Is a social enterprise a kind of charity? Can social entrepreneurs get rich? Zoe Victoria of the Biji-biji Initiative, a social enterprise in Malaysia that creates products from discarded materials, separates the myths from the realities.
More and more consumers globally are demanding to know the true story behind the products and services of their choice, such as their impact on the environment and workers.
Not surprisingly, then, social enterprises – businesses that aim to have a positive social or environmental impact – are on the rise. Yet to many consumers and budding social entrepreneurs alike, it is still not clear how the 'business' of social enterprise actually works. Here are some common misconceptions.
'A social enterprise is a charity that uses social media for fundraising'
No. Being a social enterprise means being actively committed to making a difference in people’s lives, not merely having a Facebook page that talks about it. When we explain the work we do at Biji-biji, people often look at us puzzled and ask 'so how do you pay your rent?'.
Rule number one: social enterprises can be not-for-profit or for-profit, but they need to generate income to keep going. In contrast with some organisations that seek to maximise their profits, however, social enterprises reinvest most or all of their profits into their social mission and tend not to trivialise environmental concerns, or provide poor working conditions.
Social enterprises take the best of both worlds: a financial model to ensure their continuity; working principles that guarantee transparency; and a commitment to positive change.
'Social enterprises are the ones who sell fair-trade scarves made by indigenous populations, using hand-woven cotton and natural dye'
Sure, there are social enterprises that aim to preserve cultural practices or indigenous crafts by partnering with those artisans, offering them direct sales channels and running (or teaching them) modern marketing and branding campaigns. But that doesn't mean you need a marginalised community or an environmental problem to start a social enterprise. In fact, it’s nearly impossible to sum up the variety of social enterprises out there and the variety of products and services they offer!
This rule is simple: any company can be a social enterprise. Is it not only those companies working with the homeless or tackling income inequality in developing countries. Social enterprises can exist in any industry, and under any circumstance.
'Social enterprises are just about being environmentally friendly'
Social enterprises are often commended for doing things like keeping waste out of landfills, which makes both Mother Earth and customers happy. However, this is really only half of the story. For most, if not all, social enterprises, the principles of sustainability extend into everything they do, from the way they run their offices, to the way they price their products, to the way they grow the organisation.
At Biji-biji, for example, we have developed our own 'governance framework' that sets a maximum ratio of 1:5 between the highest and lowest earner, committing to total open-book finance for all our team members, and involving everyone in the financial decisions that we make as an organisation.
'You can't make money working for a social enterprise'.
A social enterprise is only as effective as the team that runs it. You need people who are passionate, creative and who have the right mindset and set of skills. To attract and retain those talented individuals who will work to change the way things are done, you need to be able to offer a competitive salary. This means paying people what they could be earning in another company, as long as it's within the limits set by your governance framework, i.e., the rules and procedures through which you social enterprise operates.
Social entrepreneurs can even do very well financially. Social enterprises needn't be small and there's no reason why the big bucks shouldn't come rolling in. Indeed, it could be argued that the more a social enterprise grows, the greater the impact it can make.
Find out how the British Council is helping the Biji-biji Intitiative and other social enterprises in East Asia, using the Twitter hashtag #SocialBizAsia.
Social entrepreneurs, join us at Critical Mass, the UK's leading conference on social enterprise, in London on 19-20 October 2015.