Social entrepreneurship: should we make it for-profit or non-profit?
This past May, I had the privilege of hearing Muhammad Yunus (2006 Nobel Peace Prize Winner and founder of the Grameen Bank) speak at the Harris School of Public Policy. The topic was on social business, a phrase he coined to describe non-profit businesses whose mission is to better the world through some type of reform. He emphasized that social businesses are businesses– i.e. they are ran as businesses with considerable attention put on profit maximization and cost minimization, yet unlike other non-profits, the profit made is then recycled and used as funding for the next year or other projects. In this sense, once a social business takes off, the business no longer needs to be completely dependent on donations in order to function and can therefore be self-sustaining in the long run. Professor Yunus said that the world should be full of social businesses since they advance quality of life and make this world a better place for everyone but especially the people who are currently disadvantaged/poor.
While I (and other people in the room) wholeheartedly agree with Yunus’s vision with socially-conscious enterprises, many people (including me) asked him why these enterprises cannot also be for-profit. I mean, as long as the businesses are helping the disadvantaged and ameliorating the world, why cares if the businesses are making some money on the side? Their intentions are good and they are doing things to help people. Yes they might not be as helpful as social businesses that are purely non-profit, but at least they do some good for the world. Furthermore, a little bit of profit always motivates people to do great things. For most people, money is an incentive that energizes them and allows them to use their entrepreneurial creativity and think of ways to create good social change. So in this sense, by using some profit to incentivize the people, more people will be willing to create social entrepreneurship (for-profit and non-profit if they wish). But Prof. Yunus countered my argument with this response:
Imagine a smoke free room. If one person, even if it is just one person out of 1 million, smokes just one cigarette, the room is no longer a smoke free room. It becomes contaminated with smoke and everyone gets hurt through second-hand smoking. The same thing happens with profit. Even if a company only takes 1% of the profit and recycle the rest for the next fiscal year, its original mission to help others becomes contaminated with profit and the human urge to create more profit. And with the incentive to earn profit, the business most of times will make policies that will increase its profit at the expense of help others.
While I do see his point about the potential of profit tainting the mission of helping others, I also think that both social businesses and for-profit social businesses (both categories are grouped under the term social entrepreneurship) have their rightful places in society. I still go by my original thinking that as long as the businesses are creating some kind of good social change, no matter if they are for or non-profit, I will fully support them. Yes, the for-profit social businesses may not have as much impact on social change as non-profit, nonetheless, they are still having some influences and this is good for me. In short, social entrepreneurship is beneficial for society, whether if it is for-profit or non-profit…. in my opinion.