Although social entrepreneurship is not a new trend in business, it still raises dilemmas about what is “social” in social entrepreneurship. Although the Western Balkans is not unique in this dilemma, the legacy of socialism in this climate creates additional confusion in understanding the nature and characteristics of social entrepreneurship.
From this dilemma arise various unjust stereotypes and prejudices saying that social entrepreneurship is not really entrepreneurship, but “only” deals with solving social problems, and that social enterprises are not sustainable and economically efficient in terms of making a profit, etc.
All of these stereotypes are actually very inaccurate. Moreover, says Pamela Hartigan, former director of the Center for Social Entrepreneurship at Oxford Business School, that when she first encountered the term “social entrepreneurship” she thought they were business people who like to organize parties and gatherings, it is more true than that social enterprises “only” care about social impact or are not economically efficient.
Therefore, in this blog, we will try to approach and clarify what social entrepreneurship is and why it is absolutely unfair to attribute the label of socialism or communism as economic and social ideologies to it. To understand what is social in social entrepreneurship, it is best to focus on the very development of this type of business.
BEGINNING OF DEVELOPMENT OF SOLIDARITY ECONOMY AND SOCIAL ENTREPRENEURSHIP INITIATIVES – 19th Century
The emergence of such initiatives is linked to the distant 19th century and the establishment of trade unions, community societies, cooperatives, and associations. What all these organizations had in common was that they were created with the idea of responding to the specific needs of those undergoing system transformation. What does that actually mean? We remind you that the industrial revolution in the 19th century contributed to the development of the economic system, improved economic and social conditions, at least by burying feudalism deep in history once and for all, but also failed to solve all challenges, just as it failed to create economic-social system without its own shortcomings and problems that still exist today.
It was precisely the shortcomings of the emerging system and their effects on a large number of people that were recognized by the solidarity economy initiatives that emerged in the 19th century. In the process of transforming the system, the initiatives of the solidarity economy recognized numerous problems that quickly affected a large number of people. What has affected a large number of people is unemployment and disproportionate earnings in relation to the standard of living. The lack of employment opportunities and the increasing risk of poverty led to social exclusion, which, in addition to being disastrous for the individuals in question, also caused great damage to the entire community. The task of these organizations was to provide all those who remained on the margins in the transformation of the system with a basis for equal participation in society.
It is not just about employment as a basis for inclusion in society. Initiatives of this type are aimed at building an environment in which cooperation and togetherness are nurtured. In this way, a sense of shared responsibility is developed, and local resources are protected and developed. The social economy organizations of that time focused on providing services and goods to their members and the community, regardless of whether that activity brings profit and establishing an ownership structure so that it is in the hands of stakeholders (users, employees, volunteers) and not investors.
It was precisely the shortcomings of the emerging system and their effects on a large number of people that were recognized by the solidarity economy initiatives that emerged in the 19th century. In the process of transforming the system, the initiatives of the solidarity economy recognized numerous problems that quickly affected a large number of people.
FURTHER DEVELOPMENT OF SOLIDARITY ECONOMY ORGANIZATIONS AND SOCIAL ENTERPRISES – A CENTURY LATER – 20th Century
The further development of the capitalist system, based on the industrial revolution in the 19th century, increasingly revealed its shortcomings and made it more difficult for the same people to be included in social and economic trends, in addition to the growing number of people on the margins. Increasingly, “business success” was tied to “efficiency”, and “efficiency” was attributed to talents and abilities, completely unfairly neglecting starting positions that were far from equal for all. However, as today, “business success” depended much more on factors such as the amount and volume of investment capital, the limitations of available knowledge, and the economic power that made political influence greater, and created privileges for “economic giants” when it is about, for example, respecting “fair competition” in the market. The shortcomings of this system created great tensions in society, because it was not just a question of “economic success”, but of all those people who were not in a position not just to invest in entrepreneurship, but to be included in economic and social flows in any way.
A significant moment in the development of solidarity economy organizations and social enterprises is the privatization of social protection services in Europe in the 1980s. It is precisely this trend, combined with the increasingly visible negative effects of the capitalist system, that has influenced the emergence of new forms of organization and the further development of solidarity economy and social enterprise initiatives. These new organizations were aimed at reducing tensions in society, which arose as a result of market conditions and inadequate public policies. The prevailing trend at the time, which implied the privatization of social protection services, seemed to make the state, which until then had more or less effectively managed to deal with the problems of marginalized and vulnerable groups, give up that role. Social protection has become one of the products on the market, and has made a large number of people dependent on the decisions of companies and corporations on how these services will be provided and at what price. It is not difficult to conclude that social protection services have become completely inaccessible to a large number of people.
It is precisely social enterprises that were established with the aim of first providing social services to those in need and influencing the improvement of the quality of life of a larger number of users by increasing the number of services and improving their quality and accessibility. Since that time, we have defined social enterprises as actors of the social and solidarity economy that combine social goals and entrepreneurial spirit.
