Social Business is subject to a great deal of enthusiasm on the part of a number of actors (public and private donors, NGOs, companies…). Why is there so much enthusiasm?
Firstly, it must be said that the underlying idea of this new sector, which is to combine entrepreneurship and social impact, is particularly attractive! Social business covers a complex range of organizations, which differ in terms of their legal status, their relations towards capital and profit, innovations, etc. All these structures do, however, have one thing in common: the social or environmental issue they tackle must be set out in their social mission.
Social business fits in with the emerging global trend for responsible initiatives. Due to their financial constraints, governments are tending to rely more on the private sector in order to fulfill their prerogatives (insertion of people who are isolated from the employment market, improvement in access to health, education, etc.). Companies, for their part, are seeking to engage in new challenges (social and environmental), as well as in new markets in order to find growth drivers.
The enthusiasm for social business is comparable to what has been experienced by microfinance, which emerged in the 1980s-1990s, with the idea that loans, rather than grants, could support local initiatives and the construction of sustainable organizations. Social business seeks to find solutions to social and environmental issues, while generating income, which can open up access to innovative financing combining public and private capital, investments and grants.
Young generations, like the “gangsters” of the MakeSense network, find in social entrepreneurship the meaning they are searching for which they lack as salaried employees or in more traditional entrepreneurship, which focuses on seeking personal benefit.
Should we welcome this enthusiasm?
Of course we should! Social enterprises integrate the complexity of our global society more effectively by proposing local solutions tailored to local issues.
Innovative and strong social enterprises have come into being, like Phare in the arts sector in Cambodia, or d.light, whose solar lamps provide light for 50 million people around the world. These organizations, whether they are led by social entrepreneurs, NGOs or large corporates, are always remarkable laboratories of ideas and innovation. They call into question habits and the status quo. When one of their approaches is integrated into a public policy, it brings about a scaling up which can give rise to new hopes. For example, this is what the changemakers in the ASHOKA network seek to achieve.
However, this does not mean that we should fall into a kind of naïve optimism. The promoters’ motivations are less social and certain initiatives are sometimes a matter of “social washing”, more money being spent on communication than on the projects themselves. It is therefore normal to be concerned about ensuring that proper use is made of the financial support to the sector. It is also necessary to build a sustainable sector that provides a lasting response to social and environmental issues, by implementing effective models and practices, combining social and financial objectives in a pragmatic manner.
Why did you create this analysis grid?
In a new context, where economic models are still being built, the grid developed by CERISE and its partners gives social enterprises the opportunity of describing the managerial practices they have set up to carry out their social mission: it is what we call “social performance”. In the microfinance sector, fifteen years of exchanges between practitioners have led to the creation of the “Universal Standards for Social Performance Management”. The Social Business Scorecard (SBS) has been built on this experience and learns lessons from practices which have already been developed by innovative social organizations.
It is not a question of judging practices, but actually of providing the organization and its partners (donors, investors, regulators, for example) with an interpretation grid. By analyzing its practices in comparison with managerial practices deemed to be useful for building a social enterprise, we can firstly describe the profiles of enterprises and, secondly, verify the mechanisms which guarantee the social objective or avoid risks of abuse or excess, for example, by ensuring that the target public is reached without drifting towards richer consumers.
We can subsequently identify weaknesses, prioritize actions, and build strategic and operational plans, as with a continuous improvement system. We thereby hope to strengthen both the organization’s impacts and financial performance.
An investor or donor can clarify their strategy and target organizations in order to channel their financing and support their partners. For example, AFD uses the SBS grid in its initiative to support Social Entrepreneurship/Social Business. SBS will be used to verify and consolidate the key points identified to support projects (governance, CSR practices, management and pay policies, financial objectives, measurement of non-financial results).
How can the impact of a social enterprise be well assessed?
All impact measurements come up against the complex issue of attributing a change observed to an action. However, there are a number of methods to monitor the impact on beneficiaries: there are the “quasi-experimental” methods (ex post construction of a control group), experimental methods or “Random Control Trials” (RCTs), which build an ex ante counterfactual (random selection of clients who will or will not benefit from the organization’s actions), and qualitative methods based on sampling approaches, focusing on diversity rather than on representativeness, and protocols for anthropological and sociological studies.
Impact assessment is an important step in the life cycle of a project, which aims to solve a social problem. It may help social entrepreneurs gain a better understanding of where they stand. But for it to really bring value and provide input to a business plan, for example, it must also allow them to gain a better understanding of where they are going.
It is therefore necessary to ensure that the entire “impact chain” is more effectively integrated into the assessment (intention/mission =>activities => achievements => outcomes => changes => impact). While this logic is often used during project design, it is sometimes overlooked by external evaluators in theorizing the links between intentions, activities and expected outcomes. They focus solely on its last two links – change and impact – without being concerned about understanding whether the previous links are strong and well connected.
Yet the assessment of social performance via the SBS grid, by focusing on the processes and activities implemented to carry out the mission, allows monitoring indicators to be defined that are related to social objectives (profile of beneficiaries, satisfaction, etc.). These indicators, which are drawn from information collected regularly in-house, provide key elements for operational management. The analysis of intentions and procedures makes it possible to define the bases of an impact assessment which answers the organization’s real strategic questions.
Do you think that this work will support the emergence of social business?
I feel that the SBS tool provides structural elements for the emergence of a strong social business sector: understand, assess, improve, communicate.
First of all, the tool gives a better understanding of a social enterprise by describing an organization via its managerial practices. Consequently, it is the actors who analyze their own practices and identify, in concrete terms, the specificities of their social business, their “SB profile”.
Secondly, applying the self-assessment grid in order to define its “SB profile” allows strengths and weaknesses to be identified with respect to a catalogue of good practices, which are considered important for carrying out a social mission.
By establishing the organization’s priorities, an action plan can be produced to build its capacities. A regular assessment will place the organization in a process of continuous improvement. SBS provides potential practical solutions for the improvements which can be made. For example, it is possible to use the dimensions and criteria of the questionnaire as a basis to define a “social business” charter for the organization, which will set out the founding principles and indicators to be monitored in the impact measurement.
Finally, SBS allows a social enterprise to communicate on its performance and improvement plans, in-house (Board of Directors, management teams, employees, beneficiaries), and externally (donors and funders, general public). However, the managerial practices analyzed by SBS (strategic definition, procedures, training, performance monitoring, etc.) are comparable from one sector to another, which allows a database to be created on social performance and the development of benchmarks, situating an organization in comparison to its peers (same status, comparable size, same region, etc.).
I am convinced that these 4 elements are the pillars which will contribute to the construction of an attractive sector, made up of strong social enterprises capable of receiving the public and private financing they need, without the risk of deviating from their social mission.
Ed.: This opinion piece is taken from issue No. 20 of Proparco’s Private Sector & Development magazine
The opinions expressed on this website are those of the authors and do not necessarily reflect the official position of their institutions or of AFD.