Unit 4: Business Beyond Profit Motivation

Lesson 4.1
The Concept of Social Enterprise
Contents
Introduction 1

Learning Objectives 2

Quick Look 3

Learn the Basics 4

Characteristics of Social Enterprises 4
Clear Social Goals 5
Reinvestments 6
Monitoring and Learning 6
Adaptable Roadmap 7
Social Enterprises: Advantages and Challenges 8
Advantages of Social Enterprises 8
The Challenge of Sustainability 10
Contribution of Social Enterprises to Philippine Development 12

Keep in Mind 13

TryThis 14

Practice Your Skills 15

Challenge Yourself 16

Photo Credits 17

Bibliography 17
Unit 4: Business Beyond Profit Motivation

Lesson 4.1

The Concept of Social Enterprise

Introduction

Have you seen a business whose primary purpose is to help others rather than gain profits?
These businesses sell products and services to perform their social obligations by
conducting philanthropic activities, providing humanitarian aid, and assisting the
community's livelihood. Can you imagine yourself setting up such an enterprise?

You may be used to businesses operating to maximize profits, but these businesses are
different. They are known as social enterprises. Their goal is not to maximize profits for the
shareholders but to make a profit to help others. In reality, social enterprises are still few
and developing worldwide.

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Learning Objectives DepEd Competency

At the end of this lesson, you should be able to

Explain the importance of establishing and
do the following: sustaining business enterprises as a source of

● Define a social enterprise. job opportunities and financial freedom

(ABM_ESR12-IVm-p-4.1).
● Describe the advantages and challenges
experienced by social enterprises.
● Analyze the impact of social enterprises
on local communities.
● Plan for a social enterprise.

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Quick Look

Going Beyond Profit

Search the internet for examples of social enterprises. Gather information on their goals
and social responsibility activities. Summarize these pieces of information in the table
below.

Table. An example of a social enterprise

Business Name Goal of the Business Social Responsibility Activities

Questions to Ponder
1. Describe the economic and social activities of a social enterprise.

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2. How do these social responsibility activities affect the lives of their beneficiaries?

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3. Do you think social enterprises are sustainable businesses?

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Learn the Basics

Not all businesses operate for private gains. Social enterprises are new types of businesses
that desire the creation of social value over personal profit. As a rule, the solutions they
offer are supposed to be unique, socially responsible, and environmentally friendly.

Social enterprises do not usually work like corporate setups or private firms. These social
enterprises typically work with people from marginalized and disadvantaged sectors,
providing them with solutions and livelihood opportunities. Moreover, their profit from
selling their products and services is primarily oriented towards expanding their social
activities. Reinvestments are also to do more and help more.

The cost-effectiveness of social enterprises challenges their sustainability. However, positive

experiences show the long-term viability of these types of enterprises. These enterprises
make an enormous contribution and are most advantageous to society and people.

Essential Question

What advantages do social enterprises bring to social entrepreneurs?

Characteristics of Social Enterprises

A social enterprise mixes the elements of traditional business operations with the social
goals of a non-profit organization. These enterprises strive for cost-effectiveness; they can
be for-profit or non-profit, but generating profit is not their priority.

Social entrepreneurs are innovative individuals who prioritize their business activities'
impact on social, cultural, and environmental problems. They are committed to devoting
their talents to transformative actions. Social entrepreneurs typically get their ideas for their
enterprise by being observant of societal needs and demands. Figure 1 shows the general
characteristics of social enterprises.

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Figure 1. General characteristics of social enterprises

Clear Social Goals

A social enterprise will prioritize its social mission over profit. If the social purpose is not the
primary focus of the firm, and if such aims are subject to change based on the desire of
owners or shareholders, then it is not truly a social enterprise.

Profit is still essential. It ensures that the organization remains financially sustainable.
However, social enterprises mainly focus on the enterprise's benefits to the people and
community.

It is a simple task for social enterprises structured as non-profits. However, those who opt
to register as for-profit entities must structure the businesses to adopt social goals.

