With the world becoming more and more conscious about our actions, consumers become more aware of their impact on the environment around them as well as the need to take action. As such, social entrepreneurship and nonprofit organizations are coming up in order to create a change for the good of society and the environment. Despite being a business model that has been very popular in recent decades, people sometimes confuse social entrepreneurship with traditional entrepreneurship, sometimes even with nonprofit organizations. So what exactly is social entrepreneurship and how is it different from traditional entrepreneurship and nonprofit organizations. Read this article to find out the difference between these types of models.
Generally, social entrepreneurship is an approach by individuals, groups, start-up companies or entrepreneurs, in which they develop, fund and implement solutions to social, cultural, or environmental issues. In recent years, the popularity of social entrepreneurship has been rapidly increasing, attracting the attention from many sectors. Ever since the whole world starts to recognise the importance of developing sustainably and tackling social issues for the good of our environment and worldwide inclusive growth, the term has been frequently referenced on different media platforms. As the term becomes more popular, it is usually the topic of discussion in academia and social organizations. By incorporating commerce with social, social entrepreneurship is a business model that aims to tackle social, cultural or environmental issues on different scales while still making a profit.
Traditional entrepreneurship or commercial entrepreneurship was first clearly defined around 250 years ago. However, the basic practice of entrepreneurship is as old as basic trading between people and tribes. Traditional entrepreneurship focuses solely on generating profit and standardization. Instead of bringing a solution or an innovative idea to solve issues around us, commercial entrepreneurship operates based on the generation of profit without actually taking into consideration the sustainability of their actions.
On the other hand, nonprofit organizations operate without trying to make any profit for its members. Nonprofit organizations are establishments that work for the benefit of the community or they are trying to tackle a social, cultural or environmental issue that has been going on. No matter how well they are doing, these nonprofit organizations do not claim any profit from their actions, this also applies to when these groups wind up. Organizations that we usually see on social media or the internet such as WATERisLIFE, Safe Night or Human Rights Campaign are some typical examples of nonprofit organizations that work to help others as well as addressing problems we are facing and call people for action through campaigns.
How are the three types of enterprise different from each other?
Principally, both social entrepreneurship and traditional entrepreneurship generate profit through commercial strategies and they collect the profit for themselves. Essentially, due to the difference in their vision and their operating model, social entrepreneurship and commercial entrepreneurship face completely different challenges when it comes to resource mobilization. For example, social enterprises have an inability to compensate their staff as competitively as other commercial enterprises which makes it harder for these companies to develop because of their lack of talented staff, thus they would usually have to rely on people’s interest to work for a social cause. In stark contrast, all profit from a nonprofit organization comes right back into the services that the group provides. Therefore, these organizations' income comes from fundraising efforts as well as government grants that support these groups' action and the service they provide (depends on organizations, some don’t provide services).
Mission & Vision
Despite the similarities in how these organizations work, vision is a distinguishing difference between these models and their mission. Without a doubt, traditional entrepreneurship are business models that operate with the only aim of making a profit from the action of providing a service to others. In contrast, social entrepreneurs focus on resolving a social, cultural or environmental issue that they believe in while making a profit out of the services they provide. Different social enterprises have a different amount of profit allocation to their social causes but in general, they all have a social cause of their own, these could be composed of inequality, education, fair trade or environmental. Last but not least, nonprofit organizations devote almost all of their income into their beliefs which makes it completely different from traditional enterprises which are for profit organizations. All in all, traditional entrepreneurship and nonprofit organization works for completely different goals. Meanwhile, social entrepreneurship combines the vision of these two models into one.
In a nutshell, though there are similarities among these models, they are essentially different. Despite having disadvantages of their own, social entrepreneurship and nonprofit organizations are the future trend of development in the future as people become more conscious of the need to protect the environment and progress inclusively. Check out TGC’s website for social entrepreneurship programs to learn more about this model and how you could impact the world as a global citizen.