A significant moment in the development of solidarity economy organizations and social enterprises is the privatization of social protection services in Europe in the 1980s. It is precisely this trend, combined with the increasingly visible negative effects of the capitalist system, that has influenced the emergence of new forms of organization and the further development of solidarity economy and social enterprise initiatives.
SOLIDARITY ECONOMY ORGANIZATIONS AND SOCIAL ENTERPRISES
“Social” in Social Entrepreneurship is a Strong Social Mission – 21st Century
From this brief overview of the development of solidarity economy organizations and social enterprises, it would be manly to conclude that social enterprises deal “only” with the provision of social services. What is important to understand in the basis of the idea of social entrepreneurship is that social enterprises are not founded on the idea of specific products or services they can produce or provide, but around the idea that in the existing economic system, profit is used to solve social problems. Thus, social enterprises accept market competition and the framework of the current economic system, and then try to provide funds in these conditions through business, which will then be used to contribute to the improvement of living conditions for those who need it most and who suffer all the negative consequences and shortcomings of the existing economic regulation.
The term “social” in social enterprises implies a social mission that contains, depending on the specific enterprise, a recognized problem in the community that can be solved by generating profit and investing in solving the problem. Social mission is the core of the idea of social entrepreneurship and in itself imposes itself as the main finding in the operation of social enterprises. It is the social mission of social enterprises that is placed before the traditionally central idea in the capitalist economy, that profit maximization is the main and only mission of every enterprise. Social enterprises accept profit as one of the goals, but most often view it as equally important or even less important in relation to the social mission.
These organizations focus on achieving broader social, environmental, and developmental goals. Their main goal is to have social influence, not to profit from their owners or shareholders. They often engage socially excluded people, thus contributing to social cohesion, employment, inclusion, and reducing inequality. A social enterprise operates by providing goods and services on the market in an entrepreneurial and innovative way in order to achieve its social goal. The social enterprise is managed openly, responsibly and participatory, and in particular it involves employees, consumers, and stakeholders affected by its activities.
It is the fact that founding a social enterprise with the goal of making a profit for the sake of solving a social problem, that makes it “social” in social entrepreneurship. That is why today there is a wide range of social enterprises that produce various products and services on the market and contribute to the community in different ways by dealing with the economic and social challenges and problems of that community. If you are curious to find out what all social enterprises in Serbia do, you can also view our current database of social enterprises.
“Social” in social enterprises means a social mission that contains, depending on the specific enterprise, a recognized problem in the community that can be solved by generating profit and investing it in solving the problem.
DOES “SOCIALLY” EXISTS IN OTHER (TRADITIONAL) ENTERPRISES?
Thus, the social mission, in addition to the main feature of social entrepreneurship, is positioned as the main difference in relation to traditional companies that care exclusively about profit. The unsustainability of the strict capitalist system and the building of the initiative and the idea of sustainable development have also given rise to the trend of socially responsible business, which brings changes to traditional business and brings the care of the community closer to the private sector.
However, there are big differences between socially responsible enterprises and social enterprises. In this blog, we will list two examples: Socially responsible companies invest in reducing the negative effects they produce in the community (e.g. investing in the transformation of production processes, with the idea of reducing negative effects by nature), while social enterprises create positive effects in the community recycling); On the other hand, every social enterprise implies the concept of socially responsible business, while socially responsible companies do not imply all the values of social entrepreneurship and are most often focused on making contributions through extra-profit, and not the social mission they lead.
Finally, let’s return to the two main stereotypes: “social enterprises deal only with solving social problems” and “social enterprises are not economically efficient and do not care enough about profit”.
Social enterprises care about profit, because they use profit to solve social problems. In this regard, social enterprises will operate in a way that generates profit, but unlike a large number of traditional companies, they will not make savings in business at the expense of their employees in order to increase profits, but will first take care of employees and ways they can be satisfied with the work in the company, as well as programs aimed at solving a particular social problem. They will make a profit by investing in the development of new services or products, increasing quality, building relationships with the community and other ways in which it is possible to improve the conditions for increasing profits. On the other hand, perhaps the stereotype that “social enterprises deal only with solving social problems” relies on the affirmed belief that the goal is to earn money and increase their profits, in order to meet individual needs. In that case, social enterprises do not coincide in value with this belief and still act more in accordance with the idea that the community consists of individuals, and that investing originally in the community, improves the position of individuals themselves.
If you are curious to hear the stories of social entrepreneurs in Serbia, follow our blog segment „Talking with social enterprises“,and if you are interested in what products and services social enterprises in Serbia produce and provide, visit our database of social enterprises.
The Coalition for the Solidarity Economy Development has launched the first blog on social entrepreneurship in Serbia within the project “Fostering the development of social and solidarity economy” in cooperation with the Heinrich Boell Stiftung – Belgrade Representative Office.
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