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Figure 2. Farmers and farming communities are usual beneficiaries of social enterprises.

Reinvestments
Although social enterprises have for-profit generation structures, most profits are returned
to the organization. The company distributes some portion to company owners or
shareholders, but they use most of it to support the social goal.

Since social enterprises have the features of non-profit organizations, some reduce working
costs by employing volunteers. However, not all organizations have to do this.

Monitoring and Learning

For social enterprises, profit does not measure success. Successful social enterprises make
a significant impact on their social goal. How is impact measured? It needs data.

Social enterprises establish monitoring, learning, and evaluation systems to determine the
effectiveness of social activities. An essential feature of this is the learning aspect of the
evaluation system, wherein programs that worked well are repeated and expanded while
ineffective ones are discontinued.

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Adaptable Roadmap
Every organization must plan for change. Cultural and political developments impact the
market, and society's problems will improve or worsen. To be prosperous in the long run,
social enterprises must be flexible.

A roadmap with structured objectives and process is essential, but it should be easily
modified as new information and developments arise.

Closer Look

Natural Products Provide Livelihood to Poor Communities

A Filipino couple started a company committed to producing affordable,
natural, eco-friendly, and ethically-made bath and beauty products. The
company's product line includes shampoo, conditioner, soap, and oil.

The company uses the highest standards beyond the international

benchmark for the cosmetic industry. As a result, the brand has gained
popularity among loyal customers, especially those who prefer to use
products free from harmful chemicals.

Aside from offering safe and natural products, the company primarily
employs residents from poor communities. The government previously
relocated these residents from unsafe locations and into new
communities supported by other non-profit organizations.

Check Your Progress

What is the most important obligation of a social entrepreneur in social

enterprise?
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Social Enterprises: Advantages and Challenges

Social enterprises tend to be popular with the general public because they are innovative
and appeal strongly to societal and cultural values. The benefits they provide to the local
communities encourage philanthropists, government agencies, and private citizens to
contribute to their success.

Advantages of Social Enterprises

The brands of social enterprises are also relatively easy to market and promote. Since their
products or services target specific social problems, it is easier to convey customer value.
For instance, socially-aware consumers prefer to buy necessities from social enterprises
because they feel that the company meets individual and social needs. Such a perception
leads consumers to promote the brand themselves.

Employees who work for social enterprises feel good about themselves and the organization
they belong to. They are encouraged to become more productive and perform tasks beyond
what is required. For instance, they actively promote the brand on their social networks.

Social enterprises can provide sufficient income for owners if run efficiently and effectively.
It also generates jobs for the local community, especially those from marginalized and
disadvantaged sectors. Moreover, social entrepreneurs develop the skill of combining
business keenness guided by solid social awareness.

Figure 3. Social enterprises provide employment opportunities to help beneficiaries achieve

financial freedom.

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Many enterprises integrate corporate social responsibility activities into their business
operations. They want the customers and society to recognize the social value of their
existence. However, the public sees more significant social and community impact from the
activities of social entrepreneurs.

Closer Look

Showcasing and Promoting Philippine Weaving Traditions

A social and cultural enterprise is committed to showcasing and
promoting indigenous textiles from Mindanao. The enterprise hopes to
spread the stories of tribes and communities through the colorful and
masterfully created fabrics.

The social enterprise also advocates sustainable livelihood by partnering

with artisan weavers from Sulu, Basilan, Zamboanga, Marawi, Lanao,
South Cotabato, and other areas where employment and livelihood
opportunities are also scarce.

In 2019, the social enterprise received an award from a financial

institution. The institution provided free business workshops to help
them in their business management, networking opportunities, and
funding assistance to help them overcome constraints.

Check Your Progress

What do you think is the most crucial advantage of social enterprises?

Explain your answer.
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The Challenge of Sustainability

Social enterprises exist to address specific social problems and make people's lives safe,
sustainable, healthy, and prosperous. The motivating factor for social entrepreneurs is to
give back to the community and contribute to socioeconomic development. Unfortunately,
these noble intentions are often hindered by the challenge of sustainability.

