Social enterprise is a means of attempting to solve a social or environmental problem. A social enterprise is a venture that employs business principles—raising investment, cultivating markets, generating profit—to sustain and ultimately succeed in solving the problem.
Social enterprises look at the impoverished population whose problem they are trying to solve, often called the “BoP” or “Bottom of the Pyramid,” in a whole new light. Traditionally, charities see poor people as recipients of aid or money, and rarely require anything of them to receive it. Social enterprises view the poor as paying customers.
While this seems like asking a lot of those who have little, the belief is that when people are treated as customers, their specific needs are respected more. Paying for a product or service also cements the commitment of customers to make it work for them, so the poor become stronger stakeholders in both the social enterprise and the solution. (See Acumen Fund Fellows Heidi Krauel and Joel Montgomery’s 2010 paper Lessons from the Field: Sales at the Bottom of the Pyramid.) And finally, by making a profit, social enterprises can stick around longer to see through, and perhaps modify, the solution.
As well as social enterprises, the term “social entrepreneurship” applies to foundations, governments, nongovernmental organizations, and nonprofits using business principles to effect social change. Its popularity has skyrocketed, spawning scores of university programs, fellowships, business incubators, and startup projects worldwide. Some of the world’s wealthiest philanthropists are beginning to embrace the ideology and invest in the social sector.