Increasing Profit without Social Impact is that possible?

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“Social Entrepreneurship” as a concept must be redefined.  Social entrepreneurs are usually associated with non-profit organizations (NPOs), whose principle aim is furthering social or environmental goals. Business entrepreneurs are typically those who measure performance in profit and return. These definitions create a dichotomy within entrepreneurs. This differentiation may be why we have a crisis in world economies. The dichotomy prevents addressing needs of the community, and creating and maintaining effective sustainable hybrid value chains. Although there are examples of success that show hope, none have caused true transformation in communities.

Businesses look at bottom line financial results with little or no regard for societal improvements and NPOs over-rely on funds provided by business despite a clear inability to relate to businesses. On one hand, NPOs need to play a role in understanding the true value they provide to a business’s bottom line results. NPOs also need to learn to speak in terms of financial profits in light of the NPO’s mission and purpose, changing “donation” to sound more like “investment.” On the other hand, businesses need to play a role in encouraging and facilitating user generated innovation from citizens of the community, including employees and stakeholders. Users and citizens of the business are given a sense of purpose as they make a difference in their communities, in turn driving passion and innovation in jobs. This phenomena generates an appetite to integrate social innovation, allowing businesses to tap into new markets and expand client bases.  Companies are rarely aware that this also leads to better performing employees and better bottom line results. Similarly, NPOs increase their impact by generating new revenue sources for their programs and expanding their service ranges to more beneficiaries.

This phenomena is gaining ground in several countries. Laws were instituted for entities known as Benefit Corporations, permitting companies to join the profit motive with the purpose of making a “positive impact on society and the environment.” In their articles of incorporation, corporations declare their public missions like providing housing, promoting literacy, or developing entrepreneurship. They must go regularly before a third-party validator to prove that they are meeting their goals AND treating their employees, customers, and communities with the same respect as their shareholders. Traditionally, corporations are chartered without any public purposes at all and are legally bound to pursue a single private purpose: profit maximization.

The question becomes: Can a business entrepreneur achieve profit maximization without having social impact? What cannot be ignored is that businesses and NPOs are part of society and their employees are part of that same society. In fact, a majority of the protests occurring globally are due to businesses overlooking the impact they have on society. In today’s world, Corporate Social Responsibility is an act of kindness towards a community that helps the image of an organization. This view of social entrepreneurship is insufficient to make a difference in society or bottom line results of a business and must be redefined if we are to see true transformation.

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