What is social entrepeneurship?
Social entrepreneurship is the production of goods and services with the aim of creating social impact through business methods. Social entrepreneurship aims to solve a social problem or benefit society at large, without making maximum profit for the entrepreneur personally. Social entrepreneurship can be local or international in scope and can vary in the way goods are produced and services are provided.
Social entrepreneurship has not yet been defined in a common way in Europe and worldwide. The interdisciplinary nature of social entrepreneurship and the diversity of innovations make it difficult to give a clear definition. However, three key principles are at its core: firstly, the primary objective is to address a major social problem; secondly, entrepreneurship or continuous economic activity; and thirdly, democratic and participatory governance.
The main difference between social entrepreneurship and other existing organizations (NGOs, traditional businesses) is the purpose, the activities carried out and the internal governance structure. At the national level in Latvia, social entrepreneurship is associated with empowering society, acting as a social problem solver and mediator between the public and private sectors, but in a sense also as an innovator and creator of opportunities.
- Social entrepreneurship is NOT social corporate responsibility activities of traditional companies. For example, an education program run by a bank is not social entrepreneurship unless, of course, it is implemented and run as a separate, distinct, financially and substantively independent enterprise.
- Social entrepreneurship is NOT charity, where something is given to someone for free. It can, of course, be done if it is based on a sustainable business model that generates income that covers all or part of the charity’s activities.
- Social entrepreneurship is NOT a social assistance activity of the state and local authorities.
What are the origins of social entrepreneurship?
The first businesses that can be described as social enterprises in the modern sense were founded in England at the end of the 19th century. The first to define social entrepreneurship was Muhammad Yunus, a Bangladesh entrepreneur, Nobel Peace Prize winner and founder of Grameen Bank. Yunus formulated the seven basic principles of social entrepreneurship. They are now the basis for most definitions of social entrepreneurship used in Europe and around the world.
M.Yunus’s seven principles of societal entrepreneurship:
- The aim of entrepreneurship is to prevent or alleviate poverty or some other social problem (education, health, access to IT, environment), not to maximise profits.
- Financial and economic sustainability.
- Investors get back only their investment, without interest.
- After the investment is paid back, the profits are used to further develop the company and address social problems.
- Gender equality and a supportive working environment.
- The workforce receives wages and better working conditions in line with the labour market.
- Doing work with pleasure.
How is social entrepreneurship explained elsewhere in Europe?
The European Commission defines social entrepreneurship as a social economy participant whose main purpose is to create social impact, not to make a profit for its owners or shareholders. Social entrepreneurship provides goods and services that meet market requirements and uses its profits primarily to achieve social objectives.
What are the differences between the more commonly used terms?
Social entrepreneurship
A field, a way of working, a process in essence, which is in line with the core principles of creating social impact through business methods. Social entrepreneurship as a process can be carried out in any legal framework.
Social enterprise
A legal entity (LLC) with social enterprise status granted by the Social Enterprise Commission of the Ministry of Welfare (since 2018 regulated by the Social Enterprise Law)
Social entrepreneur
The person doing it, a leader in the field.
Social innovation
An innovative solution with social added value.
Social impact
Changes and improvements made by the organisation, closely linked to the objective.
Social economy
An economic sector based on democratic values and committed to improving the social, economic and environmental conditions of society. The social economy is associated with the third sector of the economy, between the private sector and the business sector, or between the public sector and government. It includes organisations such as social enterprises, cooperatives, non-governmental organisations and charities.
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