The rising popularity of social enterprises is inspiring. The promise of using business solutions to solve problems offers viable alternatives for lasting social value creation. However, the rise of social enterprises begs the question: how can we say that an organization is indeed a social enterprise, and not just branding itself as one?
In the committee of the Lasallian Social Enterprise for Economic Development (LSEED), we define social enterprises as “organizations that primarily endeavor to create sustainable solutions to community social problems, utilizing concrete business models and co-created with community members as its key stakeholders.” Simply put, an organization can be considered an authentic social enterprise if its mission, through the key stakeholder it targets, is embedded in its business model. In other words, the cost of doing mission should be embedded to the cost of doing business.
In the studies of the Center for Business Research and Development-Social Enterprise Research Network (CBRD-SERN), we find three general frameworks on how mission can be embedded in the business model. These three perspectives can help advocates to ascertain an organization’s identity as a social enterprise and also assist aspiring social entrepreneurs to ideate authentic social business models.
(1) Target stakeholder as key partners. The first perspective treats the target stakeholders as key partners of a social enterprise. In our case studies, what happens is that there are certain marginalized stakeholders that do not have market access or business acumen, but have skills or at least the potential to produce quality products. Social enterprises can partner with these marginalized stakeholders by providing them fair trade prices (e.g., paying farmers prices well above the going market rate) and training on product development. Community members can then become dignified rural entrepreneurs who are able to make decent living.
(2) Target stakeholders as key human resources. The second perspective treats the target stakeholders as key human resources. Simply put, the stakeholders become employees of the social enterprise. In our case studies, social enterprises that follow this framework put the stakeholders in positions where they directly affect the value proposition—crafting the products or rendering services. In this scenario, the end goal for the stakeholders can vary. Some social enterprises aim for the stakeholders to grow within and be a fixture in the organization, while other social enterprises function as a stepping stone for the stakeholders to gain footing then eventually achieve their preferred goals and careers.
(3) Target stakeholders as customers. The third perspective treats the target stakeholders as the customers or the actual receivers of the commercial product. Compared to the other two frameworks where the stakeholders are embedded in the operations and supply chain, this scenario frames the role of the enterprise as a producer of extremely low-cost and low-priced products that the marginalized sector can afford. In this framework, the stakeholders are seen not as mere beneficiaries of dole-outs, but rather, they are dignified customers with limited but real purchasing power.
Apart from these three general frameworks, there could be more complex business models that truly integrate mission. However, these three simple articulations of mission-driven business models provide advocates, aspirants, and scholars an intuitive grasp of how to conceptualize social enterprises, social value creation and problem solving.
As a final note, when we think about solving social problems through business principles, let us ask the key question: what is the critical role of the target social stakeholders in an organization’s business model and reason for being? If the target stakeholder is so critical to an organization, such that if it is removed, the organization ceases to function or make sense, then we can validate its identity as a real social enterprise. This is the hallmark of how embedded is the mission in an organization—the sign of a fully authentic social enterprise.
Patrick Adriel H. Aure is currently the Vice Chair of the Management and Organization Department, Ramon V. del Rosario College of Business. He advocates social entrepreneurship as head of the Social Enterprise Research Network of the Center for Business Research and Development (CBRD-SERN) and as co-chair of the Lasallian Social Enterprise for Economic Development (LSEED) at De La Salle University. He welcomes comments at firstname.lastname@example.org. The views expressed above are the author’s and do not necessarily reflect the official position of DLSU, its faculty and its administrators.