What Is Social Entrepreneurship? A Guide

Social entrepreneurship applies the principles and guidance start-up founders and entrepreneurs use to a business that directly generates social change or impacts a social cause. A social entrepreneur is primarily motivated by a desire to alleviate systemic social or cultural problems.

In this article, we’ll explore social entrepreneurship, its differences from regular entrepreneurship, and its importance. We’ll also offer some case studies to examine successful examples of social entrepreneurship.

Social entrepreneurship defined 

Broadly speaking, social entrepreneurship is a new, innovative business venture that influences change. A social entrepreneur has a specific cause that they care about, and they develop a business model around making a positive impact. The main goal is to create lasting social change through business.

Some key areas of interest for social entrepreneurs include:

• Economic development

• Education

• Gender equality

• Healthcare

• Agriculture

• Environmental sustainability

• Renewable energy

• Community development

Social entrepreneurship can operate as a non-profit, for-profit, or hybrid business, depending on the business model you prefer and the funding availability.

Case study no. 1: Grameen Bank

Grameen Bank is perhaps the most commonly cited example of successful social entrepreneurship. In 2006, the Bangladesh-based microfinance organisation, along with its founder, Muhammad Yunus, won the Nobel Peace Prize.

Yunus understood that, due to predatory lending practices, people in poverty-stricken areas could not participate in their country’s economic systems. To build sustainable local economies, Grameen Bank provides small, collateral-free loans to people in rural communities who want to start their own businesses.

These microloans enable many women borrowers to use their skills to generate income and, ideally, become financially independent. With more capital flowing through these communities, local economies can grow. On the business side, thanks to the success of the loan structure, Grameen Bank has expanded its reach with over 2,500 branches.

Entrepreneurship vs social entrepreneurship

Like entrepreneurs, social entrepreneurs aim to create a sustainable business that lasts. However, whereas an entrepreneur’s goal is to maximise profits, a social entrepreneur’s number one concern is impact. Most other differences between the two types of entrepreneurship derive from that focal point.

Here’s a side-by-side comparison of the two:

It’s important to note that a business can be concerned with and contribute to social causes without being a social-entrepreneurial venture. Social responsibility is when a business adopts policies that positively impact society, often guided by ethics. For example, a company may donate to charitable organisations or offset its carbon emissions to mitigate environmental harm.

Social entrepreneurship in society

Social entrepreneurship works within the structures of the business world to influence social change. It’s largely associated with progress, development, and innovation. Much like start-up entrepreneurs are disruptors, social entrepreneurs disrupt the status quo of systemic inequality.

Social entrepreneurship is not a new concept. For example, some experts may consider Florence Nightingale, who created the first nursing school in 1860 and thus reformed the healthcare industry, a social entrepreneur.

However, the term 'social entrepreneurship' has only gained popularity recently. As people and scholars continue to examine social entrepreneurship, we’ll learn more about how different approaches impact society and continue to develop best practices. In the meantime, social entrepreneurs are constantly reworking their business models to meet their main goal of affecting social change.

Case study no. 2: TOMS

TOMS, a US-based footwear brand, is an example of real-time social entrepreneurship.

In 2006, TOMS popularised the one-for-one model that many social-entrepreneurial businesses later replicated. For every pair of shoes sold, the company donated a pair to a person in need.

This straightforward strategy seemed to support their ability to run a successful business by selling a product to people who could afford it and directly impacting change in communities where there was a need by providing new shoes. However, over time, experts realised that simply donating shoes wasn’t promoting sustainable change—and it may have hurt communities if the shoe donations were disrupting local shoe businesses.

In response, TOMS has adapted its giving model several times over the years. Currently, it reserves a portion of its profits for grassroots goods, partners with community organisations, and provides cash grants to support sustainable change.

Other businesses have also learned from TOMS’s experience. For example, with Warby Parker’s one-for-one programme, the company sponsors eye exams and affordable eyewear for people in need for every pair of eyeglasses sold.

Incorporating social causes into business

A social cause is at the heart of every social entrepreneur’s business vision, and many social-entrepreneurial businesses begin with that cause.

Often, the first step toward social entrepreneurship is recognising a societal problem and having a desire to solve it. As social entrepreneurs learn more about the mechanisms perpetuating the problem, they can build a business model that directly corrects those mechanisms.

Keep learning.

Learning about the social cause that inspires you and the ins and outs of launching a business is one key step toward becoming a social entrepreneur. Dive deeper into the business practices that guide social entrepreneurship with the Business Strategies for A Better World Specialisation from the University of Pennsylvania's Wharton School of Business. Over four courses, you’ll learn how to apply effective business strategies to solve real-world problems.