Although capitalism may be excellent at generating riches, it fails to solve some of the most pressing issues of the day, such as climate change.
Herein lies the value of capitalism 2.0. This innovative company model seeks not just to make money but also to rescue the planet, and it offers the most direct route to resolving many of the world’s issues.
Profit incentives and social problem-solving are combined in social entrepreneurship. Corporations don’t only sell goods; they also work to prevent illness, fight poverty, and build vital infrastructure for the benefit of both the business and the consumer.
Therefore, forget about creating a rapid profit. These blinks demonstrate how capitalism 2.0 emphasizes long-term riches and success, which cannot occur if we are destroying the environment.
In the following chapters, you’ll learn
- the advantages of social entrepreneurship over charitable contributions;
- why the millennial generation is responsible for today’s social entrepreneurs; and
- How effectively do social entrepreneurs concentrate on a problem’s root cause rather than its symptoms?
Chapter 1 – A social entrepreneur may earn money while making a difference and expanding their company.
How well-versed are you in the idea of social entrepreneurship?
Given the high expense of combating problems like poverty or climate change, one might wonder if such a notion is conceivable.
Investors who want to have both a positive social impact and a financial return are what social entrepreneurs look for. These are referred to as impact investments.
Because the motivation for impact investment is built on the goal for social change, it varies from a conventional investment. To put it another way, the objective of impact investment is to have a positive social influence.
Profits and the amount of social good that was stimulated by the investment must both be taken into consideration to determine success.
According to a study conducted by the Global Impact Investing Network (GIIN) and JPMorgan Chase, $10.6 billion was invested in projects by 146 impact investors in 2014.
The survey states that 91 percent of impact investors saw returns that matched or surpassed expectations, while a staggering 98 percent stated the investment’s social effect was on par with or better than they had anticipated.
Impact investments are therefore successful from an investor’s standpoint. But when it comes to businesses, it’s also feasible to make money while improving the world.
A business may have a positive social influence, much like an impact investor.
While many businesses currently have sustainability departments or make charitable contributions, social entrepreneurship operates differently by placing an equal emphasis on the business’s social effect and financial success.
For instance, the author’s real estate company had a social goal. A part of the money generated from each contract concluded was donated to a foundation that helps communities without access to clean water by constructing wells.
The startup business gained a competitive edge and new customers by concentrating on this social benefit. This illustration demonstrates that it is feasible to generate revenue while solving social concerns.
Chapter 2 – Mindless charity giving is ineffectual and, in certain places, can exacerbate problems.
When you hear the term “charity,” you almost certainly think of something good. Why shouldn’t you? Giving money to a worthy charity is always a good idea, right?
The fact is that not all charities are up to par. In reality, many established charities are ineffective because their operations prioritize expenses above social impact.
What is the reason behind this? When individuals give to a charity, they want their money to accomplish good rather than get lost in the bureaucracy. This pressure causes charities to focus on cutting expenses, even required overheads that might be critical to generating the intended impact.
In summary, haphazard cost-cutting can harm a charity’s objective. As a result, organizations should focus on assessing social effects rather than merely cutting administrative fat.
When charities fail to directly monitor the impact of their gifts, they may begin to feel as if they are pouring money into a black hole and getting nothing in return. This does not make them appealing to potential donors.
But it’s not simply that charities fail to make a good difference; they may also have a detrimental influence on a community.
For example, Bangladeshi microfinance Muhammad Yunus writes in his book Banker to the Poor that philanthropy in general is a technique of deflecting responsibility rather than solving poverty.
And here is another illustration: as a philanthropic gesture, the National Football League has been sending Super Bowl losing teams’ T-shirts to Africa since 1997. Yet in many areas, the free T-shirts decimated the local apparel sector, making people worse destitute than before.
The NFL now collaborates with regional distributors to supply jerseys solely to areas that genuinely need and desire them after learning from its past missteps.
Chapter 3 – The world’s impoverished areas offer social entrepreneurs a sizable, unexplored market.
When social entrepreneurs discuss the four billion people who live in poor nations and make less than $1,500 a year, they are referring to the bottom of the pyramid.
There is a sizable potential market represented by this group. What size? the equivalent of $5 trillion.
Despite having low incomes, this group makes up more than half of the world’s population, making them the biggest untapped market in the world.
Given these startling statistics, creating goods that cater to the needs of those at the base of the food chain might not be such a bad idea.
While it may seem “evil” to produce goods that those with little resources should purchase, keep in mind that the poor also desire goods that make life easier and safer.
This market has previously been targeted by certain businesses. Unilever, a multinational corporation, generates more than $60 billion in revenue annually and manages over 400 brands of food, personal care, and cleaning goods. In 2015, developing markets accounted for 60% of business sales.
In another instance, medical professionals in Vietnam were utilizing donated phototherapy machines to treat jaundice in infants. Nevertheless, the outcomes were subpar.
A for-profit organization called Medical Technology Transfer and Services (MTTS) questioned why this was the case. Researchers at the company discovered that the doctors were operating on two infants with a single device, which meant that neither youngster was receiving enough light to be cured.
Engineers at MTTS were inspired to create a chic baby carrier that could only support one infant at once. The physicians and patients enjoyed the fashionable equipment, and more infants received the appropriate care as a result of their successful design.
Keep in mind that the folks at the base of the pyramid desire the same things as everyone else: high-quality goods with straightforward designs. If your product meets those requirements, you can access a big market while giving consumers what they need.
