Contribution of Social Entrepreneurship towards Sustainable Development Abstract

Social entrepreneurship is a phenomenon that has resisted attempts to establish a clear definition. A focus on organizational structures and/or what constitutes a worthy social cause has created a diverse set of terminology. Observing the positive social impact of entrepreneurs catering to basic needs, this paper recognizes their unique role in efficiently contributing to the achievement of sustainable development goals. From this perspective, the term social can be much better defined. The frameworks proposed in this paper should guide much-needed further research and facilitate decision making about more focused support from a financial as well as a learning perspective. Introduction Social entrepreneurs endeavor to create social value through innovative,
entrepreneurial business models. The potential market for these entrepreneurs is huge because of the

wide range of social needs that remain unsatisfied by existing markets and institutions. Social entrepreneurs often create tremendous value when they cater to very basic humanitarian needs; for example, by providing medicines or food, which can be a matter of life or death for those who receive them. However, the challenges these entrepreneurs face are severe. Their customers may be willing, but often unable, to pay even a small portion of the cost of the products and services provided. Many social entrepreneurs operate in developing countries that have no structures or resources that would enable and support traditional entrepreneurship. Therefore, social entrepreneurs must create novel business models and organizational structures, and unique strategies for brokering between very limited, disparate and often dynamic resources to create social value. Perhaps the greatest challenge is to capture some of the value created in financial terms, or to secure external financing, merely to keep their organizations running. It is even more difficult to expand the operational scale and scope, and to satisfy personal needs for income. Social entrepreneurship (SE) may provide some fascinating new insights that could expand the thinking and toolkits of traditional entrepreneurs, as well as enrich designs for more socially acceptable and sustainable business strategies and organizational forms. Most definitely, the insights are of huge relevance to the wider social sector.

Defining social entrepreneurship

From our definition of a unique role for SE it follows that social entrepreneurs find new
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and efficient ways to create products, services or structures that either directly cater to social needs or that enable others to cater to social needs that must be satisfied in order to achieve sustainable development. It may help if we recognize that entrepreneurship is something that is co-produced by the very nature of an opportunity and the characteristics and motivation of the individuals involved. Traditionally, most people would associate entrepreneurship with the pursuit of a business opportunity in order to make a living.

Who is the social entrepreneur? It has been suggested, however, that social entrepreneurs are very distinctive individuals. Attempts to define distinctive features of social entrepreneurs tend to portray a social hero with entrepreneurial quality. Dees says: Social entrepreneurs are one special breed of leader, and they should be recognized as such. This definition preserves their distinctive status and assures that social entrepreneurship is not treated lightly. Interestingly, some social entrepreneurs do not even know they are social entrepreneurs until they receive an award or are recognized by organizations such as Ashoka or the Schwab Foundation. People with a wide range of combinations of profit and social motives can become social entrepreneurs. Whether an entrepreneur has more of a profit motive (capturing value) or a primary motive for social value creation in both cases he or she can create significant social values.

A need for new forms of social value creation In 2000, the UN Millennium Declaration was adopted at the largest-ever gathering of heads of state. It committed countries rich and poor to do all they can to eradicate poverty, promote human dignity and equality, and achieve peace, democracy and

environmental sustainability. However, the UNDP Human Development Report 2003 says: But despite these welcome commitments in principle to reducing poverty and advancing other areas of human development, in practice as this Report makes very clear the world is already falling short. [] More than 50 nations grew poorer over the past decade. Many are seeing life expectancy plummet due to HIV/AIDS. Some of the worst performers often torn by conflict are seeing school enrolments shrink and access to basic health care fall. And nearly everywhere the environment is deteriorating.

Calling for corporate support The overwhelming complexity of sustainable development (SD) has amplified the
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calls for large corporations to take on responsibility for social and environmental challenges in a more proactive way and beyond mere legal compliance. The efficiencies of markets, combined with the resources and managerial experience of large multinationals, are

considered crucial to tackling many global development problems. Most traditional businesses and organizations create significant social value in the form of employment, improvements of working conditions, competitive environments, goods and services that people need and/or desire. Corporations pay taxes that are used for many social purposes. More directly, many large companies attempt to create social value through corporate social responsibility (CSR) or corporate citizenship programs. The World Banks World Development Report (2004) states clearly that economic growth is essential in order to achieve the Millennium Development Goals, and that the projected growth in per capita GDP will by itself enable five of the worlds six developing regions to reach the goal for reducing income poverty. However, the report also says that many services that contribute to health and education are failing poor people. The main reason for this failure appears to be the fact that public spending effectively does not reach the poor, and even if it does, service provision is inefficient and of inadequate quality (The World Bank 2004).

