Social entrepreneurship: Beacon of hope for Sri Lanka’s recovery

 Social entrepreneurial approaches often engage with local communities at the grassroots level in their development initiatives

Every form of entrepreneurship serves a social purpose. However, the hallmark of social entrepreneurship lies in its ability to combine social purpose with business practice to effect social change. The process of social entrepreneurship embedded the creative use of resources to generate both economic and social values

Sri Lanka stands at a critical crossroads in the wake of different reasons such as severe economic instability, social inequality and environmental crises. While many traditional approaches are falling short in this situation, it is time for Sri Lanka to gain traction for a new paradigm of ‘social entrepreneurship’ to come out of this crisis. 

In the last two decades, this innovative business model has continuously been examined through many management perspectives to comprehend their significant positive interventions for society by leveraging market-centred mechanisms. In particular, the growing pressure on people to do something for society, combined with the need for financial turnover to survive is one of the main drivers of the emergence of social entrepreneurship, especially in the context of market failures, government failures, economic downturns and global crises. Hence, social entrepreneurial business models, blending profit with purpose will lead nations to a transformative path of recovery. 

As Sri Lanka seeks to come out from its current crisis, social entrepreneurship can be identified as a promising avenue for its sustainable recovery. Social entrepreneurship not only creates short-term impacts but also creates ‘social change’, a transformation of social structure, social behaviours, norms, values and systems driven by the social value creation process of social entrepreneurship and ‘social transformations’, systematic deep changes to how the society operates such as civil right movements. 

Correcting market failures in favour of social welfare

In the economic world, the concept of “value” originated with the benefit. Further, shareholders’ financial performance was the primary metric used to determine a company’s success. They contend that a strict definition of value creation only links it to immediate financial results for shareholders, whereas customer needs and other factors also play a role in a company’s long-term success. However, it was questioned the role of business entities in the development of sociopolitical thinking directed towards correcting market failures in favour of social welfare. The debate on sustainability disputes the one-dimensional pure economic value creation perspective and adds strength to the multiple value creation perspective. These were the results of the emergence of new models in the corporate culture such as Corporate Social Responsibility (CSR) and alternative business models such as Social Enterprises which are often driven in Europe by nonprofit organisations. 

Every form of entrepreneurship serves a social purpose. However, the hallmark of social entrepreneurship lies in its ability to combine social purpose with business practice to effect social change. The process of social entrepreneurship embedded the creative use of resources to generate both economic and social values. However, this is a risky endeavour that constantly needs a delicate balance between commercial and social concerns. Its primary mission of creating social value as opposed to pursuing individual financial gains makes social entrepreneurship vary from every other form of entrepreneurship. What conventional entrepreneurs perceive as a barrier or a liability, social entrepreneurs seek as an opportunity. 

Beyond the traditional unilateral view which sees social entrepreneurship as an activity that creates social and economic value, it’s increasingly recognised as a bilateral which also develops new opportunities to create value for society through commercial and market-based activities. Over time, researchers discussed beyond the confines of social welfare and developmental economics and discussed the new mindset of the “world’s poorest” as “profitable consumers”. 

To this end, social entrepreneurship brings equity, social inclusion and development. Social entrepreneurship is a dynamic field involving positive societal changes through innovation and sustainable business solutions. It blends entrepreneurial ingenuity with a profound commitment to address social issues. In doing so, they blend their social mission with entrepreneurial principles. While traditional entrepreneurship is predominantly profit-driven, social entrepreneurship principally focuses on societal value generation. 

Economic resilience through social enterprise

Social entrepreneurial business models are a good solution to generate employment opportunities as a solution to one of the most pressing challenges of high unemployment in Sri Lanka. The most important thing about this business model is, that they often serve underserved communities where the traditional job market is not very interesting to attract or serve. Bangladesh social enterprise ‘Grameen Bank’ which was founded by Nobel Laureate Muhammad Yunus, well exemplifies how social enterprises can resolve deeply embedded societal problems and how this concept can uplift economies. 

While standing as a scalable and replicable solution it enables disadvantaged people to improve their economic standing which not only provides financial inclusion but also empowers millions of impoverished individuals by advancing the entrepreneurial spirit to start businesses, significantly reducing poverty and stimulating economies. It is high time for Sri Lanka also to think about such innovative business models without promoting a ‘poverty mindset’ among underserved communities and to eradicate the dependent mentality.

Moreover, attracting impact investing is a significant opportunity for Sri Lankan social enterprises. Impact investing is a rising concept where investors seek both social value creation and financial returns. According to Brainy Insights estimates the $ 3 trillion in 2023 global impact investing market will reach $ 7.78 trillion in 2033. This trend can bring much-needed capital into Sri Lanka, fostering enterprises that address social and environmental issues while being financially viable. Currently ‘Sarvodaya’ provides financial services to underserved populations while supporting economic growth at a grassroots level. 

