While doing research for my MIIS capstone project, I have come across readings referring to the birth of the social enterprise sector. Many of the readings refer to the growth of the third sector leading to social business. The third sector is what falls between public, government run, and private, pure profit business. First, non-profits formed to bridge the gap that the market left behind; educating and providing health care for those left out of the traditional market. Then, large non-governmental bodies began to take over projects that sovereign governments failed to produce, namely infrastructure in developing countries. Social business has been a relatively new construct – becoming more popular in the 1980s with the widespread popularity of Dr. Yunus and others. The mission of a social enterprise is to solve social issues with traditional commercial business practices. Just as the NGOs and nonprofits fill a market gap, so does social business.
However, the more I see social businesses operating in developing countries, the more I wonder just how much impact the businesses will make, and how different the challenges are from traditional nonprofits. One of the greatest challenges nonprofits face in the developmental world is implementing programs that reach the root of the problem they hope to address or rather trying to solve for issues that are really effects of a greater problem (For example, mobile health clinics, which get short-term relief to otherwise unmet health needs, but fail to address the larger issues as to why certain populations are not receiving the health care needed regularly – poverty, rural underdevelopment, etc.). Here, I see similar social enterprises entering into a space that hopes to make an impact on short-term alleviation, but I have seen few that are working on interventions that cause long-term behavior change.
The next biggest issue is revenue stream. Although some nonprofits rely on multiple revenue streams, the majority rely on receiving grants in order to maintain their projects. Social businesses, in theory, differ greatly in this aspect as they rely on customers buying their product or service in order to stay open. However, from the businesses I have encountered, there have been few that have not started with a grant, convertible debt (with generous interest rates) and/or alternative revenue from partner organizations. If we in fact believe that consumer behavior can lead to social change, we would allow these businesses to struggle to survive, rather than continue to promote ones that would not make it in a traditional market.
Which brings me to the third big struggle or both nonprofits and social enterprises – measuring impact and when do you call it quits? Obviously, all development projects should have a timeline. Millennium development goals have a deadline of 15 years, culminating in 2015. The idea is that if the organizations that pledged to those goals have not made significant, measurable strides, then they should bow out and make space for those that can. The tricky thing about social businesses is truly measuring their impact and then deciding when it is time for them to close up and move on. Traditional businesses would love to live on for hundreds of years, and continue to expand – there are no deadlines set. So far, the social enterprise sector has said very little about setting timelines and milestones for success, and has instead focused on “scaling up,” and out, which reflects the traditional commercial sector. Determining impact metrics and setting timelines for success I believe is going to be the greatest challenge for the social enterprise sector.