What’s Next For Social Enterprise?
Social enterprises, ventures that seek to address significant societal problems while also achieving financial sustainability, have become a bigger part of the business world. Chuck Slaughter ’90, founder of Living Goods, discusses what it will take for the field to produce a breakout star.
Social enterprise is an increasingly popular career destination for MBAs, and business schools are helping students prepare. Between 2003 and 2009, there was a 110% increase in the number of courses at business schools that include social benefit content, according to the Bridgespan Group. The field lacks a universally-agreed-upon definition, but at its core is a dual focus on achieving both social impact and financial sustainability—using the tools of business to achieve the ends of the nonprofit sector.
Jim Schorr and Kevin Lynch, writing in Stanford Social Innovation Review, argue that even without an established definition, social enterprise “has finally reached a critical mass of acceptance as a descriptor and brand for this movement…. We believe that social enterprise today is approaching a key tipping point of familiarity and acceptance that can propel this movement to heightened levels of impact and sustainability.”
However, even with all the energy going into the field, Chuck Slaughter ’90 points out, social enterprise has not produced a breakout success on the scale of major global businesses. Slaughter, the founder and CEO of Living Goods, argues that organizations in the field need to learn a lesson from the for-profit sector to achieve the kind of large-scale success that could affect billions of lives.
Living Goods itself is a nonprofit that helps micro-entrepreneurs in the developing world earn income through an Avon-style door-to-door direct sales approach, selling products that have a positive impact, such as anti-malaria treatments, clean-burning cook stoves, fortified foods, and solar lamps. But it straddles boundaries by connecting with profit-minded investors and spawning for-profit franchisees.
“A lot of innovation comes from combination,” said Slaughter. “At Living Goods, we use low-cost grant capital to incubate a business idea that has great potential. Our goal is to spin off for-profit businesses from this nonprofit social enterprise.” This hybrid model allows an organization to draw on the strengths of each sector.
“I think what we need, at the intersection of social enterprise and philanthropy, is more of this high-engagement, risk-tolerant capital,” Slaughter said. Such investors are important not just for each organization’s ability to have impact but also for developing the infrastructure to create future ventures. “If you start saying to investors that we’re going to sacrifice returns for the social benefit, you massively limit the amount of capital you are ever going to attract,” he said. “What you want are these powerful large businesses that have great purpose, powerful missions, and that are also great investment opportunities. That’s how you get scale.”