What Is Social Entrepreneurship?

Social entrepreneurship is a type of entrepreneurship that uses for-profit business practices and strategies to create positive social change.

Social entrepreneurs use their businesses to create new opportunities, solve social problems, and improve the quality of life for people in need. The concept of using for-profit businesses to help alleviate social ills has been around for a while but has come into increased focus in recent years.

How Does Social Entrepreneurship Work?

Social entrepreneurs see the functions of business—logistics, creating value, providing services, and solving customer problems—as opportunities to create change and make a difference in people's lives; it’s not just about making a sale.

Social entrepreneurs often start their businesses with a concrete social issue in mind, such as improved access to education or health care, or an environmental issue such as access to clean water or emissions reduction. The success of these businesses is predicated on the belief that the motivating force of the pursuit of profit can be used to make more of a difference in the world than simply enriching the shareholders.

What Are the Benefits of Social Entrepreneurship?

Social entrepreneurs, like all entrepreneurs, are creative people who have a passion for their work. This goes doubly so for entrepreneurs who are starting their businesses with a social impact goal in mind.

Businesses Drive Innovation

Social and environmental problems are difficult to address. To solve these pervasive problems, the people tackling them have to be creative, agile, and endlessly innovative. These are all attributes of businesses that use the pursuit of profit as a driver to produce creative solutions to complex problems, move quickly to create value, and innovate to stay ahead of competitors.

There Are Business Benefits to Focusing on Social Impact

At a time when consumers are more conscientious than ever about the social implications of their purchases, businesses with a social impact goal can lean on their mission as a point of differentiation in an otherwise crowded marketplace. Additionally, the idea of contributing to a social impact mission can energize, motivate, and attract talented employees.

Social Entrepreneurship Has the Potential to Make Real, Positive Change

Ultimately, if a small business or startup with a social impact mission is successful, it has the potential to make lasting positive changes in the lives of the people it helps. Combatting poverty, fighting or reversing the effects of climate change, improving access to health care, and more are all within the purview of a startup or small business with a social impact mission.

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What Are the Challenges of Social Entrepreneurship?

An entrepreneur is no stranger to facing challenges associated with running and growing their business. In the case of social entrepreneurs, there is an additional set of challenges to overcome.

Social Problems Are Hard to Fix

First and foremost, social entrepreneurs are tackling tough issues. Social ills like poverty and environmental issues like the need for emission reductions or access to clean water are complex, wide-reaching, and notoriously difficult to address.

Above and beyond the need to keep growing their business and achieving profitability, social entrepreneurs face issues that many, many others throughout history have failed to solve. This has translated into many social entrepreneurial projects having to change course throughout the life of the business as the enormity of the challenges begins to set in.

Social Entrepreneurs Have Competing Goals

A conventional entrepreneur is tasked with getting their business up and running—no small feat. A social entrepreneur, on the other hand, not only has to build and grow a business but continuously measure and improve the impact that business has on the stated social goal. A real estate entrepreneur who wants to tackle the issue of housing justice and equality has an additional burden that their contemporaries don’t face; in addition to turning a profit, that person must also make a positive change in the lives of the people they work with from a housing justice perspective.

Social Entrepreneurs Aren’t Running Charities

Charities can solicit donations and enjoy a wide range of tax benefits. Businesses seeking to create a social impact can also get certifications and tax breaks, but these enticements aren’t as robust as those enjoyed by 501(c)(3) charities. Moreover, regardless of how lofty the business’s social impact goal is, that company still has to contend with competitive market pressures. These pressures, and failure to outcompete other firms in the same space, could have a detrimental effect on progress made toward achieving social impact.

Additionally, some investors won’t have the same enthusiasm for a social impact project as they would for a more traditional profit-driven project. It can be challenging to tell investors a compelling story about how the company plans to make money when the focus includes social impact—something that might not generate the same level of profit as a traditional business.

Finally, social entrepreneurs often face criticism from those who don't believe that business can be used to improve social welfare. Some of these critics are suspicious of the injection of a profit motive into social welfare programs. Others believe that social welfare programs are best administered by charities, religious institutions, or governments.