Dhita Larasati
Word Count – 1987/PIN - 10501
Rethinking of Corporate Social Responsibility (CSR) and Social Entrepreneurship
Dhita Larasati
The Sustainability of Social Entrepreneurship When I first ran a research about social entrepreneurship, I found so many definitions on the terminology. Each one converges into a pretty much the same thing but none is complete enough to show the barriers of the definition. The word “entrepreneurship” came first to describe the innovative behavior that always characterize the activity. And then people add the word “social” for those activities which result a good social effect. There was a great confusion when social organizations and business ventures started to claim themselves as social entrepreneurs. Boschee and McClurg helped us to clarify the barriers of the definition. Social entrepreneurship is distinguishable to social organizations and business ventures because of its two essentials: selfsufficiency and social mission. Social organizations are not financially independent. They fund their organizations mostly from donors and government aid. They might earn some profit, but it is not their main goal. On the other hand, social entrepreneurs are profit oriented. They have to be able to sustain themselves and become financially independent. Nevertheless, profitability is not their only goal. They have a social goal which also becomes their parameter of success. Even for most social entrepreneurs, their compassion for social issue often became the starting point of their enterprises. This is the point where social entrepreneurs are different from business ventures. In business ventures, there is no greater importance than making profit. They sometimes donate their profit for social purposes, but they just do it in terms of doing a socially responsible business. Now, I will draw one final definition deducted from all those explanations I found. Social entrepreneurship is a sustainable profit-oriented organization which mission is to give solutions
Dhita Larasati
to a particular social problem with innovative and applicable ways. Further elaboration of social entrepreneurship will be within the scope of this definition. I strongly agree that social entrepreneurship plays an important role in fighting numerous social problems that we face today. The biggest of which being tackled is extreme poverty. Social entrepreneurs particularly help the people who are most in need, the ones who are below the poverty line or just slightly above it. In general, social entrepreneurs help these people by improving their quality of life. In most cases they create a new system that in favor to these people, which then give these people betterment in life. To put it into details, their role could be divided into several parts. Social entrepreneurs are distributors of money. They help to distribute the money from the rich to the poor. In order build a good rail for the distribution, they have to understand the way of thinking of both parties. Rich people do not keep their money. It’s either they spend it for leisure or invest it for more money to come. Meanwhile, poor people tend to think it is best to keep their money. They never think of spending their money for leisure, let alone using it for investment. Social entrepreneurs come at this point and totally change their mindset. They realize that the ability of saving money will not save the poor, but the ability of creating money will. The money is there, but they don’t know how to attract it. The next steps taken are usually how to make the poor be able to attract the money from the rich on their own capabilities. They guide them the way and provide them with necessary means. Social entrepreneurs don’t deliver them the fish, but they teach them how to fish. After they know how to fish and willing to try it, social entrepreneurs will be ready to rent them the hook and the bait so they can gain profit in the process as well. Social entrepreneurs are providing people with basic needs that regular ventures do not want to get into. As economy improves, demand for other necessary products and services rise, but sometimes it is just not enough to make it lucrative for ventures to open new business to answer this demand. That is why in the poor community there is usually lack of suppliers, which makes them have to get it from other cities or force them to buy it with unreasonable price. Social entrepreneurs are again expected to fill this social gap, especially when it comes to answering the
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demand for education and health. Education is the only way to cut the ‘evil chain’ so that the next generation doesn’t fall to the same pit as their parents have. Therefore, education is highly important in order to fight the succession of poverty. It is important to make education accessible to the poor. Health is also just as important as education, since it will give a better productivity within these people. They can work better and undisturbed when they have good health. In certain cases, increasing productivity might be too lavish for these people. They need health improvement merely to survive day to day from the deadly diseases that often prevail in the poor environments. Thus, it is a social responsibility for all of us to make a good health accessible to these people, and yet, it is another call for social entrepreneurs to answer. Seeing on how many and important the roles a social entrepreneur plays, we should have more reasons to make this thing really work. What bothers me since the very beginning is the sustainability of a social enterprise. Most of them are not prepared with necessary measures since the beginning of the journey. Now I could see only a few social enterprises survive many years of operation. Sustainability of Social Enterprise The fundamental work for most social entrepreneurs are creating a new and better system in the society they want to serve for. The society had their system but somehow the system just didn’t work, which is why they stayed in their situation of poverty. Social entrepreneurs read the whole pictures and map a new way to get out of the cycle by replacing the existing components to different positions. The map leads them to a new cycle, and once they have settled, a new equilibrium is formed. In this new equilibrium, the role of the social enterprise changes. They are no longer facing the society they faced at their first launching, but they are facing a society with different demands and needs. The social enterprise might no longer be needed after that, and therefore they cannot sustain their business, although their social mission might have been accomplished. Other threat for sustainability is that social enterprises are taking profit from the poor; hence they cannot set a high margin for their profit. The only way to make a big profit in their business is increasing the quantity. The more people involved, the more profit they make. The investment is
