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Can social entrepreneurs make money and do good at the same time?

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This article was published in the 29-May-2014 issue of Finweek Magazine

When you hear the words “social entrepreneur”, what image comes to mind? For many of us, it’s the founder of a non-profit organisation (NPO) trying to do good but each month battling to raise enough money to cover their costs, relying on volunteers and unable to pay anyone a salary, including themselves. These untenable organisations hang on precariously from month to month. However, social entrepreneurship doesn’t have to be unprofitable or unsustainable. Author Thomas L. Friedman summed it up brilliantly when he said that social entrepreneurs should  “combine a business school brain with a social worker’s heart.” We unpack some of the misconceptions in this space and speak to two inspiring social entrepreneurs who are running impactful businesses sustainably.

Shona McDonald, Founder and Managing Director of Shonaquip

In 1982 Shona McDonald’s daughter Shelly was born with cerebral palsy. Shona committed herself to making life better for Shelly. After becoming involved with a NPO where she interacted with other parents of children with disabilities, she started designing and making special devices for children with disabilities. In 1992, Shona founded Shonaquip as a social enterprise focused on designing and making innovative wheelchairs and posture support devices, and providing accessible community-based support services and training.   Shonaquip’s aim? To empower and improve the quality of life of children living with severe disabilities. Says Shona: “I saw an opportunity to create appropriate wheelchairs, services and training solutions for Africa. However, I  wanted to start Shonaquip for personal reasons. I wanted to change the perceptions about people with disabilities, and the way parents with disabled children were informed and supported.  But I didn’t want to do this un-sustainably by depending on hand-outs.”

This innovative organisation and its founder have won numerous awards in South Africa and abroad: the Design Indaba Innovation Award 2014, Ashoka Fellow 2012, the 2011 Shoprite Checkers Women of the Year Award  in the Socio-Economic Business Developer category, the World Economic Forum’s Outstanding Social Entrepreneur for South Africa 2010, Schwab Fellow 2009, and Endeavor Entrepreneur 2008. To name just a few.

And yet despite all these accolades, Shona is refreshingly humble. When we asked her about  the achievements and milestones that she is particularly proud of at Shonaquip, she didn’t mention one award. Instead she said: “Shonaquip been around self-sustainably for over 20 years and we continue to achieve our goal i.e. improving the quality of life of people with disabilities. We’re continuing to drive our social purpose against all odds, keeping true to our original goal.” Not an easy feat for any entrepreneur.

Louise van Rhyn, CEO and Founder of Partners for Possibility and Symphonia for South Africa

Partners for Possibility (PfP) is the core programme of Symphonia for South Africa (SSA). SSA is a national NPO and PBO, based in Cape Town. Their bold, audacious goal? Quality education for all children in South Africa by 2022.

PfP began in 2010 when Louise van Rhyn (its Director and Founder) became the first business leader to partner with a school principal, with the goal of improving their school’s education outcomes.

So what exactly is PfP? It is a home-grown, innovative programme to address South Africa’s desperate education crisis one school at a time. As Louise says, it’s a bold way of “redefining Corporate Social Responsibility (CSR), moving away from cheque-book philanthropy and dumping money and goods on under-performing schools, to tapping into the skills, knowledge and experience of passionate business leaders in the organisation”. According to their website, the PfP programme sets up a partnership between a skilled, experienced business leader and a willing school principal from an under-resourced school. The two becomes PfPs for one year. Together they complete a customised leadership development course and get professional coaching from an experienced learning process facilitator. PfPs are brought together into a Leadership Circle, comprising 8-10 similar partnerships from the same region. Each Circle is an incubator, helping its members come up with unique improvement plans to solve their own specific challenges. What makes this mix so potent? It’s the blend of business skills, knowledge and grassroots experience,  plus peer and organisational support. The PfPs also actively involve their own communities in the implementation of their plan. This journey enables principals to become powerful change leaders in their schools and communities, instead of the despairing, overwhelmed principals they often were before joining the PfP programme.

Since 2010, PfP has rapidly grown to 170 partnerships between principals and business leaders countrywide.

The PfP programme and its founder have received many awards: the Feather Award in the category of Entrepreneurial Woman 2009, the Ogunte Womens Social Leadership Award for Campaign Leader 2012 and the Blue Dart CSR Award for Social Entrepreneurship 2012. With endorsements from household names such as Archbishop Desmond Tutu, Tony Leon (PfP’s patron), Dr Mamphela Ramphele, Trevor Manuel, Clem Sunter, plus many more, the programme is going strong.

We spoke to Louise and Shona about social entrepreneurship, the misconceptions in this space, and how they run their for-good businesses sustainably.

  1. There is a widespread view that social entrepreneurs run NPOs and don’t make money.  Why do you think this is? What are your thoughts on this?


Shona: “It is based on a misunderstanding of what social entrepreneurship is. An NPO is the total opposite of a for-profit business.  The space in between represents  a  significant continuum of social enterprise activity ranging from self-subsidising NPO’s, sustainable NPO’s, hybrid social enterprise, business for good and business that does not harm.  Activities and opportunities in this space are not yet  clearly defined, nothing is just black and white.

