Why social enterprise could be the next boom

“Capitalism has failed New Zealanders.”

So said newly elected New Zealand Prime Minister Jacinda Ardern as she laid out plans for her first hundred days in office. 

Once upon a time the prospect of a new leader openly trashing the founding idea on which the world economy works would have been controversial. These days it barely raises an eyebrow. 

“Social enterprise has been growing for some time and presents a much kinder face of capitalism.” - Tom Cropper

Everywhere you look in the world, capitalism is facing accusations of crisis.

The Paradise Papers shed light on just how far the richest people in the world would go to hide their wealth from the tax man. People are angry and are making their voices heard.

The Occupy movement, Brexit, Trump, the rise of Bernie Sanders and the election of Ardern herself – they all owe something to disillusionment with the establishment.

Rightly or wrongly, many people have come to view capitalism as an inhibitor to public welfare. Capitalism, it seems, boils down to profits being privatised by the few, losses being socialised and paid for by the many.

On the up

So, what’s the answer? It may be more capitalism – but different. A few weeks before Ardern’s election, Christchurch played host to the World Social Enterprise Forum. It revealed a sector on the up: vibrant, optimistic and convinced its time had come.

Peter Holbrook, chair of one of the largest support organisations in the world, summed the challenge up nicely.

“Just eight people own more wealth than the 3.5 million poorest people in the world,” he said in his address to the event.

“There’s no sign of that being tackled,” he explained. “We’re at a loss about how to achieve that. Is it any wonder that we are seeing social unrest?”

Social enterprise has been growing for some time and presents a much kinder face of capitalism. It focuses on the idea of combining business with a social good.

One of the most successful has been TOMS Shoes which use the ‘buy one, give one’ model. For every shoe they sell, they donate a pair to someone in need.

In New Zealand Eat My Lunch is following the same principle – for every lunch people buy they will donate one. It’s a win/win model – the more money they make the more good they do.

Another big success story is Project Everest which builds commercially sustainable solutions to help communities in the developing world.

Although starting from a small base, it is growing more quickly than founder Wade Tink could have imagined and is already turning over more than a million dollars.

A growing market

Success stories such as these show what can be achieved with a little imagination and perseverance; and interest is certainly growing.

In New Zealand, Australia and around the world the number of social enterprises is on the rise. Young people increasingly say they would like to start their own business and that they would like that business to have a positive social impact.

Impact investing is also growing rapidly with some analysts predicting it could become a new asset class in its own right.

According to figures from the Global Impact Investing Network, assets under management are growing at 18 per cent year on year, and more investors say they want social as well as financial returns.

There is an enormous opportunity for growth and a growing number of social enterprises are starting to demonstrate workable and profitable business models. They are helped by a market which is increasingly receptive to products and services which have a positive social profile.

Fair Trade has progressed from a niche sector into a multi-billion dollar business.

Bumps along the way

Even so, social enterprise is still developing. For every success story, there are many which never get off the ground.

While awareness is growing there is still plenty of confusion in the wider business world which can create problems, according to Michelle Sharp of Kilmarnock Enterprises.

“Often we find people don’t understand what we are,” she said. “We get challenged for being too social and we get challenged for being too commercial.”   

Greenwashing is also a major concern. The strength of the social value market encourages a less than honest approach in marketing. Brands often make grand claims which can’t be backed up.

The result is confusion for the consumer and an erosion of trust between the buyer and the seller.

Fulfilling potential

Yes, there are obstacles but even so, social enterprises have enormous value – both commercially and socially.

At a time when authorities are struggling to fund welfare, social enterprise can fill the gap. Governments in both New Zealand and Australia are starting to catch on.

Cities such as Auckland are leading the way. They use what they call ‘registered social enterprise places’ to involve local and national government, businesses, charities, consumers and budding social entrepreneurs bringing them together to grow their social enterprise 

The programme aims to promote, raise awareness, and build the markets for social enterprise at a local and national 

“We have a growing number of fantastic organisations such as Ooooby, Make, Live, Give, The Pallet Kingdom and many others working to reduce inequality and provide the kind of change that will allow local communities to realise their potential,” Tricia Fitzgerald Chair of Aukland Social Enterprise said.

In Australia, Victoria has spent $A5 million on promoting the social enterprise sector in the region. A new profit procurement plan is intended to encourage government to buy from companies which deliver a social purpose.

It hopes to use the state’s considerable purchasing power to grow the market for social entrepreneurs in the region.

So, any firms looking to find the next big thing can do much worse than turn their eyes towards social enterprise. It has a vibrant culture of entrepreneurship, has a growing pool of investors, and a rising consumer demand, as well as an increasingly supportive stance from government.

In a world in which Donald Trump is a thing, this is an altogether friendlier and increasingly successful side of the capitalist beast.

Tom Cropper is a Freelance Social Enterprise Journalist

The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.

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