Social entrepreneurship: the answer to the circular economy

The circular economy is hip. This is not just about short-term profits, but also about ecologically responsible and socially just results. To what extent should organizations align their goals with corporate social responsibility? Is it worth it for organizations? And how do you promote the circular economy through social entrepreneurship?

Social entrepreneurship is becoming increasingly important

Social entrepreneurship is the answer to the circular economy. But what exactly do we mean by social entrepreneurship? According to Caroll (1999), social entrepreneurship is ‘the expectation that businesses can contribute financial and human resources that improve the quality of people and/or regions‘. Social entrepreneurship is therefore essentially about the company also realising value for its environment.

Social entrepreneurship emerged in the 1950s. It has changed the way many organizations do business. And now social entrepreneurship is hotter than ever. Consumers are increasingly opting for products and services from companies that practice corporate social responsibility. The government, business partners and other stakeholders are also finding this increasingly important and are focusing on it. This is only logical, as social entrepreneurship can help organisations create multiple value in every action and decision. Provided you approach social entrepreneurship strategically. How do you do that?

The Rainbow Model shows which steps are needed to arrive at multiple value creation, and thus at social entrepreneurship. The Regenmodel has been developed by Pim P. Valentijn, deputy director of Essenburgh Training & Advice.

Figure 1: Rainbow model

Rainbow model for value creation

Caroll’s CSR pyramid

The pyramid of corporate social responsibility (Caroll, 1999)is a valuable tool for developing social entrepreneurship. This pyramid shows the organization’s priorities and four responsibilities to society: economic, legal, ethical and philanthropic.

The return of social entrepreneurship

In the ideal situation, economic, ecological and social values are in balance. The pyramid model can help organisations with this. Social entrepreneurship has several advantages, according to an increasing body of literature. Such as: less employee turnover, better reputation and higher customer satisfaction (Galbreath, 2010). According to Nurn and Tang (2010)social entrepreneurship provides better financial performance. It also helps to attract better employees, work more efficiently and reduce operating costs. According to Siddique (2015) , it can also improve employee motivation and confidence. In addition, there is also the competitive advantage for firms in the commercial sector(see also Klará (2011).

How do you anchor social entrepreneurship?

Do you want to get started with social entrepreneurship? It is wise to do this step by step. Because that is the only way to embed it properly in the organisational culture and in the minds of employees. After all, awareness creates support. And from support comes enthusiasm and determination. This is necessary for successful social entrepreneurship. A good instrument for this is the Rainbow Model. This model shows that value-creating leadership consists of several leadership domains. Namely the micro level (person level), the meso level (team and organisation) and the macro level (the ecosystem of different organisations). According to Tharp and Chadhury (2008)social entrepreneurship can be integrated into any organization and contribute to its goals. If you do this well, social entrepreneurship becomes part of the organisation’s capital. With activities, monitoring, goals and incentives (Lev and Radhakrishnan, 2005).

Have an eye for the hard and soft organizational capital

Multiple value creation depends on people who can work together in a context of innovation and trust. To realize this, according to the Rainbow Model, the right balance is needed between functional ‘hard’ (such as money, data and rules) and ‘soft’ change interventions (such as culture, mission, norm and values). This is a complex process that requires thorough knowledge of the context.

Develop social leadership

Good management and leadership skills are very important for good social entrepreneurship. For example, Jones & Kramer (2010)argue thatthere is sufficient evidence that management and leadership development are important. And that fostering leadership capabilities improves sustainability outcomes. Cornelius, Wallace & Tassabehji (2007)argue that ethical training is a catalyst for developing corporate social responsibility. Essenburgh Training & Advice therefore offers various evicence based leadership trainings.

Be transparent

Organizations that use corporate social responsibility as a sustainable strategy need to communicate well. And they need to be transparent about their processes and their revenues.

This is best done in the Annual Responsibility and Sustainability Report, also known as the CSR report. Such a report states what has become of the plans in terms of planet, profit and people. You also mention the plans for next year. Naturally, you can also communicate about CSR efforts in other ways. This will strengthen the reputation of your organisation.

Do something about social entrepreneurship too

Do you want to work on social entrepreneurship? A good first step is to realize that social entrepreneurship is about creating shared value (Porter and Kramer, 2011). This means that you not only create economic value for your own organisation (profit maximisation), but that you also have an eye for ecological and social values. Of course, your organization doesn’t have to become a charity.

Next, it is good to know that the organisational structure does not need to be completely overhauled. Small steps in particular can yield great results. Step by step you grow into social entrepreneurship.

What is important is that social entrepreneurship should not be seen as an isolated practice. Or as a means to an end. This requires a different way of working for organisations and a new form of leadership: value-creating leadership.

Do you want to know more about value creating leadership? Then download the ebook Leadership in the Economy of Value below.

Tip: checklist for social entrepreneurship

Want to know what commitment your organization has for social entrepreneurship? There are several tools for this. Like the assessment tool of CSR Europe: download the social entrepreneurship checklist. Or click herefor our leadership training courses.

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dr. Pim Valentijn

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