The ambitious and challenges of social busine ...

Social business is a demanding business model: social enterprises pursue social or environmental goals while also seeking long-term profitability and they face many challenges. In the wide- ranging ‘impact investing’ sector, it is vital that the social businesses are able to structure and differentiate themselves, both to attract investment and to boost their impact.

Despite the involvement of the international community and extensive multi-actor engagement, guaranteed access to essential goods and services is still a long way off for the world’s poorest populations. 1.5 billion people do not have reliable access to clean, affordable electricity; more than a billion lack drinking water or adequate health facilities; access to existing treatments for infectious diseases such as HIV/AIDS, tuberculosis and malaria is still very limited; and 70% of all children around the world not attending school live in Southern Asia and sub-Saharan Africa (Acumen, Hystra, WHO, 2014). Public funding alone cannot tackle all these challenges and while the private sector is already a significant funding source of development,[1] there is a need for new sources to be harnessed so that wider approaches can be developed, ‘workable’ solutions disseminated, and innovative responses devised that will benefit the very poorest. Working alongside the public sector, which plays a vital role in all these areas, investors and social enterprises face the challenge of developing capacity to meet this global demand for goods and services at affordable prices.

The emergence of ‘social business’: the culmination of a long story

The business world has many different terms for enterprise with a social or environmental focus, including “the social and solidarity economy”, “social entrepreneurship”, “bottom-of-the-pyramid initiatives”, “the inclusive economy”, “impact investing” and “social business”. However, while these terms appear to refer to the same concepts, they need to be differentiated. “The social economy” is an established term that represents a global attempt to combine economic activity and social benefits. This movement has produced different kinds of business, including cooperatives and mutual societies. Since the late 1990s, traditional private sector businesses have increasingly been embracing environmental and social issues, initially by focusing on controlling their environmental and social risks, and subsequently by incorporating notions of sustainable development and corporate social responsibility (CSR) into their organisation. At the same time, the financial sector has been creating “socially responsible investing” (SRI) tools – new investment vehicles that enable investors to monitor how their assets perform in social and environmental terms.

See the full article on the blog Private Sector & Development, animated by Proparco.