From Social to Responsible Entrepreneurship

By Professor Hamid Bouchikhi, ESSEC Business School

I’m not comfortable with the exclusive ownership of the label ‘social’ by a movement whose respectable achievements, and also extensive media coverage, engendered the idea that there would be good Samaritans , social entrepreneurs, and bad capitalists, for-profit entrepreneurs .

Because ideas guide not only speech but also the behavior and decisions of public and private actors, it is necessary to put the record straight and provide a more accurate framing of the reality of entrepreneurship in the 21st century.

The association of the ‘social’ label with one particular form of the entrepreneurial phenomenon suggests, at a subconscious level, that for-profit entrepreneurship would be asocial or anti-social. I shall explain why this cannot be true.

Entrepreneurship is not asocial and cannot be anti-social

For-profit entrepreneurship cannot be asocial because entrepreneurs do not act in a social vacuum. They inevitably live and work in a social context. Their actions are shaped by the surrounding social environment and impact it in return. Do not we often say that the great business builders were at the right time and the right place? Without in any way diminishing the value of individual achievement, ‘great’ entrepreneurs, like ‘great’ politicians or generals, found themselves in tune with their environment in particular circumstances. Thus, reserving the label ‘social’ to a part of the entrepreneurial phenomenon does not make sense. All entrepreneurship is a ‘social fact’ in the Durkheimian sense.

For-profit entrepreneurship cannot be anti-social either. I would not have claimed this forcefully if I were writing in the 19th or the first half of the 20th century. I would not do so either if I were writing from a part of the world still dominated primitive forms of capitalism of wild capitalism.

In countries where democracy, the rule of law, and public scrutiny are developed, entrepreneurs are subject to tight controls and cannot afford to play against society or the environment. The legitimacy of profit is now subject to respect for people and nature. In other words, while property rights and the pursuit of profit are not challenged, how profit is made and how it is employed are subject to increasingly normative social control, to the point that some entrepreneurs find it, sometimes not without reason, excessive and discouraging.

Even though this is disputed among historians, I share the belief in the inevitable development of education, democracy and civil society. In countries where this is not yet completed, entrepreneurs will be made accountable for negative social and environmental externalities. Recent developments in China with regard to pollution are a very good illustration of this trend.

Social entrepreneurship is not always what it seems

Having explained why entrepreneurship cannot be asocial or anti-social, it is time to undertake a deconstruction of social entrepreneurship. Presumably, the distinguishing feature of this form is to place the social purpose at the center of a company. When a project has a commercial dimension, the commercial logic is supposed to be submitted to the social mission. However, social entrepreneurs are human beings and the organizations the set up to serve the mission, if not tightly governed and managed, can either use the social purpose as an alibi or squarely play against it. For example, the aggressive distribution of micro credit by complacent field officers has aggravated the hardship of the poor. In 2010 alone, the government of Andhra Pradesh, the Indian state home to one third of micro credit borrowers in India, counted 80 suicides among over indebted borrowers[1]. India also witnessed the public listing of micro credit companies on the cynical ground that the stock exchange would provide easier access to more funds to lift more families out of poverty. In Bangladesh, where Mohammad Yunus pioneered it, and in Morocco, micro credit has also been controversial.

Because the example of micro credit is an easy target, we have to find other illustrations of drift in social entrepreneurship. I was exposed recently to a young entrepreneur who claimed openly that his internet platform is a for-profit business although its mission is framed as a social business. This example illustrates a growing trend where non-profit organizations are set up to feed for-profit business models.

Also, the social mission is blurred when the income or social identity of a person, or of a group, is based on a social enterprise. In this case, the continuity of the business becomes its own end. Organizational sociology has extensively documented the institutionalization process where a means, an organization se up to treat a social problem, becomes its own end. When income, power, salvation, the meaning of life or the identity of a social entrepreneur are pursued through service to disadvantaged populations or the fight against environmental damage, the persistence of these populations and the underlying problems is necessary to ensure the continuity of the organizations supposed to resolve them. Can Greenpeace survive without threats to the environment?

When social entrepreneurship results in fairly large organizations, un-intended phenomena such as power struggles, conflicts over resource allocation, emergence of silos, and submission of volunteers to technocrats are inevitable and can drive the organization away from the social mission.

Beyond the dichotomy: responsible entrepreneurship

Since for-profit entrepreneurship is necessarily social and social entrepreneurship is not always so social, we should look for a label other than ‘social’ to help us sort the good from the ugly.  From my point of view, a more valid distinction must be made between responsible and irresponsible forms of entrepreneurship. Irresponsible entrepreneurship is easier to delineate.  Irresponsible entrepreneurs are driven by self-interest seek to achieve goals, be it material wealth or salvation of the soul, by using other people as means  and not taking responsibility for negative externalities.

By contrast, responsible entrepreneurship, for-profit or not, begins by recognizing that human beings are driven by self-interest, instead of pretending the contrary, and compelling entrepreneurs to pursue their objectives in respect of people and the environment. The ideal responsible ideal entrepreneur is engaged in a positive sum game with society and the environment. A less idea entrepreneur does no harm and does not produce negative externalities. The real entrepreneur often produces negative externalities but must be held accountable for them: they clean when they pollute, they develop employability when they do not want to promise lifetime employment, they offset the drudgery of work when they cannot avoid it, etc.

Emphasizing responsibility has another advantage. It contributes to the development of the paradigm of responsibility in management. Business schools are asked to promote responsible leadership, responsible governance, responsible employment, and responsible investment. They also have to emphasize responsible entrepreneurship.

[1] http://www.bbc.com/news/world-south-asia-11997571

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