Three Challenges In Defining Social Enterprises

Author

Yana Ahlden Yana Ahlden

Date

November 29, 2016

by Yana Ahlden
November 29, 2016

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The Asia Policy Dialogue (APD) hosted a Symposium on Definitions in the Social Investment Space in Yangon, Myanmar on Friday November 18. We were able to welcome experts from across the Social Investment Sector in Myanmar, as well as key representatives from Singapore and Bangladesh.  The symposium, moderated by AVPN’s CEO Naina Subberwal Batra, saw passionate debate on key definitions, highlighting, yet again, the need for agreement on terminology that can be distributed for use across the region and support cohesive dialogue across the social spectrum.

Easily the most contested topic of the discussion was the definition of a Social Enterprise. Is this a social purpose organisation that is for-profit or non-profit? The core dilemma for participants seemed to be the reconciliation between the social mission and the incentives profits can offer. Those in favor of allowing social enterprises to make a profit argued that a revenue model increases the abilities of the social enterprise to become a sustainable practice and create the incentives for founders as well as future investors.

To others, the definition of social mission plus profit simply constitutes socially responsible business, which should be practiced by all businesses. Proponents of limiting social entrepreneurs from reaping profits from their endeavors argued that the role of social enterprises is generating income for community not individuals and any profit made should be poured back into the enterprise itself. With a sustainable model, this should allow the enterprise to scale its activities and increasing social impact, which, argued the participants, should be the enterprise’s primary focus.

Why is this definition important?  There were 3 key challenges that were identified that are directly impacted by this definition.   Although these were raised in a Myanmar context, it was agreed that these were common barriers across the region.

Challenge 1: Am I a Non-Profit or a Business?

The definition of the Social Enterprises drives the decision on how to register the organization as most countries still only offer two options under the law: a charity or a business.  Participants in the Round Table from Myanmar outlined the options available although all led to the same decision:  whether or not to structure themselves as a business or a charity.  The advantages and disadvantages were discussed as most participants viewed the charity structure as being too restrictive, however social enterprises, structuring themselves as a business increases scrutiny, due to an enhanced desire for accountability and transparency from investors and government.

Challenge 2: The competing agendas of the Social Investors

Participants were quick to voice the role that donors and investors play in the direction of the enterprise they support. The interest in and presence of impact investors is expanding in the region who are only interested in a social enterprise that combines impact with profit.  Therefore, these investments are in enterprises which can create scalable and sustainable initiatives that have the potential to run efficiently on their own without relying on continuous grants. However, to create the scalable business, social enterprises rely on grants.  Many of these social investors are only interested in supporting non-profits. How does the Social Enterprise reconcile these two types of funders?  There was agreement that new legislation to support these transitions is necessary for the Social Enterprise sector to thrive.

Challenge 3: Effective Engagement of Corporations

Everyone at the table saw the need to increase the engagement of corporations in social investment to move beyond the CSR model into responsible business. This could be defined as the shift from “do no harm” to “do good”. Those representing social enterprises voiced the desire that corporations do more than simply donate, hoping that supporting investment in social enterprises would result in the creation of shared value and sustainable social impact.  The challenge is that funding for social enterprises comes from their investment portfolio, whereas support for non-profits is often driven from the corporate foundation agenda. It was agreed that continual engagement to bring ideas and concepts to share with corporations can make the impact more tangible, bridging the existing gap of business and philanthropic mindsets present even in highly socially oriented corporations.

The impassioned discussions on the definition of a social enterprise and what impact this can have on long-term success highlights the need for continued engagement through the APD dialogue. AVPN is looking forward to supporting this discussion and expanding its network in Myanmar where it will focus on strengthening the social sector ecosystem through engagement with local and international social investors from different sectors to increase the flow of financial, intellectual and human capital into Myanmar.


About Author
Yana Ahlden
Yana Ahlden Partnerships and Marketing Associate AVPN

Yana is a Partnerships and Marketing Associate at AVPN. She just completed her LLM in Law and Economics at the Erasmus Mundus Programme European Master in Law and Economics. For this, she spent three months each at the University of Hamburg, the Erasmus University of Rotterdam, and the University of Haifa. Prior to her Masters she graduated cum laude with a Bachelor of Arts from Amsterdam University College in the Netherlands, for which she spent a semester at the National University in Singapore.

Raised in Germany, the United States, Argentina and Brazil while holding dual citizenship, Yana in internationally oriented and passionate about bringing parties around the world together to solve and discuss the larger problems that face our world today. She was involved for many years in Model United Nations and part of the inaugural team of TEDxAUCollege.

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