Rethinking of Corporate Social Responsibility (CSR) and Social Entrepreneurship
Dhita Larasati
set to be for a long term and not expected to payback in the short run. This kind of business is very prone to instability. A small change that happens in the system might end up with a total destruction of the business. It is also sensitive to the emerging competitors. As social entrepreneurship is gaining more attention, I predict there will be more competition in the field. With only a low margin they can take, they are prone to plunge to the red zone of competition. When regular business ventures face a profitability problem, they usually take any necessary means to fix their profit. Social entrepreneurs cannot do the exact same thing because they have other responsibility which sometimes is the hindering factor. A wrong approach to tackle the problem might lead them to a shift in their social mission, and their status as social entrepreneurs will no longer be suitable. The most fragile to get hit by this storm are the new social enterprises. It is not surprising since new players will have to adapt first to the new game and important decisions are usually missed along the way as they learn the correct way of doing social entrepreneurship. The easiest way to prevent destruction is to learn the lesson-learned from the old players. Each enterprise might have different characteristics of problems, but some big lines could be drawn from this bunch of experience. Most of the old players like Grameen Bank and BRAC have a great dynamic in their way of operating their enterprises. They change along with the situation and keep adapting to the new condition. They are not just forcing themselves to adapt, but they also make their clients to adapt to the occurring situation. They usually do this by changing the rules of the game, offering more lucrative packages to make people use more of their products or services. On 2000, Grameen Bank, the most profound social enterprise faced a crisis due to its congestion of repayment. The media said that Grameen Bank had been virtually bankrupt. No publicity explains exactly what happened during the crisis, and how Grameen Bank managed to rise back with a new name, Grameen II, and become a stronger player than ever. Many believe that the founder, Professor Muhammad Yunus had done a remarkable restructuration in the organization. They screened outstanding loans to raise repayment rates, reschedule loans and, when necessary, write-off loans that could not be recovered from borrowers or their centers. And to build a fresh image of the
Global Initiatives Symposium in Taiwan 2009
bank, they redesigned the Bank’s products, so that they became more profitable and could compete with the many other providers of microfinance in the country. They did the right thing at the perfect moment, and they did it quickly. That’s why they can have a strong rebound after the crisis. One other way to keep surviving when the scenario goes bad is to through financial aid from the government and loyal donors. Being a social entrepreneur doesn’t mean that he has to be totally independent from financial aid, because sometimes this aid could be a run-away mean from the worst terms. In order to have a good financial support, social entrepreneur has to build a strong network from the very beginning. The network needs to be constantly extended over time and the more it involves people the better the chance of survival will be. The network has got to be diverse, not only limited to donors, but could be allies with whom they often cooperate. With a good networking, a social enterprise can rely on his networks to help him when he cannot help himself. As an enterprise with a positive social goal, there will be a lining backups willing to help. Since social entrepreneurs will make a new system and there’s a probability that in that new system new things are required, then from the very beginning social enterprises have to be prepared to expand their organization to meet those new requirements. Social entrepreneurs have to be able to read where the system might go and what shall be prepared beforehand. Recruiting allies could be one effective way to do expansion. This could be a fast way if a social entrepreneur wants to quickly deliver its influence. Different types of social enterprise have different types of allies that should be approached. Alvord, et.al, suggests three types of social enterprises followed with each allies need to be approached. The first one is capacity-building enterprises (empowering local people) which have to emphasize attention to local constituents and resource providers; second is package dissemination enterprises (providing products that help the improvement of people) which have to emphasize attention to package users and disseminators; and the last one is movement-building enterprises (moving people to be able to stand for themselves) which have to emphasize attention to members, allies, and target actors.
Rethinking of Corporate Social Responsibility (CSR) and Social Entrepreneurship
Dhita Larasati
Social enterprises that adaptable to a constant change have a better chance to sustain their business. Change might happen to the system, but the noble social mission has to remain unchanged. At the end of the day, these enterprises might want to ask themselves: Am I still doing any good for the people? ď€ Bibliography: 1. Allen, Candace A. The Entrepreneur as Hero. Economic Insights. Retrived by 25th March 2009 from www.dallasfed.org/research/ei/ei9701.html 2. Alvord, Sarah H.,et.al. Social Entrepreneurship: Leadership that facilitates societal transformation – an exploration study. Retrived by 25th March 2009 from www.gsb.stanford.edu/jacksonlibrary/articles/hottopics/social_entrepreneurship.html 3. Bornstein, David. 2007. How To Change The World. 2nd edition. Oxfor University Press US 4. Boschee, Jur and Jim McClurg. Toward a better understanding of social entrepreneurship: Some important distinctions. Retrieved by 25th March 2009 from www.sealliance.org/better_understanding.pdf 5. Hulme, David. November 2008. The Story of the Grameen Bank: From Subsidised Microcredit to Market-based Microfinance. Retrieved by 25th March 2009 from www.bwpi.manchester.ac.uk/resources/Working-Papers/bwpi-wp-6008.pdf 6. Kohler, Scott. 1976. Grameen Bank. Ford Foundation. Retrived by 25th March 2009 from www.pubpol.duke.edu/dfrp/cases/descriptive/grameen_bank.pdf 7. Santosa, Setyanto P. Peran Sosial Entrepreneurship dalam Pembangunan. Retrived by 25th March
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Global Initiatives Symposium in Taiwan 2009