and other worsening social and environmental crises, Ashoka and other social entrepreneurial organizations are successfully responding to the world’s most critical opportunity - multiplying society’s capacity to adapt and change intelligently and constructively and building the necessary underlying collaborative architecture (ibid., 7-9).

Philanthropreneurs

Philanthropreneurs are individuals with great wealth who seek to use their resources in highly entrepreneurial ways. In 1998 Jeff Skoll, the former president of Ebay, established the Skoll Foundation, the largest foundation for social entrepreneurship in the world, and the Skoll Centre for Social Entrepreneurship at the Oxford University Business School.

Skoll also established Participant Productions, which funds feature films and documentaries that promote social values while being commercially viable.

These films include Al Gore’s An Inconvenient Truth about global warming; Syriana about petroleum politics; The Kite Runner about life in war-torn Afghanistan; Angels in the Dust, a hopeful film about an AIDS orphanage in South Africa; and Jimmy Carter Man From Plains. Each film is connected to a social action campaign encouraging increased awareness and concrete actions by individuals to address the issues (Welch, 195-196).

***

As we’ve been seeing in the past year with the collapse of the fossil fuel-based energy system and the industrial food system, our most powerful societal sectors – business and government – are unable to effectively resolve these and other worsening crises. As history amply demonstrates, every crisis presents new opportunities. With the new millennium a new “superpower” – civil society led by visionary and innovative social entrepreneurs – has begun restoring and transforming society in a more just and sustainable direction.

Only by building strong, self-sustaining civil society with thriving local communities will people in every country be able to withstand the forces of technological displacement and market globalization that are threatening the livelihoods and survival of much of the human family (Rifkin, 250).

Civil society is a powerful global force and the most important social innovation of the 20th century. It ranks in importance with the invention of the nation state beginning in the 17th century and the creation of the modern market starting in the 18th century (Perlas, 27).

The millennia when only a tiny elite could cause change has come to an end. A generation hence, probably 20 to 30 % of the world’s people, and later 50 to 70 %, will be changemakers and entrepreneurs. That world will be fundamentally different and a far safer, happier, more equal, and more successful place (Drayton, 27).

Leave a Response

Please note: comment moderation is enabled and may delay your comment. There is no need to resubmit your comment.