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Social entrepreneurship: What it is and why it matters


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In 2006, Muhammad Yunus won a Nobel Peace Prize for founding Grameen Bank – a microfinance institution which encourages economic growth at the grassroots level – in Bangladesh. His win brought the concept of social entrepreneurship squarely into the spotlight. While the term has been in use since the 1960s, and was in fact popular in the ’80s and ’90s, it was Yunus’ Nobel Prize which catapulted it to the top of contemporary consciousness.

Since then, this business paradigm has gained a lot of traction, and many social enterprises are receiving a lot of press. It certainly sounds like a good idea on paper, but will it be a good idea for you?

Before we get into that, let’s get a few things straight.

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What is social entrepreneurship?

Social entrepreneurship aims to effect social change through the use of sustainable business techniques. It involves investing in and organizing businesses (social enterprises) that directly address social issues in creative and innovative ways.

A social entrepreneur is someone who champions change within a community and hopes to capitalize on an idea that can make the world a better place. Social entrepreneurs build companies that solve problems, hire people in need, or both.

Want to read more? Here are 5 examples of successful social enterprises

Social enterprises vs. non-profits: What’s the difference?

What makes the definition of social entrepreneurship complicated is that all sorts of organizations can fall under its umbrella. For example, non-profits with a measure of business acumen and for-profits whose business models focus on social change are both described as social enterprises.

The problem with using “social enterprise” as a blanket term is that doing so ignores the question of where profits come from and where they will go. The main differences are as follows:

  • As a rule of thumb, much of the income generated for a non-profit come from the government and private donors. The money received through such fundraising efforts may only be used to finance the organization’s programs.
  • For-profit social ventures, on the other hand, have a freer hand in both generating and earning income. They can use their earnings  to both improve their communities and expand their business.

While it is true that a fairly broad spectrum of organizational models may be defined as “social enterprise,” recent developments emphasize increasing independence from the non-profit paradigm. In other words, more and more social ventures are actual businesses that implement positive change rather than socially responsible organizations that simply adopt business techniques to improve efficiency.

The rise of social entrepreneurship today

The main appeal of social entrepreneurship is its ability to make a difference. Social entrepreneurs’ desire to change the world has come on the heels of internet and mobile technology – both strong catalysts for personal and social connection. While the most high-profile and interesting examples of social entrepreneurship come from the developing world, strong social enterprises can also be found in the USA, the UK and Australia.

Incidentally, many social enterprises are successful precisely because of the social impact they seek to make with their products and services. They find support in a world that is increasingly philanthropic and cause-oriented.

Today, thousands of young and aspiring entrepreneurs enter business schools and set up enterprises that inspire social change both in their communities and in areas starving for socio-economic development. Social entrepreneurship has gotten so popular that MBA programs all over the globe have started to include elective classes focusing on the implementation of social ventures. And with an increasing focus on ESG (environmental, social, and governance) in all businesses, the trend is clear: having a heart is just good business.

Why social responsibility is good for business

There is a pressing need to make things better – not just in developing countries, but in our own communities. It is more important than ever to build sustainable organizations that inspire significant social change. Social entrepreneurship, especially when applied to small, local-level businesses, can help stabilize entire communities and create opportunities for the next generation. As a result, giving back from the moment you launch your business will render you more successful in the long run.

With social entrepreneurship, you create something more than a source of income. You create a future that goes beyond yourself.


Originally published Jan 27, 2012, updated May 05, 2022

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Business leadership

5 examples of successful social enterprises

In a previous post, we discussed social entrepreneurship and its merits. Today, we’re going to look at social entrepreneurs and social enterprises that have been successful in creating social change through commercial initiatives. Through persistence and boundless dedication, these individuals and organizations have proven that there is profit in integrating social patronage with your business ...


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