As businesses with a mission to do good become increasingly trendy, social entrepreneurs said they were finding it harder than ever to tackle one of their major problems – explaining what they do.
For years social entrepreneurs trying to solve a wide range of issues from affordable healthcare to homelessness have faced the same question: are you running a charity or a business?
There is no universally accepted definition but a social entrepreneur can be described as someone who applies commercial strategies to tackle social and environmental problems and can operate as a for-profit or not-for-profit businesses.
A Thomson Reuters Foundation poll in 2016 found almost 60 percent of social enterprise experts in the 45 biggest economies said there was a lack of public awareness about their work which made it harder to raise funding and sell products and services.
While the sector has continued to grow in recent years with rising interest from socially-conscious consumers, some of the 1,200 people at Britain’s top social entrepreneurship conference this week said this had made explaining their work even harder.
Cassandra Staff, chief operating officer at Miller Center for Social Entrepreneurship, a U.S.-based training scheme at Santa Clara University, said as social entrepreneurship became trendy, there was more confusion about its definition.
“There has been a lot of conflation within the definition as it has become more trendy, and fragmentation as everyone tries to work out what it means to them,” she said on the sidelines of the 16th annual Skoll World Forum in Oxford.
The confusion “just increases the complexity of barriers to entry”, she said.
Over the past decade the sector has surged but so has the confusion, said leading social entrepreneurs.
Social sector organizations account for more than 5 percent of economic output in several nations, including Canada, Germany and the United States, according to the British Council, a partly state-funded body that promotes British culture overseas.
The Big Issue Group, one of Britain’s leading social enterprises tackling homelessness by producing and selling street newspapers, regularly gets mistaken for a charity, said Nigel Kershaw, its executive chairman.
“It’s often an assumption when you are doing something for the people and the planet you must be a charity,” said Kershaw on the sidelines of the four-day Skoll Forum in Oxford.
He explained this created a problem because the Big Issue aimed to build self esteem in the homeless vendors who sell its magazine. If it gave money to them instead, like a charity, it would be “perpetuating a dependency”.
Precious Lunga, co-founder of London and Nairobi-based Baobab Circle – which uses mobile and artificial intelligence technology to improve healthcare – said investors tend to see the social enterprise as a charity while users viewed it more as a business.
“There is no collective understanding about what a social enterprise is because it encompasses a wide range of types of organizations from non-profit to for-profit,” she said.
“Many of my contemporaries see themselves as entrepreneurs first.”
For Carenx Innovations, an Indian pregnancy care social enterprise, this confusion made it more challenging to attract funding from investors who might not realize it wanted to grow.
“People feel we are a charitable organization and that is one of the difficult parts – we have to emphasize and explain what is our social component and what is our business component,” said Shantanu Pathak, the co-founder.
Social entrepreneur Victoria Hale in 2000 founded and ran the first not-for-profit pharmaceutical company in the United States, One World Health, which develops drugs for poor people.
The pharmaceutical sector is mostly made up of profit-driven businesses so her social enterprise model bucked the trend.
“I learned to walk away from 80 to 90 percent of the people who questioned me and challenged me in relation to why I was starting a non-profit pharmaceutical company,” she said.
She said the concept of social enterprise has taken a while to catch on in the United States.
“There is a lot of explaining to do,” she said.
By Sarah Shearman @Shearmans. Editing by Belinda Goldsmith