A unique role for social entrepreneurship The European Commission has defined CSR as a business contribution to Sustainable Development (European Commission 2002). In line with this definition, It defines a unique role of SE as The contribution of individual entrepreneurs to Sustainable Development. The Millennium Development Goals in support of achieving sustainable development do not imply that there is a limited set of high-priority issues. Rather, underlying these goals is a huge set of problems and human needs, any of which may only be satisfied by small-scale, flexible and local efforts. A growing number of case studies indicate that the innovative and creative forces of entrepreneurs and their flexibility of choices of structure, funding, resources and business models can succeed in meeting these unsatisfied needs. Three main players are expected to make complementary contributions to achieve sustainable development: i) Governments, Non Governmental Organizations (NGOs), and International Organizations (IOs) target broad policy areas using a multitude of instruments as well as enforcing legal structures to protect human and labor rights or the environment; there is an important interface with SE (philanthropic foundations, development grants, etc.), but also with corporations, through networks such as the UN Global Compact or the World Business Council on Sustainable Development; ii) Corporate Social Responsibility (CSR) is defined by the European Commission as a Business Contribution to Sustainable Development, and we see an
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important opportunity for Social Intrapreneurship as a bridge between CSR and SE; and iii) Social Entrepreneurship (SE) is defined in this paper as the contribution of entrepreneurial individuals to Sustainable Development.

A framework of social needs underlying sustainable development What are the specificic needs the term social refers to in SE, when seen from the SD perspectives? A unified definition of SD does not exist, but the most frequently cited definition was that put forward in 1987 by the World Commission on Economic Development. Sustainable development is: development that meets the needs of the present without compromising the ability of future generations to meet their own needs (WCED, 1987). Figure 1 depicts a framework for thinking about separate categories of needs: those of individuals, those of communities or societies, and those of future generations. These three categories are very different from each other, yet they combine to represent the two principal forms of human organizations individuals and collectives of individuals over time. Social entrepreneurs are seen as providing products and services to all three levels of needs. Case studies of social entrepreneurs to illustrate this framework have been provided.

Figure 1

Purpose

Sustainable Development

Levels

Individuals

Communities/ Societies Needs for enabling structures

Future Generations Needs for maximizing choice

Needs

Basic needs

SE

Efficiently supplies products and services

It define s the purpose of SE to be to contribute to Sustainable Development. Entrepreneurial efforts target three distinct levels: individuals; large communities or whole societies; and future generations. The needs that SE meets range from basic social needs of individuals, societies needs for structures and capacity to build sustainable communities, and the need of future generations to inherit a minimum of constraints (e.g. polluted environment that demands high levels of investment for clean-up), so as to maximize the choices they have to fulfill their own needs and desires.
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1. Basic needs of individuals Because it is generally accepted that SD cannot be achieved so long as the essential needs of the poor remain unsatisfied, SE may play an important role in alleviating the most serious survival problems of the poorest individuals and in helping them to build lives that are not just a mere struggle for survival but an expression of their potential as human beings. Case 1: The Institute for OneWorld Health

OneWorld Health is the first US non-profit pharmaceutical company. It has created a new business model in order to be able to deliver medicines to those most in need in developing countries. It attempts to redesign the whole value chain of drug delivery and thus challenges traditional profitability thinking, which seems incompatible with developing such cures. Large philanthropic organizations and governments provide much of the funding initially, and in this sense being a non-profit company is an enabling structure for entrepreneurial value creation. OneWorld Health has established a new set of partnerships that aim to create value for everyone involved. Biotechnology companies have found an appealing outlet for idle intellectual property. Compassionate research and development efforts have attracted scientists and volunteers to donate time, effort and knowledge to the project. The company has pushed strongly to utilize and integrate the scientific and manufacturing capacity of the developing world to be able to deliver affordable, effective and appropriate new medicines where they are needed most. The Bill & Melinda Gates Foundation and the US National Institutes of Health have donated over $6 million to launch the first programs. The first late-stage drug development program is underway to treat visceral leishmaniasis, a parasitic disease that affects more than 500,000 people on three continents. The patent for the antibiotic to treat the disease was provided by the World Health Organization, which received it many years ago from the original pharmaceutical patent holder, who decided not to pursue further development of this drug.

2. Needs for enabling structures in communities and societies. A second level is reflected by the need for communities and societies to provide enabling structures and a fair distribution of limited resources. This allows individuals to act in their own best interests but also enables the collective to sustain and improve structures and resources for themselves and everyone else. The Natural Step, a non-profit, international organization with a mission to accelerate global sustainability, offers the following as one of the
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conditions for SD: In a sustainable society resources are used fairly and efficiently in order to meet basic human needs globally. The drive for economic development comes from communities and societies that seek responsible allocation of resources, protection of the rights of individuals, trusted institutions, and means of risk sharing for building entrepreneurial initiatives through legal, communication, and market structures that are efficient and fair. In addition, society plays an important role in providing structures that are capable of satisfying the basic needs of its members. In developed societies, social security and welfare systems provide this structure, whereas the governments of developing countries often do not meet the basic human survival needs of even the present generation, not to mention future generations.