Because it’s a fashionable word, both corporate and government are putting  a lot of pressure on NPO’s to embrace income-generating activities and become more financially self-sustainable.  But this is not always possible because, in many cases, the work they carry out is focused on areas that demand reliance  on grant money and donations, They are not set up to generate income through enterprises activities but rather geared to deliver on serious gaps in social services and there need to focus entirely on social impact.

Shonaquip is set up from the start as a business with a purpose to drive social change, and make strong social impact. I didn’t want to be entirely reliant on funders and donors, I wanted to be beholden to myself. So I chose the hybrid model of an income-generating business and an NPO. Our business model addresses social change as the core of its activities and sometimes at the  expense of the business.  The NPO and the children it serves are ultimately the beneficiaries of  a sustainable high impact business.“

Louise:  “Social enterprises are firstly for-purpose but they also need to be self-sustaining. Our challenge in South Africa is that our accounting systems don’t really enable for-purpose kind of organisations. We also have BBBEE legislation that makes it necessary for social enterprises to be registered as PBOs (Public Benefit Organisations) and it is difficult to get that done with a for-profit. Most successful social enterprises implement a hybrid model and have 2 legal entities: a for-profit and an NPO.”

  1. Why is it that capitalists on Wall Street and worldwide can run incredibly profitable businesses without guilt, and yet social entrepreneurs who are addressing a real need and doing good, seem to feel guilty about charging?


Louise was outspoken on this issue: “I think this is a mind-set and an expectation that must be challenged. At Partners for Possibility we are very clear that we are offering a great opportunity for business leaders to learn about leadership and we have no qualms about charging a fee for this. However, we have developed a cleverly-designed process that enables us to have maximum impact at minimum cost. So our offer is typically a better value-for-money option than those offered by for-profit organisations or even traditional NPOs.”

  1. For aspiring social entrepreneurs, any suggestions on how to create a viable, sustainable business with a solid revenue model while still having a social focus? 


Louise: “This is the holy grail that we are all searching for: To provide a service / product that will have a social impact but be able to charge for it (so we also have to show the value to the buyer).”

Shona’s advice was to just focus on creating businesses for good.

She was also careful to voice her reservations about the term “social entrepreneur”: “Nowadays the label of social entrepreneur is fitted to anyone who wants to start something new. The more people who want to become entrepreneurs and want to leave the world a better place that how they found it , the better – the label does not matter.

If anything I think the term social enterprise has become so confused with NPO that it is creating a barrier to enterprises obtaining the working capital, which would provide them with opportunity to scale the impact of their work.

  1. What structures and business models does your organisation have to ensure it is sustainable and income-generating?


Shona: “At Shonaquip we use hybrid legal entities to achieve our goal of business with a social impact agenda. Shonaquip is a Level 2 BBBEE company that designs and manufactures wheelchairs and generates income. We also have a foundation NPO/PBO called Uhambo that attracts donor funding. In addition to this raised-income component, it also earns income through its own income-generating activities . Shonaquip and Uhambo are two completely separate legal entities with separate income streams but sharing a common purpose.”

Louise: “We have been forced to register Symphonia for South Africa as a NPO and PBO so that we could benefit from the BBBEE codes. However, we very intentionally operate as a social enterprise with a goal to be financially self-sustainable, rather than being dependent on charitable contributions. We have pitched our leadership development offering against the best of the world’s offerings and have actually won some awards for it.”

 

So, yes, it CAN be done. Social entrepreneurs CAN make money and do good at the same time. And they should not feel guilty about charging for the good they do and the real value they add to people’s lives. Certainly, they have far more right to than most for-profit corporations.  Author Richie Norton captured it brilliantly when he said: “Start projects that motivate you to save the world and simultaneously make you money (and create mindshare) for your company. Social innovation makes magic happen.”



The lingo in the social entrepreneurship terrain

1. Business for Purpose (also called Conscious Capitalism): according to John Mackey co-CEO and Founder of Whole Foods, this is about “aspiring to do good, while doing business.”

2. Non-Profit Organisation (NPO) or a Not-for-Profit: according to Wikipedia, this type of organisation uses extra revenues to accomplish its goals instead of distributing them as profit or dividends.

3. Public Benefit Organisation (PBO):

  • a non-profit company where a memorandum of incorporation is its founding document
  • a trust where a trust deed is its founding document
  • an association of persons where a constitution is its founding document.

A PBO is exempt from income tax. PBOs must carry out PBAs (public benefit acts). These can involve Welfare and humanitarian, Health care, Land and housing, Education and development, and so on.

4. Social Entrepreneurs are people tackling society’s problems with innovative and entrepreneurial solutions, according to the Social Enterprise Academy’s glossary. They may create social enterprises, NGOs, private companies or work in larger companies to accomplish their goals.

5. Social Enterprise is a way of doing business that makes positive social and/or environmental changes. Social enterprises believe there are other things as critical as making profit. These may be working with homeless people, or young people with problems, or helping the world’s poorest people break out of poverty. There may also be an environmental aspect, such as motivating people to recycle.

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Author: Colette Symanowitz

Managing Director of www.BeatingBullies.com and www.MBAconnect.net. Passionate about entrepreneurship, personal branding and networking. I also tweet under @mbaconnect_net and @Beating_Bullies

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