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The term “social entrepreneurship” entered the mainstream in the early 1980s, attributed in large part to Bill Drayton and his work at Ashoka, one of the leading organizations dedicated to identifying and supporting entrepreneurs who focused on social impact as well as financial success. Today, definitions of social entrepreneurship are as plentiful as they are diverse, and while useful in building public consciousness around the importance of including impact in business strategy, they have in some ways limited impact to a small subset of innovators. Many more entrepreneurs care deeply about solving global challenges and are dedicated to improving the world, but would not consider themselves “social entrepreneurs.”
In fact, we see that our existential and systemic challenges in environment and society are demanding the integration of purpose, social, and environmental concerns in all businesses, regardless of whether an innovator is a wholehearted social entrepreneur, or simply cares about impact.
In building a socially and environmentally conscious organization, the journey and “how” is as important as the destination or “what” of the business, and there are key considerations around goal setting, structure, governance, ownership, growth strategy, and funding that are paramount to building impactful organizations. Purpose-driven entrepreneurs need catalytic tools, information, and networks to leverage the innovative financial, legal, and internal structures that help businesses scale, while keeping purpose at the center of what they do.
In thinking about these key questions we pulled from our own experiences, a broad literature review, and interviews with dozens of experts including researchers from Oxford University, Stanford, and MIT, and leaders from Purpose Economy, Schmidt Futures, Evolve Foundation, and the Presencing Institute who are building new platforms that connect entrepreneurs and funders working to incorporate purpose in all facets of business.
Through our research, we identified seven key concepts for founders to reflect on, in efforts to build a purposeful entity. While an entrepreneur can consider any of these ideas individually, there is obvious synergy in building an entity that explores each element.
Mission: Do we have a clear definition of purpose that addresses a specific problem affecting a large population or the most underserved, considers externalities, and helps to achieve a sustainable and equitable future? Is that purpose measurable? Shorefast, a registered Canadian charity formed with the explicit goal of catalyzing local economic development through charitable programs and for-profit social businesses on Fogo Island. Shorefast’s charitable initiatives including arts efforts, a micro-lending fund, and numerous heritage restoration projects--are furnished by profits from three for-profit businesses. The team’s laser focus on revitalizing the Fogo Island community after the collapse of the cod industry is deeply embedded in everything the organization pursues, and is measured through their “economic nutrition labelling,” which transparently demonstrates “where the money goes,” and how it impacts their community.
Ownership and Governance: Have we aligned a long-term governance and ownership plan that prioritizes impact and values diversity of experience and perspective? For example, when Robert Bosch, founder of the Bosch Group, a leading global supplier of technologies and services considered his legacy and the future of Bosch after his tenure, by experimenting with different forms of ownership, and ultimately articulating three possible ownership and governance structures to be put in place after his death. Executors settled on a trust-foundation model, which separates ownership and voting rights. In this configuration, the “decision makers” at the company are not entitled to dividend rights—an attempt at ensuring that those making strategic choices are driven by long-term sustainability of the company, rather than short-term financial performance.
Culture and Team Building: Are our values reflected in our day-to-day work, including processes for recruiting, on-boarding, decision-making, and governance? For decades, King Arthur Flour has been employee owned, and because employees are owners, they are engaged as stakeholders in direct strategic efforts, including sharing personal baking tricks and discoveries (e.g. gadgets, cookbooks, and pantry staples), which often end up sold in catalogue or store. The company uses the freedom from external shareholders to emphasize corporate values, such as social and environmental responsibility, and the wellness and satisfaction of the employee-owners.
Leadership and Personal Development: Am I investing in my emotional, physical, mental, and spiritual health and growth? Am I using strength-based and situational leadership to lead by example and deeply embed my values in our work? Academia has been an early home to research focused on bringing mindfulness to the world of business. For example, Professor Otto Scharmer, senior lecturer at MIT Sloan, and co-founder of the Presencing Institute has developed a framework called TheoryU: the process of how individuals, teams, organizations, and large systems can build the essential leadership capacities needed to address the root causes of today’s social, environmental, and spiritual challenges.
Business Models and Growth: What is the appropriate business model to achieve our mission that aligns with our values? The perennial strategic choices of corporate giant Patagonia exhibit the tensions between growth and environmental impact. In the early ’00s, the company argued that materialism and global environmental concerns are linked, at one point even running an advertisement in the New York Times on Black Friday 2011, shouting: “Don’t Buy This Jacket.” While cynics might argue that the company is using a marketing gimmick to appeal to a specific consumer, it is indisputable that the team has considered trade-offs between growth and encouraging reuse, rewear, and repair of existing goods.
Capital Strategy and Financing: Are my sources of capital aligned to my mission and will allow me to grow sustainably / built to last? Investments from mission-aligned capital: mission-driven funds, Donor Advised Funds (DAFs) and family offices provide a particularly interesting opportunity for entrepreneurs pursuing founder-friendly capital. Solve Innovation Future, the philanthropic venture vehicle of MIT Solve, was specifically created to maximize investor flexibility, to better meet the needs of early stage founders. Rather than starting with a hurdle rate, and backing into investment structure, a DAF structure and philanthropic source of capital allows Solve Innovation Future to start with founders, to understand their needs, and then to structure an investment that supports sustainable growth and appropriate return.
Partnerships: Are we driving systemic change through partnerships, including private public sector relationships (formal or informal) as critical to achieve sustained impact? Queen of Raw, a marketplace and inventory management supply company that helps enterprises quickly and easily buy and sell unused fabrics, works with apparel and textiles customers every day, but has proactively built relationships with local and international public partners. Through a partnership with the New York Circular City Initiative, Queen of Raw is helping to reimagine New York’s economic systems by proposing sustainable solutions that require public-private partnerships, and collaborations across industry sectors: like helping to identify and reuse excess industrial materials, to avoid contributions to landfills. Partnerships like these, at the nexus of public and private, emphasized early in a company’s growth journey, are critical to leveraging the power of the private sector to contribute to solving our world’s most pressing problems.
Emerging research confirms that the integration of purpose across an organization’s strategic plan better positions that company to win. It’s not just about environmental, social, and governance (ESG) criteria consideration, but instead that long-term focus can be instilled deep in a firm’s mission, values, and growth strategy. Founders who pursue these strategies position their entities for long-term success and lasting positive impact.