Even the Asian Development Bank (ADB) is excited about social enterprises these days. According to Bart Edes, ADB’s director of poverty reduction, gender and social development, a social enterprise is either a business-oriented not-for-profit organization, or a mission-oriented for-profit enterprise. “It has a social or environmental mission—or both—at the core of its work and seeks to operate in a financially sustainable manner,” he said. Collectively, these social enterprises “have improved the lives of millions of people in developing Asia by creating livelihood opportunities and expanding access to affordable essential services” (Edes, 2013).
Since many social enterprises operate in a limited scale, they often encounter the same challenges faced by typical small- or medium-scale enterprises (SMEs). After all, they both operate within the same business environment.
Social enterprises, for example, seek to develop product ideas that make use of indigenous materials so as to develop industries in their target communities. Some develop products that address both social and environmental concerns. While coming up with creative designs might be easy for Filipinos, developing production processes that will generate commercial quantities at a reasonable cost is another thing. At the onset, social enterprises already incur higher costs because they commit to pay fair-trade prices for products that they source from poor communities. This is a valuable lesson learned by Jacinto & Lirio, whose luxury bags made of water lily had a very small niche market, and could, therefore, not be sustained without additional income from an expanded product line.
Fortunately, other social enterprises have shown that pursuing both economic value and social value could be done, with some initial support. Among these budding enterprises are those incubated at the Gawad Kalinga (GK) Enchanted Farm in Angat, Bulacan (e.g. Bayani Brew, Golden Duck, Plush and Play). The goodwill generated by the ‘GK brand’ provides these businesses access to market that they could not have easily developed on their own.
For these social enterprises to be financially sustainable, however, they must be able to generate the resources they need to continue their product development efforts, to expand their capacity, and to reach new markets, in addition to financing their regular operations. This is where impact investors can come in.
According to the ADB, impact investors seek investments “with demonstrable, positive social and environmental impact.” These include development finance institutions, foundations, investments funds, and high net-worth individuals.
According to Edes, impact investing “holds the potential to channel large-scale private capital into initiatives that address some of the region’s most pressing challenges.”
I wonder whether La Salle alumni with successful businesses might want to channel some of their philanthropic funds to social enterprises or whether corporate foundations of large firms might want adopt social enterprises as part of their portfolio of programs. Aside from providing financial support, our alumni can also share their expertise in marketing, finance, and strategy so as to enhance the business acumen of social entrepreneurs.
Raymund B. Habaradas is an Associate Professor at the Management and Organization Department of De La Salle University, where he teaches Management of Organizations and Management Research. He welcomes comments at email@example.com. The views expressed above are the author’s and do not necessarily reflect the official position of DLSU, its faculty and its administrators.