The surge in interest in social enterprises: what’s driving social innovation?

Something is changing in the world of social entrepreneurs. Social innovation, new ideas to meet social needs, is gathering momentum among traditional businesses. Non-profits and small social entrepreneurs have pioneered social enterprises as a means of achieving financial sustainability. They incorporated business activities to generate new revenue streams or created small companies, social enterprises, with the hope of changing the world while earning enough to get by. I have observed a definite surge in interest from the business community to carve out a role for themselves.

I believe there are 4 major forces at play here:

Non-profits: They are struggling to make ends meet and are exploring social enterprise models as a means to improve their financial situation.

Businesses: Concepts like Creating Shared Value, promoted by Harvard’s Porter and Kramer are encouraging corporations to look at new ways to play a role in society that transcends profit maximization. Organizations view social innovation as a means to be a source of social good.

Governments: cash-strapped, they are making deep budget cuts. To wean off non-profits from some of their dependency on government subsidies, without negatively impacting social programs, they are embracing social innovation. The more progressive ones are creating new legal frameworks for social enterprises. They are also experimenting with new financial instruments, like social impact bonds and impact investment funds, to scale-up social enterprises.

Investors: They have discovered a new Eldorado- impact investment, which consists in placing their money into “blended” investments that provide a combination of financial and social returns. According to some studies, impact investment could represent 5-10% of all investments portfolios within the next 10 years.

These forces all converge on the brave new world of social innovations. No doubt this momentum will create many more opportunities for social entrepreneurs.

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