At the 2017 WINGSForum session on ‘Social problems: business solutions: myth or fact?’, the panel discussed questions about social enterprises and their interaction with the philanthropic sector. Topics discussed included the question of can social enterpreneurs help solve social problems? Should they be funded by philanthropists although they might earn a profit? Are business models more effective than philanthropic activities in making an impact?
The panel, consisting of Matias Bendersky of Inter-American Development Bank, Dominique Lemaistre of Fondation de France, and Edwin Ou of the Skoll Foundation, more or less agreed that there were no complete black-and-white answers to the posed questions, but that social entrepreneurship and philanthropy can go hand in hand given the right circumstances are in place, and that each party has their own role to play.
One might ask a more fundamental question, seen from a foundation perspective: Why consider social entrepreneurship as a tool for solving social or environmental problems?
Well, it depends on the problem you want to solve. It also depends on the context, the alternative solutions, and the required philanthropic investment measured against the impact return you can expect to get.
Social entrepreneurship is basically a potential tool in the philanthropic toolbox. The experience with this type of companies in a philanthropic context is relatively new, and the Skoll Foundation are one example of a more systematic use of this business model.
One of Skoll Foundation’s main arguments of using social entrepreneurship as a vehicle to make a change is the entrepreneurs’ innovative approach to solve problems.
As a foundation, it is desirable to scale your activities and impact, and given that the social entrepreneurs can create and deliver upon a new way of doing things and make an impact, it is an attractive ‘philanthropic business model’ to test new solutions. If the entrepreneurs find the way, the scaling up is more a questions of more resources to do so, and eventually to let the market take over.
So, in that respect, social entrepreneurship can help close the gap between the public and private sector and act as a catalytic mechanism to solve or reduce social problems and in best cases fix ‘failures’ in the systems.
However, this applies only under certain conditions – if the social issue, for instance poverty, is huge in a populous country, the scalability is more likely than with issues and in smaller countries where problems are more scattered. If the situation concerns more specific problems in a more isolated context, the model might apply, but scaling is much more difficult.
It will be interesting to see the development in this field over the coming years alongside other mixed financial and strategic instruments, such as capitalist philanthropy, corporate philanthropy, mission-driven, and impact investments – all varied forms of philanthropy, which are on the rise.
Definitely the match of what could be called ‘classical grantmaking’, and business-oriented models, will be an effective and more sustainable way of of solving social problems in many cases. But business solutions will always be a tool, that should be evaluated against the specific problem issue and the context and its alternatives before it should be applied, so it is with reference to the WINGS panel discussion that it is neither a myth or a fact that it will work out.
Jens Böhme is Head of Philanthropy at Realdania in Denmark.
You can find more coverage from the WINGSForum 2017 here.