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Social entrepreneurship and other frequently asked questions

By Sarah Shearman, Reuters | November 12th 2019

Whether it is building schools from plastic waste or opening a cafe staffed by trafficking survivors, social entrepreneurs find innovative and creative ways to solve a diverse range of environmental and social problems through a business lens.   

As social entrepreneurship gains traction around the world, misconceptions about the work persist, according to the findings of the Thomson Reuters Foundation’s second global poll on the best countries for social entrepreneurs.

The survey of about 900 social enterprise experts found more than half - or 54 per cent - said the public did not understand what they did. This compared to 58 per cent in the inaugural poll in 2016. Here are six frequently asked questions about the sector:

Who is a social entrepreneur?

There is no universally accepted definition, but broadly a social entrepreneur can be described as someone who uses commercial strategies to tackle social and environmental problems, prioritising social good while pursuing financial gain to sustain their venture and its impact.

Do they run businesses or charities?

Social entrepreneurs can structure their organisations as non-profit or for profit.  Typically, any profits generated from the business are reinvested to advance their stated social cause or benefit their community.

When did the term become popular?

Bill Drayton is said to have coined the phrase in the 1980s when he founded his US-based non-profit Ashoka with the aim of supporting individuals looking to make positive social change though entrepreneurial means.

Social entrepreneurs started being more widely used in the 1990s amid a drive by co-operatives and community enterprises wanting to use businesses to create social change and an increase in conscious consumerism.  

However, over time it has evolved into an umbrella term often used to describe a broad range of activities from mainstream business that has a social impact to individual activism.

Within the sector there is perennial debate over whether a more concrete definition would help or hinder the sector.

Do governments support social entrepreneurs?

More nations are considering laws to promote social entrepreneurship, with many implementing legal definitions, tax incentives and funding to businesses looking to do good.   

Britain has a specific business structure for social enterprise, offers tax breaks and this year expanded its law incentivising government to buy products and services from ethical businesses.

This year Thailand implemented a law to give tax breaks to registered social enterprises, who commit to reinvesting 70 per cent of their profits, while Ireland published its first social enterprise policy for social enterprises to help build awareness and growth.

While government support and recognition are often welcomed, there is continued debate over whether regulation could hamper creativity and innovation within the nascent sector.

How are they funded?

Social ventures typically generate income from trading products or services. Like charities they can seek grant funding and, like private companies, they can get investment in various forms, such as seed capital or equity.

There are many funds designed to specifically help businesses that deliver social impact, known as impact investing – a fast growing field of finance estimated to amount Sh50 trillion ($502 billion), according to Global Impact Investing Network (GIIN), an industry body.

Other ways that social enterprises can raise funds include crowdfunding, community investment funds and competitions.

What are some of the best known social ventures?

Some of the most famous social businesses include Grameen Bank in Bangladesh, Britain’s the Big Issue, which hires homeless people to sell street papers and sparked a list of similar organisations globally, and India’s Barefoot College, which aims to improve life in rural villages around the world by training women skills in solar engineering, healthcare and water testing.   

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