Oslo Startup Day: Social entrepreneurship – how to make it work

Social entrepreneurship – how to make it work

Before entering the stage at Sentralen, Simon Eisner from Allwin (www.allwin.nu) stated that ”To build a business model around a welfare problem in a socialist country like Sweden or Norway is like trying to climb Mount Everest without clothes”. But what did he mean by that?

To grasp the challenges of social entrepreneurship in a socialist country one must ask: Who is responsible for handling a social welfare problem? Is it the government, the companies (global or local) or maybe the individual person? Because if you are going to create a business around a social welfare challenge, you first of all need to be able solve the problem, but that is not enough. You need someone willing to pay you for solving that particular problem. The challenge then arrives if everyone believes that the government should pay for all solutions solving a welfare problem. Then social entrepreneurship basically ends up being ideas created to solve the government’s problem, paid by the government.

Simon Eisner is a Swedish example of a social entrepreneur trying to break out of this mindset. His idea is to collect leftover food at stores and hand it out to people who need it, through voluntary entities like the food drive of the local church, shelters or café for homeless. This could easily be viewed as a charity setup, where the company nicely gives away surplus goods to people in need. But what are the other solutions for the store to get rid of their surplus goods? Well, they could recycle it the “traditional” way, maybe turning it into biofuel or other energy sources. But this costs money. So, why should it be free to get rid of the surplus goods by using a company that turns it into something even better that biofuel? It’s not free to find trucks, people and other equipment to run the Allwin cycle of picking up and delivering food. So it shouldn’t be free to use this service. Should FedEx help you send a package for free just because it’s a gift?

To make social entrepreneurship work it is important that this focus also gets embedded in the entrepreneur itself. – Oh, no. I cannot ask for money for salary to my staff or myself. We can do this without pay for now. To many “social entrepreneurship” companies get started based on voluntarily work and with a more or less vague hope that someone realizes how good this is for the society and jump in to pay the bill. Sorry people – this is not how it works. In a world of limited budgets, you allocate the money where new problems get solved. You don’t use them to pay already solved problems, even if the people solving them complain along the way. That’s why, in many senses, the voluntary work can actually work against it’s purpose if we want to build a sustainable business.

Instead of falling into the charity trap, we should actually endorse that it is possible to be both sustainable and responsible. Sveinung Jørgensen and Lars Jacob Tynes Pedersen has researched on this at NHH Norwegian School of Economics and shows statistics that in fact companies with a higher social responsibility has performed better on the stock marked compared to companies with lower social responsibility from 1994 until today (Eccles et al., 2014). It’s not a matter of charity – it’s good business. And as social entrepreneurs we should build good business ideas around helping our own or other businesses do less bad and do more good. And do we find this magic spot where money and good-doing meet, we will see the full power of great social entrepreneurship.

(Eccles et al., 2014) showing the difference in stock price between companies with a higher social awareness compared to companies with lower social awareness.(Eccles et al., 2014) showing the difference in stock price between companies with a higher social awareness compared to companies with lower social awareness.

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Posted on: May 4. 2015
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