Sustainability in business refers to the ability of an enterprise to manage its natural, human,
and financial resources to create wealth and contribute to development. Social enterprises
are usually people- and environment-friendly because they integrate social awareness into
business operations. However, their financial viability to operate in the long run and their
ability to expand as fast as traditional businesses are constantly challenged.

Based on the experience of social enterprises, they can achieve a more sustainable future
for the organization and its community by the following principles.

1. Growth will be difficult.

Social enterprises can grow like traditional companies. However, it would require
more time, effort, and commitment from the social entrepreneur. Practically, social
enterprises do not simply cut costs in production if the solution will harm the
environment or its employees. Therefore, the growth of social enterprises will not be
as fast as other businesses, but capital, environment, and people development will
be more balanced.

2. Focus is important.
Given the limitations on using financial capital, it would be best for social enterprises
to focus on a specific product line. Creating new products and diversifying brands to
address a wide range of social needs might be tempting. However, the advantages of
social enterprises rest on their being expert organizations.

Focus allows social entrepreneurs to target a specific market, spend less on

advertising, and position their products better. More importantly, it will enable them
to develop their expertise and improve their processes in addressing specific social
concerns. This way, the consumers will view them as genuine social organizations
rather than a typical business.

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3. Business aspect is paramount.

Social entrepreneurs are business owners. They do not differ much from other
entrepreneurs regarding time, effort, and funds invested in their business. The core
of their operations is also similar to traditional companies. Thus, social
entrepreneurs should know how to create, communicate, and deliver customer
value. They should also keep in touch with the developments in the business climate
and changes in customer preferences.

Social enterprises, like traditional businesses, must continuously improve, reinvent,

and reposition their products to gain sustainability. Enterprises with a strong sense
of social responsibility must continue to challenge ideas, adjust to changing
environments, and learn from their experiences.

Closer Look

Financial Constraints of Social Enterprises

A study published by the British Council and PhilSEN revealed that
financial constraints mainly hindered startup social enterprises. Of the
total 206 social enterprises they surveyed, 51% had a limited supply of
capital, 34% had an unrefined business model, and 31% had problems
accessing investors due to their lack of networks.

Check Your Progress

Why is profit still necessary in managing a social enterprise?

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Contribution of Social Enterprises to Philippine Development

The number of social enterprises in the Philippines increased in the last decade. According
to a study by the Asian Development Bank in 2019, there are over 164,000 social enterprises
in the Philippines. It comprises 17% of the total number of registered businesses in the
Philippines. Almost 70% of these social enterprises are micro, small, and medium
enterprises (MSME). The scale of these enterprises remains limited due to financial capital
constraints.

Based on an earlier study by the European Union in 2016, 19% of social enterprises in the
Philippines are focused on agriculture, while 9% serve the education sector and another 9%
on business development. The remaining portions are distributed in different sectors.
However, social enterprises consider that they benefit multiple groups in society.
Seventy-two percent (72%) of social enterprises in the Philippines benefit their local
communities, 58% contribute to specific organizations, and 54% said they help women and
their development.

The same study showed that social enterprises tend to hire women. Women comprise 56%
of the total workforce of social enterprises.

Closer Look

From Rags to Fashion

A social entrepreneur organized nanays from poor communities to train
them to become fashion artisans. These women used to scour cloth
scraps from dumpsites and sew these into foot rugs. Today, these
mothers have sustainable livelihoods creating fashion items together with
renowned designers.

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Keep in Mind

● Social enterprises are new types of businesses that desire the creation of social value
over personal profit. They mix the elements of traditional business operations with
the social goals of a non-profit organization. The distinct characteristics of social
enterprises are shown in the following figure.

