Can a sustainable business be good business? And what defines good business?
The term ”good business” can mean two things, business being successful from a profit perspective, and a business doing good. It is common to distinguish between entrepreneurs and social entrepreneurs. The definition and common incentive for the later seems to be to find a solution to one or many societal challenges. It is also often assumed that these companies will be less profitable, which potentially impact the investment opportunities. Since our societies are facing big challenges in both an environmental and social perspective, it might be time to start re-define how we look at entrepreneurship and businesses in total. So, is it necessary with separate labels? Can a sustainable business be good business? And what defines good business?
Social entrepreneur vs entrepreneur?
– takings from Gather Festival
Last week we visited Gather. Gather is a combination of a conference and a music festival based on five core themes with the focus to collaborate, question and think different. The program is broken down into theme sessions with inspiring on-stage discussions and box talks. One of them within the category Human & Machine focused on how we build apps that are truly useful, sustainable and take the wellbeing of the users into account, rather than maximize usage. There was a panel on Fem Tech consisting of four female all entrepreneurs or investors. The term Social Entrepreneurship was brought up and quickly a conversation about the misinterpretation of the terms social entrepreneurship versus entrepreneurship started going. The panel consisted of Therese Mannheimer – Co-Founder Grace.health, Bonnie Roupé – Founder Bonzun, Sara Wimmerkranz – Tech Entrepreneur & Investor and Sofia Breitholtz – CEO of Reach for Change.
Social entrepreneurship is a term used more often, but the definitions vary. For some it can be defined as the use of start-up companies and other entrepreneurs to develop, fund and implement solutions to social, cultural, or environmental issues. Others say that the critical distinction between entrepreneurship and social entrepreneurship lies in the value proposition itself. Simplified, the value proposition and the exception for an entrepreneur, and also its potential investors, is to create financial profit. On the other hand, the quick assumption for a social entrepreneur is often that the social entrepreneur neither anticipates nor organizes to create substantial financial profit for itself or the investors. Rather, the meaning is the value in the form of large-scale, transformational benefit that accrues either to a significant segment of society or to society at large.
The panel at Gather were all agreeing upon the fact that the term social entrepreneurship is sometimes problematic, especially within the area called Fem Tech. By leading organizations striving to solve problems for females within various areas, they often get named by the label ”social entrepreneurs”, simply because they have got a more clear purpose. As the term itself for many is proposing a non-profit approach it can be problematic to get funding, as many investors only seek profitable opportunities. The panel believed that we need to separate startups or entrepreneurs with a purpose from the non-profit organization if we want the investments to be more diverse and equal, and in the end, lead to more businesses actually trying to do good as well.
”There seems to be a misinterpretation. People, investors and others, believe these entrepreneurs only do it for good, for social responsibility reason. A lot of journalists and others are instinctively assuming that females are less capable of building businesses that will make money.” – Sara Wimmercranz, co-founder of Backing Minds.
She continued saying that 30% of all entrepreneurs are female, but that they get less than 1% of all the investment money per year. Sara and her companion behind Backing Minds believe that a lot of investors are missing out on big ideas, and great opportunities. Sometimes because of the label social entrepreneurship automatically being attached to those who run a business with a purpose, and hence some investors not being interested because of that. In the area of Fem Tech the target group for the various products or services offered are female, hence consisting of around 50% of the world’s population. How can that not be seen as an opportunity where money can be earned, simply because it has got a more clear purpose, the panel argued?
With the many challenges we are facing, both in Sweden and globally, it would be good if more investors, organizations and entrepreneurs were trying to solve some of the problems. Rather than some businesses or entrepreneurs being problematically labelled social businesses because of their cause, maybe it is time to change the label itself? How long can we keep on defining organizations as “normal” organizations and social organizations? Can a sustainable business also be good business? And what does good business mean, do we need to start redefining the term?
These are questions we seek to investigate the coming weeks. If you have any thoughts on the topic, please don’t hesitate to contact us at firstname.lastname@example.org.
Reflection: Sofia Breitholtz, CEO of Reach for Change
Last week we published some takings from Gather Festival, where interesting thoughts related to the terms social entrepreneurship verses entrepreneurship was discussed. One of the inspiring participants in the panel was Sofia Breitholtz. As the CEO of the foundation Reach for Change she supports social entrepreneurs and aim to create social impact on a daily basis. We wanted to further investigate what she believes are the biggest challenges, and opportunities, for a more sustainable economic system.
Thank you for talking to us Sofia! There seems to be various definitions of the term social entrepreneurship. As the CEO for Reach for Change, a foundation supporting Social Entrepreneurship, how would you like to describe it?
– At Reach for Change, we are driven by our core values of being “smart, brave and passionate”. We define our social entrepreneurs using the same lens. We coach and support passionate individuals who are driven by purpose and heart – which means they are driven they key target of achieving social impact. We work with teams and individuals who are smart, meaning they have a unique understanding of their beneficiary and target group and approach this problem in a new way, with an aim to iterate their solution and scale it. They are brave in that they dare to innovate and challenge existing structures, systems and ways of doing things.
We also measure our entrepreneurs by the return of investment we seek, and that is that they have had a proven impact on the social problem they are solving. We of course want them to be sustainable and have solid business models, but their main driving force is to achieve social change. We not only measure them on this, but our network of over 600 social entrepreneurs also prove this every day through grit, persistence and passion.
All of you participating in the panel discussion at Gather seemed to agree that it is sometimes problematic being labelled a social entrepreneur. What do you think, are there misinterpretations with the term itself?
– I think that any concept that challenges the status quo and traditional ways of doing things can always be problematic. We still have a long way to go between understanding that profit and purpose do not have to be mutually exclusive, and sometimes social entrepreneurs can get stuck in this bias. At the same time, I see from our entrepreneurs that there is an incredible force in being labelled a social entrepreneur. Once more role models step up, and if we celebrate more success stories, we will be able to stimulate the ecosystem so it does not seem so problematic anymore.