Addressing social issues through social entrepreneurship

Social entrepreneurship is significant for developing countries like Sri Lanka where individuals are strongly affected by many deep basic needs and problems. Social enterprises in developing countries have to focus on the primary level of social issues while developed countries focus on the secondary level of social issues. As an example, poverty elimination in Sri Lanka is a social value while obesity is a social problem for any developed country. Social entrepreneurship offers affordable products and services to improve living standards directly and provide innovative, cost-effective solutions to bridge the gaps in the market to break the cycle of poverty and promote eco-friendly practices and climate actions such as organisations like Carbon Consulting Company (CCC) which is necessitated because Sri Lanka is vulnerable to climate change and environmental degradation. 

Social entrepreneurial approaches often engage with local communities at the grassroots level in their development initiatives. It ensures social entrepreneurial solutions are tailored to specific social issues by fostering a sense of ownership and participation among beneficiaries. ‘Good Market Sri Lanka’ is a prime example of a platform for local social entrepreneurs to create a community-based marketplace that promotes sustainable consumption and production while strengthening community ties and enhancing local economic resilience. ‘TOMS shoes’ business model globally distributed over 100 million pairs of shoes by showing how much social impact can be created by a business model while generating profits.

Creating an enabling ecosystem

Even though Social Entrepreneurship is relatively new as a “concept”, the phenomenon of mixing profit and non-profit is not new to Sri Lanka. The concept is deeply rooted and has a long and distinguished history in the form of cooperatives, thrift societies, and welfare and development societies to employ and leverage market mechanisms to address social problems. Less than a year after the 2017 December coalition of 17 countries including Sri Lanka at the Social Enterprise World Forum, the Sri Lankan Government also announced their support for the development of social enterprises for the first time in Sri Lanka. According to the survey conducted by the British Council in 2017 partnered with both international and local partners interestingly found that there has been a surge in social entrepreneurship across Sri Lanka with new social enterprise establishments in all 25 districts. 

Interestingly in the past decade, Sri Lanka’s social entrepreneurship sector has become vibrant and increasingly diverse. They have adopted a range of business models, operating in multiple locations while addressing the issues at the village, national and, in some cases even international levels. However, understanding the phenomena of social entrepreneurship and social entrepreneurs was limited and we need to create a supportive ecosystem that nurtures and scales social enterprises in Sri Lanka, to fully harness the potential of social entrepreneurship. 

This can be attained through workable and diligent policy frameworks and legal frameworks such as introducing favourable funding streams, favourable tax regimes, support mechanisms and introducing legal recognitions and benefits for social enterprises through structures like Community Interest Company (CIC) in the UK. Investing in capacity-building programs is another way to harness social entrepreneurship. In capacity building, academic institutions should play a vital role by incorporating social entrepreneurship into their curricula and equipping students with the skills to start and business that addresses social issues while creating economic value. 

Unfortunately, awareness about this innovative business model is somewhat lacking even among the academia in Sri Lanka and only a few events like the Sri Lanka Social Enterprise Summit by the University of Peradeniya and Uva Wellassa University of Sri Lanka facilitate networks and platforms for social entrepreneurs, researchers, practitioners and organisations to collaborate, share best practices, learn and showcase their work. Further, a few organisations like Lanka Social Ventures, British Council Sri Lanka, Chrysalis and Social Enterprise Lanka offer training and mentoring programs for social entrepreneurs. 

Such initiatives can robustly pipeline capable social entrepreneurs in Sri Lanka because many of the Sri Lankan social entrepreneurs, themselves didn’t recognise them as social entrepreneurs due to a lack of awareness, though they met many of the defining criteria academically. Therefore, it is vital to recognise their capabilities and create fertile ground for them to grow. This social entrepreneurship journey is a collective one. Together, we could steer Sri Lanka towards a sustainable and inclusive recovery. 

References:

Bellostas, A. J., López-Arceiz, F. J., & Mateos, L. (2016). Social Value and Economic Value in Social Enterprises: Value Creation Model of Spanish Sheltered Workshops. Voluntas, 27(1), 367–391. https://doi.org/10.1007/s11266-015-9554-6

British Council. (2014). What will Social Enterprise look like in Europe by 2020? Social Entrepreneurs: Have Your Say in Strasbourg 16-17 January 2014. www.britishcouncil.org/europe/our-work-in-europe/social-enterprise

British Council; UNESCAP; Lanka Social Ventures. (2017). The State of Social Enterprises in Sri Lanka. https://artnet.unescap.org/sti/publications/books-reports/state-social-enterprises-sri-lanka#:~:text=It estimates that today there,objectives they aim to achieve

Hietschold, N., Voegtlin, C., Scherer, A. G., & Gehman, J. (2023). Pathways to social value and social change: An integrative review of the social entrepreneurship literature. International Journal of Management Reviews, 25(3), 564–586. https://doi.org/10.1111/ijmr.12321

Neessen, P. C. M., Voinea, C. L., & Dobber, E. (2021). Business models of social enterprises: Insight into key components and value creation. Sustainability (Switzerland), 13(22). https://doi.org/10.3390/su132212750

(The writer is Lecturer at the Department of Management Sciences, Faculty of Management, Uva Wellassa University of Sri Lanka.)