A Taxonomy of Social Entrepreneurship

In a recent blog post, my colleague Molly Brister investigates the rise of social entrepreneurship, which she rightly characterizes as a phenomenon whereby local actors are able to achieve development goals or address social and economic issues when “the government may not have the capacity or ability to do so.” Having recognized the power of social entrepreneurship, many donors are eager to provide needed resources, whether financial or technical, to further these initiatives. Indeed, supporting social entrepreneurship is an attractive area for companies seeking to maximize the impact of their corporate social responsibility (CSR) dollars, as mentioned by Anna Nadgrodkiewicz in her piece on recent trends in CSR.

But in analyzing the social entrepreneurship landscape, one quickly sees that the term means different things to different groups. As Brister points out throughout her blog, the players here include “for-profit companies, nonprofits and NGOs, or even… existing resources… in government.” The landscape can be difficult to navigate, with overlapping understandings that can be difficult to unpack. To keep the conversation going, I propose a small taxonomy of social enterprise and social entrepreneurship.

In the first category I would place activists (civic, environmental, human rights, health, and so on) using entrepreneurial methods and approaches to achieve social aims. These are non-profit undertakings that seek to improve upon previous waves of activism by leveraging social media and building strong partnership with a range of stakeholders. They are often strongly data-driven, and are not afraid to take risks, fail and start over. Think of this as activism 2.0. These are non-profits, funded through charity, donations, grants, or volunteer staff time.

In the second category fall initiatives that aim to achieve social ends by employing market mechanisms. How to get villagers to value clean water? How to get urban residents to dispose of waste safely? How to improve healthcare provision for the poor? Injecting an element of pricing will often more effectively allocate resources and improve service delivery, and ensure that recipients value the service. These are revenue-generating, project-oriented undertakings – with two subcategories: for-profit and not-for-profit (cost-covering). Those that are for-profit may reinvest profits into the enterprise or pay returns to founders or investors.

In the third category I would place for-profit companies that generate a positive social return in addition to earning financial returns for founders or investors. These are companies that see an unserved or under-served market and fill a need in a way that produces wider benefits – bringing electricity to previously unwired villages, or recycling computers for sale in schools that have not been wired, or selling affordable malaria nets or pharmaceuticals or personal hygiene products to reduce instances of disease. There is a market demand here that a company meets, which also helps address a social or economic gap.

My aim with this taxonomy is to note that NGOs, major donors, multilaterals, and corporate CSR leaders all have different aims and organizational strengths. Knowing what they aim to support (and how) could help them find their way to designing appropriate programs, given that “social enterprise” and “social entrepreneurship” are not one-size-fits-all descriptors.