What Is a Social Entrepreneur?

A social entrepreneur is a person who pursues novel applications that have the potential to solve community-based problems. These individuals are willing to take on the risk and effort to create positive changes in society through their initiatives. Social entrepreneurs may believe that this practice is a way to connect you to your life's purpose, help others find theirs, and make a difference in the world (all while eking out a living).

Widespread use of ethical practices—such as impact investing, conscious consumerism, and corporate social responsibility programs—facilitates the success of social entrepreneurs.

Key Takeaways

  • A social entrepreneur is interested in starting a business for greater social good and not just the pursuit of profits.
  • Social entrepreneurs may seek to produce environmentally-friendly products, serve an underserved community, or focus on philanthropic activities.
  • Social entrepreneurship is a growing trend, alongside socially responsible investing (SRI) and environmental, social, and governance (ESG) investing.

Understanding Social Entrepreneurs

While most entrepreneurs are motivated by the potential to earn a profit, the profit motive does not prevent the ordinary entrepreneur from having a positive impact on society. In his book, "The Wealth of Nations," the economist Adam Smith explained, "It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own self-interest." Smith believed that when individuals pursued their own best interests, they would be guided toward decisions that benefited others. The baker, for example, wants to earn a living to support his family. To accomplish this, they produce a product—bread—which feeds and nourishes hundreds of people.

One example of social entrepreneurship is microfinance institutions. These institutions provide banking services to unemployed or low-income individuals or groups who otherwise would have no other access to financial services. Other examples of social entrepreneurship include educational programs, providing banking services in underserved areas, and helping children orphaned by epidemic disease. All of these efforts are intended to address unmet needs within communities that have been overlooked or not granted access to services, products, or base essentials available in more developed communities.

A social entrepreneur might also seek to address imbalances in such availability, the root causes behind such social problems, or the social stigma associated with being a resident of such communities. The main goal of a social entrepreneur is not to earn a profit. Rather, a social entrepreneur seeks to implement widespread improvements in society. However, a social entrepreneur must still be financially savvy to succeed in his or her cause.

Social entrepreneurship is related to socially responsible investing (SRI) and environmental, social, and governance (ESG) investing. SRI is the practice of investing money in companies and funds that have positive social impacts. SRI has also grown in popularity in recent years. Socially responsible investors will often eschew investments in companies that produce or sell addictive substances (like alcohol, gambling, and tobacco). They may also seek out companies that are engaged in social justice, environmental sustainability, and alternative energy/clean technology efforts.

Socially conscious investors screen potential new investments for environmental, social, and governance (ESG) criteria. This set of standards considers how a company performs as a steward of nature, how it manages relationships with employees, suppliers, customers, and the communities where it operates, and how it treats its company’s leadership, compensates its executives, and approaches auditsinternal controls, and shareholder rights.

Examples of Social Entrepreneurship

The introduction of freshwater services through the construction of new wells is another example of social entrepreneurship. A social entrepreneur may have the goal of providing access to communities that lack stable utilities of their own.

In the modern era, social entrepreneurship is often combined with technology assets: for example, bringing high-speed internet connectivity to remote communities so that school-age children have more access to information and knowledge resources.

The development of mobile apps that speak to the needs of a particular community is another way social entrepreneurship is expressed. This can include giving individuals ways to alert their city administrations to problems such as burst water mains, downed powerlines, or patterns of repeated traffic accidents. There are also apps created to report infractions committed by city officials or even law enforcement that can help give a voice to the community through technology.