Reach for Change aims to unleash the power of entrepreneurship and innovation to create a better world for children. Why are you focusing on children?
– Children and youth our our most important resource. They are the ones who will inherit all the social and environmental problems we create, but they will also inherit our solutions. If we equip them in the best way possible, they will be able to drive the change we as adults initiate.
You also aim to bring sectors together to create social impact. In an article you say that one key challenge is that innovative partnerships don’t necessarily align well with traditional organizational structures. However, you also say that a shift has happened where more non-profits actively embrace business concepts, and talk enthusiastically about innovation and sustainable business models, and at the same time, that business leaders are increasingly preoccupied with purpose rather than just profit. Looking at the fact that we, both in Sweden and on a global scale, are facing big challenges in both social and environmental perspective: what do you think, can we continue having these separate ways of looking at business? or even having separat labels?
– There is a huge demand from future customers, employees, employers and future leaders for the corporate sector to take an active role in solving the societal challenges we face today (some research we conducted with Ipos shows that 6 out of 10 people surveyed in Sweden demand this). This demand is particularly acute from millenials and women. So business will have to take a genuine approach for driving social change or lose out. At the same time, we cannot make unrealistic demands of our businesses. They do not always have the expertise in social change and in target groups as NGOs or social enterprises tend to have. Therefore it is a win-win to partner across sectors, where each sector can leverage their key strengths. Effective – and the only way we will be able to face the challenges we face today.
What do you believe is the biggest challenge to create a more sustainable economic system?
– That is a big question. Some of our work with partnerships and cross-sector collaborations show that one challenge can be thinking that is limited to the short term or the next quarterly report. Social change is a long-term investment and needs to be backed up by long-term financial investments. We also need to set clear common goals and measure targets when we initiate partnerships, so that they are genuine and do not just become window dressing. I also believe strong leadership and role models cannot be underestimated. Social movements and mobilizing large groups of people are a great force, but we also need leaders to stand up and join the movement.
And finally, what motivates you?
– Meeting the children whose lives our entrepreneurs touch is a great motivation.
What defines good business, and how should we look at it to meet the challenges we are facing? If you have any thoughts on the topic, please don’t hesitate to contact us at email@example.com. If you want to read more about the work of Reach for Change, visit their website and read their interesting article about bringing sectors together.
Are consumers or businesses the most efficient driving force to save our planet?
Two weeks ago, we started this Issue thread related to what ‘good business’ actually means in times when we are faced with economical, social and environmental challenges around the globe. We started asking whether a sustainable also can be good business?
Many experts and climate activists agree that we can’t solely trust politicians to solve the problems related to climate change, even if it on a global scale is a very important means to reach the UN Sustainable Development Goals. In a recent article published in Veckans Affärer Anders Wijkman, the president of one of the few global sustainable think tanks The Club of Rome puts pressure on businesses, saying they are the ones able to solve the climate changes, rather than the politicians. The Club of Rome, consisting of a 100 economists, scientists and previous business leaders argue that the political movement towards a more sustainable world is too slow since some leaders of powerful nations are completely neglecting the very existence of climate change.
This inspired us to take the discussion further. If we look beyond politics and speak about businesses and consumers; who should we deem responsible to take action and force a shift towards more sustainable ways of living, producing and consuming? Everyone seems to agree many forces need to work together, but the opinions about who is the most efficient driver seems to differ.
Sweden is considered one of the world’s most sustainable countries, where industries as well as personal ways of living are shifting in ways causing lower emission. From a geographical or sector based perspective, the emission from transports (train, cars, trucks and flights), heating and other use of electricity has diminished over the recent years. If looking at it from this point of view split between all inhabitants in Stockholm, the emissions have reduced 50% since year 1990.
However, the emission caused by our consumption is not normally included in these statistics. If they were, the total emission for all Swedish citizens would be a lot higher. According to a recent study, 80% of the cities being taken into account (63 out of 79) have larger consumption-based green house gas emissions than sector-based emissions, and in many cities in Europe and North America it is even more than three times as high.
According to Naturvårdsverket, the consumption-based carbon print is approximately 11 000 kg CO2 per capita in Sweden. And even if these numbers are not completely secured it confirms the fact that consumption should be considered an important factor when talking about our national impact on the climate changes. Especially with Sweden being a nation with high thoughts of itself in regards to sustainability.
As a small country with a wealthy economy, the products we import from around the world are many and regularly. As the economy flourishes, so does consumption. Increased consumption means increased demand for goods and services, which from one perspective is for the GDP, but also rather problematic for our climate.
Taking into consideration the size and population of our country, the amount of products and services we import from around the world are very high. When measuring the total national emissions by geography, the emission from gods and services produced in other countries are impacting these countries’ total national emissions rather than being based on where the consumption takes place.
Just as Anders Wijkman believes in businesses opportunity to be the main force to act upon the climate changes, the journalist Naomi Klein, author of This Changes Everything: Capitalism vs the Climate, points out “we humans are capable of organizing ourselves into all kinds of different social orders, including societies with much longer time horizons and far more respect for natural life-support systems.” “Indeed,” she writes, “humans have lived that way for the vast majority of our history and many Indigenous cultures keep Earth-cantered cosmologies alive to this day. Capitalism is a tiny blip in the collective story of our species.” In short; consumers have a lot of power to put pressure on companies and demand greater products sourced or manufactured in a more sustainable way.
What do you believe? Are consumers or companies the most efficient driving force to save our planet before it is to late? We aim to investigate this further by talking to people of different background and believes.
Links to relevant articles: