Why Social Enterprise Is Important (With Examples)

One of the trends Deloitte identified is that companies today must be “social” in a truly external sense.

Why are social enterprises important? In recent years, a growing number of social enterprises have stepped up to provide crucial support towards:

  • Providing volunteer, training, and employment opportunities
  • Ameliorating poor standards of living in disempowered and underprivileged areas
  • Creating a greater sense of local identity
  • Helping to develop self-confidence among local people
  • Retaining and reinvesting profits into the local economy

According to Deloitte, detailed data analysis, as well as business and HR leaders around the world, have suggested that businesses today are entering a whole new paradigm for management: one which considers a business less as a “company” and more as an “institution,” integrated into the social fabric of society.

  • 65% of companies surveyed now rate “inclusive growth” as one of their top three goals, eclipsing strategies like “growing market share” or “being the category leader.”
  • “Citizenship and social impact” were rated critical by 77% of our respondents, and this topic was rated the “least ready” issue among the executives we surveyed

Customers, stakeholders, communities, business partners, and employees all have an enormous impact on a company’s brand, growth, and profitability. Being a “social enterprise” means going beyond a focus on revenue and profit and clearly understanding that businesses operate in an ecosystem, and all these relationships are equally important.

Successful international social enterprises 

  • GoodWeave

In the early 1980s, children’s rights activist Kailash Satyarthi, joint winner with Malala Yousafzai of the 2014 Nobel Peace Prize, realized that underprivileged children often became prey for labor brokers who recruited workers for several Indian industries, including carpet weaving. Captured by these brokers, the children were sold to business owners who dictated them to work for over 12 hours daily, under harsh conditions. Their nimble fingers produced gorgeous yet inexpensive rugs retailers sought after. 

Satyarthi began his career in activism primarily through advocacy and organizing raids on businesses, to raise awareness of child exploitation. His approach reached a major turning point during an occasion when he confronted a group of labor brokers boarding a train with dozens of children bound for a life of servitude while he was heading home after a dreadful though victorious raid. The encounter struck him with a sudden realization that freeing 20 or 200 children when another 200 or 2000 would come right behind them, was not the sustainable solution. What could make a difference, he discovered, was inspiring consumers who would refuse to buy rugs that had been made with slave labor. 

Growing efforts to eradicate poor living conditions while empowering the underprivileged

In the mid-1990s, he launched Rugmark (now GoodWeave International) as the first voluntary labeling scheme to certify rugs produced without child labor in South Asia. Today, GoodWeave has rescued over 6,700 children from labor, provided quality education to almost 26,000 rescued and vulnerable children, and deterred hundreds of thousands of children from entering labor. Operating across the globe, GoodWeave focuses on the top retail markets and key rug-producing regions across Asia. More than 130 carpet importers have signed on, pledging to source woven rugs that have been certified by GoodWeave. 

  • Kiva platform

Before Matt Flannery and Jessica Jackley created the Kiva platform, it was nearly impossible for small-scale lenders in wealthy countries to lend to small-scale borrowers in poor countries. Prospective lenders had no way to funnel funds through microfinance institutions (MFIs), which are largely regulated as banks by the countries in which they are based. Instead, they had to stick with charitable giving by making donations to NGOs that offered microfinance programs in poor countries.

Through social enterprising, profitable businesses, including themself, were spawned

The Kiva platform created a technology to break through these barriers, enabling microlenders across the globe to make loans as small as $25 to micro borrowers in poor countries. Kiva manages the transaction and legal costs and requirements with its global network of MFIs and validates borrowers through locally-based partners. As a result, transaction costs on both sides have plummeted as more lenders and borrowers have begun to use the platform, and Kiva is on track to facilitate more than $1 billion in microloans within the next couple of years. It has enjoyed a 98% repayment rate since its founding, in 2005, and its earned-to-contributed revenue ratio increases each year.

  • Aravind Eye Care

Aravind Eye Care is one of the earliest examples of a social enterprise model at work. This renowned Indian organization is designed to let people pay what they can. Aravind provides cataract surgery and other eye care services to anyone who comes for it regardless of their ability to pay. Those who can afford to pay the market price, do, and those who can’t, don’t. 

Restoring vision by improving accessibility to eye care services across developing countries

Since its inception, Aravind has handled more than 34 million outpatient visits and performed more than 4.3 million surgeries—60 percent of which are subsidized or provided free to the poor. Revenue from the paying clients makes the organization self-sustainable. Aravind’s hospitals are supported by a network of specialty clinics, research laboratories, and manufacturing facilities. Mobile eye camps reach even the remotest villages.

Improving the quality of education and replicating the positive cause

Leading medical schools from the United States and Europe now send students to Aravind for training, and its model has become a case study for business schools. Aravind is now expanding into the rest of the developing world, where 275 eye hospitals in 27 countries have received consultancy services in eye care management and nearly 6,300 eye care personnel from 95 countries have undergone clinical and management training at Aravind.

CONCLUSION

In a nutshell, social enterprise is important in helping to address pressing issues that are neglected to ignite legislative activism, attract private capital, and/or provide the means to alter suboptimal socioeconomic equilibriums to a more desirable state. Successful social enterprises have proven that accomplishing social goals while effectively managing their company’s funding and profitability is a possibility.

Social enterprises are businesses with fundamental social or environmental objectives. Driven by their core principles, they are more likely to innovate, experiment, and generate solutions to ameliorate social issues that may have not been receiving sufficient attention from the public or private sectors.

I hope this article has given you some insights and perspectives to help you realize the importance of social enterprise, and hopefully inspired you to generate some new ideas, strategies, and solutions for your organization to thrive while positively impacting society.


Efforts have been made to get the information as accurate and updated as possible. If you found any incorrect information with credible source, please send it via the contact us form

Darryl Ang
Darryl was born and raised in Singapore, the Little Red Dot situated at the heart of Asia. Growing up, he realised his interest in research, consumer psychology and entrepreneurship, which have motivated him to participate in multiple national-level entrepreneurial projects for which he clinched recognisable accolades. As a young and aspiring business consultant, he is now interning at a local business development and marketing consultancy firm to nurture his passion, and pursue his mission of helping businesses while contributing towards positive social changes. Through his knowledge and experience, he hopes to create more appealing articles that can impact businesses.


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