Social Entrepreneurship: A Hybrid Business Phenomenon

By QuickBooks Canada Team

2 min read

For socially conscious capitalists, profits are the most effective way to create sustainable economic value that can lead to true social progress. The new hybrid business model that combines business and charitable missions is attracting a significant number of social entrepreneurs who seek to utilize their skills and expertise to turn profits into shared economic value for the benefit of social development.

The Difference Between Social Entrepreneurship and Social Responsibility

For the last couple of decades, corporations have embarked on a campaigns to demonstrate a corporate social consciousness. They have invested billions of dollars in programs that divert a portion of their profits into social and environmental causes that appeal to their investors and their customers. While the amount of money donated by these corporations creates a social benefit, it is often limited by their budgets and it creates little in the way of sustainable social development. For these companies, the quest for profits is still their primary objective. A social enterprise also seeks profits, but its primary objective is to use those profits for the greater good. A company operating under a social development mission seeks to change the trajectory of society’s capacity to affect its own positive economic and social progress. The measure of success for a social enterprise is the societal value a dollar of profit can create. Successful for-profit social enterprises can create an expanding circle of economic value that can perpetually sustain both the enterprise and its societal beneficiaries.

The Expanding Societal Value of TOMS

One of the most celebrated examples of a successful social enterprise is TOMS, a popular shoe brand. Its founder, Blake Mycoskie, was traveling through Argentina when he came across communities of children who ran around barefoot. He discovered that these kids simply had no shoes. He learned that shoeless children often suffered debilitating illnesses and injuries, and that many were not allowed in schools. He embarked on a mission to change that. He started TOMS with sole purpose of covering the feet of any child who needed it. Patterned after the local footwear of Argentine farmers, TOMS began to manufacture these canvas shoes in different styles. For every pair of shoes sold, it made a pair of shoes for the cause. Within the company’s first year in 2006, Blake returned to Argentina with 10,000 pairs of shoes, and he has since distributed tens of millions more to children all around the world. The shoes that TOMS provides have dramatically reduced soil-transmitted diseases and injuries and have enabled children to lead normal lives, attend schools, and be more productive in their communities.

Creating Sustainable Economic Value

TOMS has since built manufacturing plants in some of the developing countries where the shoes are needed the most, employing hundreds of people and accelerating the social and economic progress of those communities. TOMS may record its dollar profits on the company’s bottom line, but the actual economic value of those profits and their impact on sustainable social development is incalculable. Not all of society’s ills can be solved through the social enterprise business model, but shared value offers companies with the opportunity to utilize their skills and resources to lead social development in profound ways. For social enterprises, “profit” is not a dirty word; it is the way that they make transformational changes to improve society.

References & Resources

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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