What is the relationship of Social Enterprise to Poverty and Charity?

What is the relationship of social enterprise and poverty? Or charity?

Within the IMN we have been chatting about business models.   Rightly so,  business concerns itself with the “bottom line”.   If there is no profit,  there is no business.  Profit is good and so are the businesses that make a profit with offerings that maintain or enhance human life.  Without profit-making business, goods, services,  jobs all go away.

In recent years there has been a lot of attention given to “social” enterprise and social entrepreneurship.  The result has been the creation of a “double bottom line” consciousness.  A decade or so ago when I first heard about this concept,  it was referred to as a “triple bottom line” referring to revenues (gross profit),  net profit,  and social benefit.

The emerging “double bottom line” consciousness concerns itself with both profit and social benefit.   Research suggests that, all things being equal,  consumers would prefer to do business with a company that contributes to the social good.

Of course, there’s a huge difference between what people say they would do and what they actually do. The greed of the average consumer would drive a socially conscious business bankrupt. Times of change are always tempestuous times. The goal is for all business to be conscious of the social impact of their business and for consumers to stop passing the blame for the world’s ills to the corporations.

Tom’s shoes,  which employs a one-for-one business model,  is a popular example of a social enterprise.  For every shoe they sell,  they give a pair away to a poor person somewhere in the developing world.  They make a profit and help better the world.  That’s the theory and intention.

Our hesitation about this model is that,  while it is good-hearted,  it may actually hurt the poor.  For one,  giving shoes to the poor may undercut local shoe makers.  What indigenous shoemaker could compete in a marketplace flooded with free shoes imported from the United States?

poor shoemaker

Another hesitation is that,  while this model “gives a man a fish to eat”,  it doesn’t teach him “how to fish for himself”.   Charity of this sort can create a dependency which hinders the potential economic and entrepreneurial development of nations and families. To it’s credit, TOMS Shoes is also rethinking it’s own strategy.  Give TOMS Shoes credit — and continue to buy their shoes– because credit is due.

At present we’re tweaking TOMS one-for-one business model.  What if,  rather than giving product away for every product sold, we were to give a grant or a “micro-loan” to an entrepreneur in the developing world?   Soon,  through the creativity network called VOXTROPOLIS,  we’re going to release what we call the “MissionT” or the “EnterpriseT”.   For every “EnterpriseT” we sell, buyers will be investing in an indigenous entrepreneur and a locally run business that benefits that local economy.

In time we’ll add more products and we’ll tweak the business model when it doesn’t produce both bottom lines — profit and real social benefit.

Coming soon: Social Enterprise and Sustainability

What do you think?





7 thoughts on “What is the relationship of Social Enterprise to Poverty and Charity?

  1. alex

    You’re welcome Dave. TOMS has recently changed their business model based on the same analysis. Kudos to them for being alert and sensitive to the conditions on the ground.

  2. Dave Hemmerle

    In our holistic approach here in Montreal to multiplying transformational churches, we are looking at different business models which will support local Christians and have a social impact. Thanks for this insight into TOMs and some of the negative consequences that a model like their’s can have in the majority world.

  3. alex

    Thanks for your input Shawna. For many people the idea that helping can “cause more damage” may seem odd. But you’re so right. In the end we have to distinguish what makes us feel good from what creates sustainable and greater opportunity for those we seek to help.

  4. tony sheng

    Good stuff Alex – that’s a lot of the idea behind that book too – dependency and not doing for others what they could do for themselves.

    The path of ‘self -> service -> systems’ is more something we are encouraging people to think about. So many young people want to help the poor, which is not bad in and of itself. But sometimes, in my experience, they plateau at a point that creates dependency, like working at a soup kitchen every weekend. Maybe we can help them think about creating something more…

    Love this topic.

  5. Shawna Snow

    Great question. There are many ways that charity/social enterprise has hurt the poor. Without contextualizing the need, it is easy for a well intended idea to cause more damage. I can give many examples of this in developing countries as well as those in Western societies.
    In my ever so humble opinion, what is needed is long term relationships and long term social investments. This looks like well meaning people moving into an area and staying put for a long time, building relationships, understanding what the needs are, walking alongside the community and empowering them to make better choices. The more that is done for them, the more they will expect to get, and they will learn not to work for it themselves. So, education, training, support while respecting the culture and context of that community is needed. It isn’t sexy, it’s hard. You must only lead a few steps ahead.
    And depending on the context, make sure what you are doing is actually leading them where they need to go, not where you want to take them.

  6. alex

    Thanks Tony. I’m not familiar with that book so I can’t comment on it. So the path you described — self>service>systems — is that descriptive or prescriptive?

    When it comes to the poor there is “poverty” and there is “misery”. Misery we must help alleviate. But in terms of poverty there at several different categories of poor. Sometimes we create a dependency that cripples economic development. Rather than helping we create more trouble.

    Systems thinking is one of the foundational elements of futures thinking. There is no way to think of “self” clearly without recognizing the way we are each and all connected to the whole.

    Thanks for the comment.

  7. tony sheng

    i think this is a significant thing to think about. the people in my circles have really been affected by reading Toxic Charity by Bob Lupton which talks a lot about the same ideas you have posted about here. we are toying with this mantra:
    meaning that people start thinking about themselves and then they start thinking about serving but maybe we have to get them to think about systems to help the poor – maybe it doesn’t stop at just serving the poor….

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