The Rise of Social Entrepreneurship: Why American Consumers Want Action
English business magnate Richard Branson once famously remarked that no one should ever go into business just to make money. If profit is your primary motive, he said, you’re better off doing nothing. Branson understood that one of the greatest indicators of a successful startup isn’t its bottom line, but its ability to impact the world in a positive way. The startup that gives society the most will naturally prosper over its competitors in the long run.
Branson is far from alone in this philosophy and now, more than ever before, consumers expect businesses to be active in the community. As people have increasingly come to view the products and services they buy as an extension of themselves, it has become more common for consumers to prioritize giving their business to startups with a purpose-driven mission, or “social enterprises."
A 2020 global study conducted by the Zeno Group revealed that American consumers are four to six times more likely to buy products and services from companies they deemed to be purpose-driven. What’s more, one in three consumers said they would tell people when they perceive a brand to be making honest and ethical decisions, and over half of American consumers said they would stop buying from brands they believed were unethical, according to market research firm Mintel.
The desire for more social enterprises has only been exacerbated by events like George Floyd’s murder and the COVID-19 pandemic. On the corporate front, we’ve seen companies with little history of activism such as Walmart and PayPal come out in support of the Black Lives Matter movement, while companies like Nike and Ben & Jerries dedicated entire ad campaigns to philanthropy and social justice.
“Over the past year we’ve had so many areas of upheaval — whether it is the pandemic, the Black Lives Matter Movement, seeing the cracks in the public safety net, watching small businesses suffer etc...,” said Quinlan School of Business Senior Lecturer of Entrepreneurship April Lane-Schuster. “All areas of our lives were impacted and the cracks in the system were exposed, creating new areas of opportunity.”
The altruistic entrepreneur
More than press releases and donations, though, consumers want to be able to support their most valued causes through the products and services they buy. Whether it be sustainable food or ethically sourced clothing, any entrepreneur who can provide an altruistic alternative stands to benefit.
Entrepreneur, chief marketing officer, and philanthropist Genesis Emery is one of these people. As the mother of a special needs child, Genesis is the founder of the Little Dapper Collection — a children’s bow tie company that gives a percentage of all its proceeds to children with special needs. Genesis started her company as a way to advance a cause that was personal to her.
“Since I started my journey as a business owner, my goal has never been solely based on just driving profitability alone,” said Emery. “The reason being is because I know my greater purpose was to become a beacon of hope, inspiration, and positive change for the greater good.”
On the question of profitability, Genesis sees no reason why one can’t drive financial growth while also reinvesting in the community.
“Being a business owner comes with the fact that you must be able to meet your bottom line in order to sustain long term,” said Emery. “However, at the same time, just because your first order of business may be crunching numbers and addressing your financial business needs, that doesn’t mean that the needs of your society just go away or that they’re any less important.”
One of the biggest advantages of running a social enterprise is access to more engaged staff. As career services like LinkedIn and Indeed have made it easier for American workers to find new jobs, the labor market has become increasingly tight. If your company can’t compete on pay or benefits, it’s hard for them to justify staying. Social enterprises, on the other hand, offer their employees an opportunity to work towards a cause they fundamentally believe in. Even if the pay or benefits may not be as good as somewhere else, the work itself remains more attractive.
“People naturally feel more connected to causes and societal work that they can relate to and in many cases, can even identify with,” said Emery. “When you hire candidates to work for a company with the incentive of a dollar amount and maybe a few nice benefits here and there, sure they’ll take it if they're in need of a job or even a transition in their career. But when you hire candidates that are passionate evangelists for a societal cause, these individuals are going to live and breathe every aspect of the business.”
Opportunity in every sector
A big part of the growth of social enterprises is also increased economic competition. Consumers have never had more options, and more options breeds more leverage and opportunity.
“I think we as consumers are more cognizant of the power of how and where we spend our money and how we can use our own choices for good,” said Lane-Schuster. “If I need to buy something and I have the choice to buy it from a company that exploits its workers or a local small business, which do I choose? I think we are more aware of the power of supporting purpose-driven companies or ones that align with our values than ever before.”
At the crux of this trend is the reality that the integration of social causes and entrepreneurship is actually pro-business. Rather than wait for local governments to take action, we live in an era where business owners can drive change in their communities themselves.
“I strongly believe that with the great deal of challenges happening within our society, the majority of entrepreneurs are going to transition into the world of social entrepreneurship by default because they’ll seemingly have to,” said Emery. “If people are constantly talking about the need for social change and improvement, you would be doing your stakeholders a disservice by not getting involved.”
As consumer groups such as millennials and Gen Z’ers grow in purchasing power, the gap between demand for social enterprises and the supply will only continue to grow.
“No matter how you define social ventures, there are still very few of them relative to the number of businesses overall,” said Lane-Schuster. “I think there is an opportunity in every sector for more social ventures.”
Like the economy, a community is only as strong as the people and businesses who support it. With a desire to help grow the next generation of social enterprises, the Quinlan Business Leadership Hub invites industry professionals from all sectors to partner with us in advancing the work of those who seek to make the world a better place.