Chapter 4 – Socially conscious investors, or “Kickstarter,” grant millennials the money they need to make a difference in the world.
Have you ever attempted to quit a bad habit like smoking? There is always a chance of reverting to previous habits while trying to modify behavior. However, millennials and Kickstarters have the potential to drive a long-lasting shift to capitalism 2.0 in today’s society.
Unlike previous generations of affluent contributors, Kickstarters aren’t content with merely signing cheques and leaving. Kickstarters have learned a lot from traditional capitalist practices, thus this group is eager for results and willing to help make those goals a reality.
Kickstarters like to ensure that their money genuinely changes the world.
As a result, funders on Kickstarter frequently go above and above to provide a social entrepreneur with the resources necessary for success. For instance, Jeff Skoll, a co-founder of eBay, established the Skoll Foundation to invest more than $500 million in social enterprises.
The biennial Skoll Awards for social entrepreneurs provide applicants with more than just financial support; they also provide them access to a network of past winners and three years of institutional support.
The generation of persons born between 1980 and 2000 is known as the millennials, and they make up the majority of today’s social entrepreneurs even though Kickstarter is essential to the financial backing of social projects.
This generation grew up in a time when cell phones and other powerful mass technologies were widely used, providing them with instant connections to the outside world and rapid pleasure. This cohort also entered adulthood at a time when societal issues like global warming seem to have reached a breaking point.
Because of this, many members of the millennial age want the world to change for the better right now.
Because of this drive, the majority of millennials want to start their own business. Only 13% of students intended to move up the corporate ladder, according to research published in 2014 by Bentley University, whereas 67% aspired to start their businesses.
Let’s see how a prospective businessperson might create a social business.
Chapter 5 – Effective social entrepreneurs assess their effect and concentrate on the root causes rather than the symptoms.
It is not possible to utilize a cheesecake recipe to make carrot cake. Similar to this, a social enterprise does not necessarily have to go by the same regulations as a traditional, for-profit firm just because it is a business.
There are various things to take into consideration while starting a social company. We’ll look at two of them.
A social entrepreneur should first concentrate on the root of an issue rather than its symptoms.
Get to the bottom of a problem if you want to make a significant difference. As a result of open cooking flames and inadequate ventilation, a lot of people in Africa were getting sick. African Clean Energy took a reasoned approach to the issue. The firm created a new, ecologically friendly stove to replace the polluting open cooking flames rather than only concentrating on healing ill individuals.
Furthermore, customers will be eager to buy your goods when your business provides a solution to an underlying issue. Families were delighted to discover a solution that effectively met a daily requirement while keeping them and their kids healthy.
Second, make sure to assess the results of your efforts. Your ultimate goal is metrics. No ethical social entrepreneur should be ignorant of the extent to which his offering is having an effect. To do this, it’s critical to assess the efficacy and efficiency of your efforts.
Efficiency takes into account how much time, money, or other resources were used to obtain a result, whereas effectiveness relates to the degree to which issues are handled.
For instance, the effectiveness of your business would be measured by the number of individuals who had functioning lights as a result of your efforts if you were bringing power to a village that was not connected to the grid. The amount of money you spend concerning the revenue from sales of your goods would be your efficiency.
Scaling up is the next stage for a social entrepreneur after measuring their performance.
Chapter 6 – Attempt to overcome your fear of failure as you scale your socially conscious business to have a long-lasting impact.
Regardless of the industry, every firm has difficulties. But for social entrepreneurs, the toughest challenge is how to have an impact that lasts.
The problem you’re trying to solve won’t go away if you don’t expand your firm; it could even get worse.
You must make your product broadly accessible if you want to have an impact. Making a cheap product and selling it to those with lesser incomes at the base of the pyramid is one tactic.
For instance, social company d.light developed a solar-powered light for individuals without access to electricity by capitalizing on falling prices for LEDs, batteries, and solar panels. The firm was able to reach a large market by creating an inexpensive light, and as a result, d.light now has over 51 million clients in 60 different countries.
Furthermore, you must overcome your fear of failure. Keep in mind that failure might be the first step toward a better future.
Officials in New York City bemoaned the fact that almost 50% of young offenders who had served time at the Rikers Island prison returned there after committing new crimes. To invest $9.6 million in a government initiative aimed at reducing recidivism rates, the city approached Goldman Sachs.
This wasn’t a loan in the classic sense; instead, the social impact bond’s returns were dependent on how well the program worked.
For instance, Goldman Sachs might earn up to $2.1 million if the city could reduce recidivism rates by more than 10%.
Even though the program ultimately fell short of the desired reductions, investors didn’t view the experiment as a total failure because clients’ interest in social impact bonds increased, spurring Goldman Sachs to pursue other social impact initiatives like one to raise preschoolers’ reading levels.
The Business of Good: Social Entrepreneurship and the New Bottom Line by Jason Haber Review
It is feasible to earn money while supporting social issues, and many investors and business owners are already having success doing so. In a world of capitalism 2.0, social entrepreneurship is here to stay, and it will be to everyone’s advantage.
IRIS lets you quantify your influence!
It’s critical to gauge the societal effect of your business. IRIS, or Impact Reporting and Investment Standards, is a helpful tool. IRIS is a free, publicly accessible internet platform that offers performance information to impact investors so they may gauge return on investment.