● Social enterprises have advantages over traditional businesses. The value

proposition of their brands is relatively easy to communicate. They receive support
and funding grants from private and public entities. Moreover, employees tend to be
more dedicated and active in promoting the brand and its products.
● Sustainability issues and financial constraints often hinder the noble intentions of
social enterprises. To overcome these challenges, social entrepreneurs should
prepare for slow growth, keep their focus, and uphold the business aspect of their
operations.
● In the Philippines, about 17% of registered businesses are social enterprises. They
contribute to societal development by focusing on disadvantaged and marginalized
sectors, especially agriculture. Social enterprises contribute significantly to providing
livelihood and employment opportunities to poor communities.

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TryThis

True or False. Write true if the statement is correct. Otherwise, write false.

________________ 1. Social enterprises cannot earn any profit.

________________ 2. The primary purpose of social enterprises is to help the

community and contribute to social progress.

________________ 3. The goal of social enterprises is to maximize shareholders’

profit.

________________ 4. Social enterprises provide livelihood and employment

opportunities to poor, disadvantaged, and marginalized
communities.

________________ 5. Social enterprises seldom experience financial constraints

because they receive support from private and public entities.

________________ 6. Profit is not important for social enterprises.

________________ 7. It is natural for social enterprises to change their social goals

based on the desire of owners or shareholders.

________________ 8. The profits made by social enterprises are primarily

distributed to its owners or shareholders.

________________ 9. Social enterprises in the Philippines contribute to reducing

the employment gap between men and women.

________________ 10. Most of the social enterprises in the Philippines are micro,
small, and medium enterprises.

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Practice Your Skills

Social Enterprise Case Study

Search the internet for examples of social enterprises in the Philippines. Analyze the
benefits they bring to the communities they belong to. Answer the following questions to
guide you in your analysis.

1. Describe the social enterprise and its mission.

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2. What products do they offer? How do consumers perceive their products?

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3. What benefits do community members or beneficiaries receive from the enterprise?

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4. What kind of support does the enterprise need?

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5. Write a short message encouraging consumers to support the social enterprise.

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Challenge Yourself

Answer the following questions.

1. If you are going to establish a social enterprise in your community, what would it be?
What will be its mission and goals?
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2. How will the community benefit from your social enterprise?

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3. What actions can you take to support the social enterprises in your community and
in the country?
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Photo Credits
File:Fashion futures (26348622964).jpg, by DFID - UK Department for International
Development is licensed under CC BY via Wikimedia Commons.

File:Rice farmers at work in the Philippines.jpg, by IRRI Images is licensed under CC BY via
Wikimedia Commons.

File:SPS Intertech factory13.jpg, by Josh Jackson is licensed under CC BY via Wikimedia

Commons.

Bibliography
Fausto, Rose. “Social Entrepreneurship in the Philippines.” The Philippine Star. Updated
October 13, 2021.
https://www.philstar.com/lifestyle/the-budgetarian/2021/10/13/2133637/social-entre
preneurship-philippines#:~:text=According%20to%20a%20study%20by,NGOs%20an
d%206%25%20are%20coops.

Haber, Jason. The Business of Good: Social Entrepreneurship and the New Bottom Line. Irvine:
Entrepreneur Press, 2016.

JGunn, Robert. Social Entrepreneurship. London: Calouste Gulbenkian Foundation, 2010.

Parker, Simon, ed. The Life Cycle of Entrepreneurial Ventures. New York: Springer, 2007.
https://doi.org/10.1007/978-0-387-32313-.

Thompson, James D. and Ian C. Mcmillan. The Social Entrepreneurs Playbook. Philadelphia:
Wharton School Press, 2015.
https://wsp.wharton.upenn.edu/book/the-social-entrepreneurs-playbook-2/.

Tsai, Stephen Dun-Hou, Liu, Ted Yu-Chung, Hu, Jersan and Li, Shang-Jen, eds.
Entrepreneurship in Asia: Social Enterprise, Network and Grassroots Case Studies. World
Scientific Pub. Co, November 2014. https://doi.org/10.1142/9196.

4.1. The Concept of Social Enterprise 17