According to the Social Enterprise Alliance, “social entrepreneurs work to solve critical social problems and address basic unmet needs through innovation. Their entrepreneurial endeavors create system change, improving the lives of underserved or marginalized groups.”
Social innovation, or creating ideas for change, has played a vital role in academic debates and the international political community’s agenda. As an outcome of the 2008 economic and financial crisis, social innovation began to gain strength as practical solutions for tackling social, political, economic, and environmental challenges such as poverty, aging, or migration.
Social entrepreneurship as a mindset has steadily gained momentum over the past two decades, and several trends are emerging in this field. Here are five that are gaining traction.
1. The shift from shareholder to stakeholder capitalism
In August 2019, 181 CEOs committed to leading their companies to benefit all stakeholders (employees, suppliers, customers, and communities), not just shareholders, in a new “Statement on the Purpose of a Corporation” from the Business Roundtable.
That announcement added to the ongoing conversation about the changing nature of business. Examples include increasing activities and expectations around CEO activism, such as BlackRock CEO Larry Fink’s annual letter. More companies are taking stances on meaningful issues, such as the 500+ B Corps commit to net zero emissions by 2030.
Over a year after the release of the Business Roundtable’s statement, it remains to be seen if it’s truly a landmark in the evolution of corporate governance or an exercise in public relations.
2. Impact investing goes mainstream
Impact investing is a type of venture capitalism that invests in companies, organizations, and funds intending to create a measurable social or environmental benefit in addition to a financial return. The Global Impact Investing Network estimates the global impact investing market’s current size to be $502 billion, nearly double the amount from 2019.
As impact investing and ESG (environment, social, and governance) investing continue to gain momentum, nearly all major asset-management firms have launched impact strategies. Impact investing’s popularity is due to two factors: financial investors seeking purpose and meaning in their own lives. Recent studies show that impact investments have tremendous returns that encourage other investors to fund social impact startups.
3. Changing consumer preferences contribute to the growth of benefit and social purpose corporations
Benefit corporations and social purpose corporations are newer forms of businesses that choose to dedicate their company’s existence to a purpose rather than just profits.
Benefit corporations are a legal entity that has a greater level of transparency, accountability, and social purpose compared to standard C Corporation or S Corporation companies. Distinct from Certified B Corp companies, which are certified by the nonprofit B Lab, a benefit corporation is required by law to uphold its impact on all stakeholders, not just shareholders. Both B Corp and benefit corporations have strict standards and greater social commitments, making them more trustworthy to the public.
Social purpose corporations are legal entities that are considered less stringent benefit corporations or a hybrid between nonprofits and benefit corporations. It’s a newer form of business that is not eligible for 501(c)(3) status but can pursue both social mission and profits. Social purpose corporations are recognized by a few states in the US and are required to share an annual report about their progress on achieving their respective social purposes.
With increasing demand for corporate social responsibility, there is significant growth in benefit corporations, certified B Corps, and social purpose corporations. Mission-driven startups find these business entities are highly successful at attracting customers, employees, and investors with their contractual obligations to be transparent and ethical.
4. Social entrepreneurs fighting Covid-19
A recent article in Forbes, How Social Entrepreneurs Will Help Us Fight Covid-19 And Build Back Better, discusses how social entrepreneurs are uniquely positioned to address the pandemic’s challenges. They are aggressively stepping up to the pandemic challenge, not only to address urgent needs but to transform entire systems. Covid-19 is a holistic crisis, similar to climate change, gender inequality, racial injustice, and a range of other systemic issues that expose the foundational cracks of our society. The impacts extend beyond heath to unemployment, food insecurity, economic disparities, inadequate educations systems, and more. Given the complexity of these integrated crises, social entrepreneurs are key to finding and implementing comprehensive solutions.
First, social entrepreneurs are well-positioned to address gaps in the market and reach constituents that are not addressed by governments. Economically or socially disadvantaged communities are the hardest hit by this pandemic, and that same disadvantaged position makes it difficult for government relief and services to be effective. Social entrepreneurs can help these underserved groups—in many cases, they already have reach into these communities. By leveraging those connections, they can help mitigate the disproportionate impacts of this pandemic.
Second, social entrepreneurs can address the secondary and tertiary challenges of the pandemic. While governments concentrate on the highest-level health and economic shocks, social entrepreneurs can innovate solutions to all of the cascading impacts, from employment to education. For example, YouthBuild USA is tackling a systemic challenge: the estimated 4.5 million young adults aged 16-24 in America were neither in work nor school even before Covid-19 hit. Sadly, that number has now more than doubled since the pandemic began.
YouthBuild has shifted their model to focus not just on building jobs and skills, but on the mental health and wellness of their students—and on creating strong community connections that can help young people weather the storm of Covid-19.”
Finally, social entrepreneurs can help us rebuild better in the wake of Covid-19. Most of our leaders have been focused on putting out fires rather than solving long-term issues. But social entrepreneurs have the stamina to change broken systems. With support, social entrepreneurs can not only help us survive this current crisis but create a better world long term.
5. Purpose-driven celebrity branding
Golden State Warriors’ star Stephen Curry and Under Armour recently announced the launch of Curry Brand, which the NBA icon and athletic gear company describe as a purpose-driven athletic apparel brand focused on securing fair and equitable access to sports for any young person interested in athletics.
According to a news release from Under Armour, “Curry Brand is the first athletic brand that will integrate social impact into its bottom line. This brand says it is aspiring for a world in which the success of any athlete isn’t determined by his or her circumstances.”
Stephen Curry has a long history of social activism that includes organizing events in support of the Black Lives Matter movement, speaking out for women’s equality and inclusion, as well as his ongoing efforts to raise funds and his work to eliminate infectious diseases.
Under Armour cites a statistic that less than a quarter of kids who live in low-income households are able to participate in youth sports. In addition, the company concludes that the typical child today spends less than three years playing a sport and, on average, quits by age 11.
One of Curry Brand’s first initiatives will be a partnership with the Oakland Unified School District to donate both new athletic apparel and sporting equipment for all middle school athletes and coaches within the district. Also, two local nonprofits will receive funds to groom youth sports coaches across the northern California city.