Case 1: Appropriate Technologies for Enterprise Creation (ApproTEC). ApproTEC is a social enterprise organized as a non-profit organization (501 status) that operates mainly in Kenya. ApproTEC acts as an enabling structure that coordinates many activities and diverse groups of people to create value from very limited assets and resources. It researches markets to identify unfulfilled needs and match them with technology solutions, such as oilseed presses or manual irrigation devices bearing product names such as The Super MoneyMaker. These products can be produced at low cost along a value chain of

manufacturers, resellers and the final purchasers of the technology. Because there are no efficient institutions or capital markets that would enable poor people to earn the money they need in order to survive, ApproTEC is an important and very efficient structure for empowering people to act. ApproTEC has created over 33,000 jobs in the last 5 years and has expanded to Tanzania and Uganda. The scale of the operation may well have a transforming effect on the whole communities in which ApproTEC operates. While CDI in Brazil responds more to a need for individuals to improve their skills to pursue existing opportunities, ApproTEC caters much more to a collective need to create opportunities that are less dependent on individual skills, and acts as an institution that performs multiple roles such as providing capital, know-how, skills, and organizational and management functions, while serving as a trusted platform for the exchange of goods and services. However, the absence of corporate partners that are interested in the technology or skill set of the entrepreneurs produced by ApproTEC puts severe strains on its funding. About 70% of ApproTECs budget comes from donors such as the Department for International Development (UK) or the United States Agency for International Development. To enable ApproTEC to capture some of the profits their entrepreneurs are generating financial institutions would be necessary that could transform the abstract future values of an entrepreneurs profits into present cash and made
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possible a more balanced transaction through the pricing of ApproTECs products. This opens up an opportunity space for microcredit banks as an important complementing player to enable local sustainability. The current dependence on external capital sources limits the process of scaling out ApproTECs operations and increases the risk of a breakdown of the structures it has built once funding is withdrawn. This may cause significant negative social impact for the people that rely on ApproTEC support.

3. Needs of future generations Future generations have a current albeit abstract need for us to act on their behalf and in their interest as well. Because we do not know the exact nature of future needs, SE may be a flexible and dynamic model to react to emerging social needs over time. Certainly, future generations have a need to make their own choices. The concept of sustainable development thus implies that we should act in ways that do not increase constraints and by so doing restrict the choices available to future generations. Inheriting a set of serious environmental and social problems, for example, will not support this goal. Environmental degradation is not part of common measures of economic development such as GDP. Its consequences are long-term and are spread over many stakeholders. The environment, as a social asset, is a shared common property, a characteristic that does not maximize the incentives for individuals to best maintain it (Hardin, 1968). Consequently, legislation implemented by powerful institutions is necessary to protect environmental assets on behalf of society and future generations. This opens up opportunities for social entrepreneurs to help enact such legislation. Conclusion In this paper I have put forward an explicit sustainable development perspective for studying SE. SD has become a global metaphor that guides many international efforts, and supports specific framing of the complex set of problems and opportunities underlying economic and social growth and development. Our definition of SE allows looking at disparate social entrepreneurship efforts targeting isolated social needs and problems in an integrated way within frameworks that are structured along relevant dimensions of SD. This should facilitate identification of successful models that need to be supported or an understanding of how individual efforts need to be linked in time, scale, and scope to create positive and reinforcing development spirals. Significant international and local efforts, institutions, knowledge and funding sources exist and continue to be provided in support of SD. These institutions and the sources of funds available may be important assets for social entrepreneurs who understand themselves, or are perceived as, specifically contributing to SD goals. Furthermore, attempts to set
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up and manage communities of social entrepreneurs to share knowledge and orchestrate resources, projects, and relationships amongst themselves and with other institutions depend largely on having an explicit shared purpose to serve as a guiding principle.

It is important to note that definition accepts the existence of other perspectives on the field of SE, all of which may contribute to an overall understanding and the further development of SE. The European Commission uses SD as the guiding principle to understand and structure the social responsibility efforts of established corporations. We thus aim to understand how SE differs from the way traditional entrepreneurs and businesses create social value, as well as how it is complementary. This differentiation will be important to develop learning that is based on existing entrepreneurial knowledge but is extended to reflect the unique insight necessary to advance the field of SE by providing more integrated strategies and appropriate support. SE could then be an important means to flexibly adapt to and cater to the changing scales and types of social needs underlying SD a dynamic that challenges our ability to grow in a way that is compatible with both our current needs and the emerging needs of future generations.

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