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The Rise of Social Enterprises

The Rise of Social Enterprises

By Sun Yong Kim

Edited by Anjini Chandra,Senior Editor, The Indian Economist

In an age where governmental ineptitude and private sector disengagement have left many social issues unanswered, the rise of the social entrepreneur shapes up as perhaps the greatest ally the socially disadvantaged will ever meet. Armed with the financing and strategic tools of social impact financing and innovation consulting, social enterprises have been able to create innovative solutions to the social dilemmas that other stakeholders have failed to address. The story of Ahmed Khan is a testament to this fact.

Plastic Roads

Ahmed Khan, an Indian entrepreneur troubled by the inadequate road infrastructure inflicting his native homeland, designed a novel plan to build superior quality roads by creating ‘Plastic Roads’. The idea here is simple. Mixing plastic with asphalt forms a compound called polymerised bitumen, which is capable of withstanding India’s prolific monsoon rains far better than current pavements due to plastic’s tendency to act as a binding agent and being water resistant.

After initially experimenting on potholes in Bangalore City, Ahmed’s company KK Plastic Waste Management has produced more than 1,200 kilometers of road using 3,500 tonnes of plastic waste, primarily in Bangalore in a pilot association with the Bangalore Municipal Corporation (B.B.M.P). Plans have now been put in place with co-ordination from the Bangalore Development Authority (BDA) to turn Bangalore into the world’s first plastic free city, using Khan’s road model as a central tenant.

Social Impact Financing: The key to rising Social Entrepreneurship

Ahmed Khan’s work presents a powerful story of how individual entrepreneurial action can deliver the necessary social impact against the backdrop of an ineffective, and in India’s case, corrupt public sector infrastructure. Yet, Khan’s great work would not have been possible had it not been for the rise of social impact financing, an interesting phenomenon which has negated the scalability issue associated with social enterprise financing.

Until recently, it has been an unfortunate reality that social projects such as Khan’s ‘Plastic Roads’ have often lacked the scalability that investors often desire to diversify risk profiles because of the inherently high risk nature of such social ventures, which lack case study precedents. The resulting capital gap has been the principal reason for why 50% of all social enterprises fail in their first year, despite the inherent social value that their endeavours will undoubtedly bring.

The introduction of social impact financing options such as social benefit bonds, have however gone a long way to negate these concerns. By pooling investment sums from a plethora of social investors, social benefit bonds achieve the very diversification that institutional investors often desire, to align socially conscious investment decisions with market mechanisms.

In this way, the social impact bond represents a wave opportunity to attract funding for high risk social ventures, that have previously been shunned of capital due to the scale issues. Issues such as finding a cure for Alzheimers Disease, Behavioural Disorders and Brain Science research have long been neglected areas of science, as a result of the pre-existing capital gap that dominated the pre- social impact bond environment.

The Innovation Consultant: Strategic Support System for Social Entrepreneurs

Another important development for the social entrepreneur has been the rise of the Innovation Professional. Innovation consultants who assist entrepreneurs with planning a structured, strategic approach to their innovative endeavours have become instrumental for social entrepreneurs who often lack the business know-how to take their innovative idea to market.

Whilst this structured approach to innovation may indeed conflict with the inherently freelancing perception that is entrepreneurship, there are several reasons why such a move toward structured innovation may prove to be a positive.

Firstly, innovation consultants help social entrepreneurs maintain their commitment to innovation over the long term. They assist social entrepreneurs in achieving the balance between innovation and the need for business sustainability, by helping entrepreneurs create a strategic vision that communicates that idea and which reminds the business about the importance and relevance of innovation. 3M’s goal that 30% of its revenue comes from disruptive products is a perfect illustration of this fact.

However, more importantly, innovation consultants assist entrepreneurs in choosing between their numerous visions, so as to structure the creative innovative mind towards more feasible, marketable ideas. Innovation consultants also help social entrepreneurs establish the necessary processes to differentiate between feasible and non-feasible social innovations, that are consistent to the structured approach to innovation that these consultants offer.

The Future

Armed with the financing and strategic tools of social impact financing and innovation consultants, social entrepreneurs have and will continue to combine the financial acumen of the private sector, with the drive and passion of the NGO sector to create the ultimate social impact. If the past is anything to go by, the future will only increase our fascination with social enterprise.

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