5. Achieving the Social Foundations

Milton Friedman "there is one and only one social responsibility of business..."

The collapse of the USSR left the room to liberalism to conquer every part of the planet, even in the few remaining communist countries.

Liberalism has a long history, and not arguing with historians or economist, we can consider its modern history starting with the first industrial revolution in the mid-18th century.

Series of innovations accelerated the production of (new) goods and services, making them more affordable to a wider spectrum of the society, thus feeling more basic needs, improving the social well-being, but at a price of rising inequalities. Nevertheless, until recently, there were a consensus among those having a say, to consider the cost/benefits ratio mostly favorable for the society.

As long as discontentment was limited to the working class, to those anyway not having access to the social status goods, not having a political voice, the model could evolve and prosper. But things started to crackle when environmental and social costs began to outweigh the benefits of increased GDP (Constanza et al. 2015).

A minority of people, well socialized, complying with all the clauses of the tacit social contract, wondered if the counterparts were respected. Do they have access to their basic needs, do they reach their expected social status? What is the social cost to satisfy the needs of happy few? What role do the companies play in this productivist and extractivist model?

From these questions, started to emerge the notion of corporate responsibilities. To which, one of the most renown and listened economist of the time, the Nobel price-winning Milton Friedman, clearly answered in 1970: “There is one and only one social responsibility of business to use it resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud” (Friedman, Ny Times, 13 Sept. 1970)[i].

While the business community listened carefully to this oracle, some other business actors, so called social entrepreneurs considered the corporates have much more responsibilities than making profit, they aim at providing the social foundations for more social justice.

Social Business and Social Innovation

According to another Nobel prize-winning, Muhammad Yunus, a Bengalese economist, social businesses are economically viable. They differentiate from standard businesses as they are aiming at solving a social problem by using business methods (Yunus, 2010)[ii]. Even if all businesses cannot be social, they should nevertheless follow basic principles of responsibility such as respecting life, making the planet safer, respecting laws, and supporting well-being for consumer or employees.

Social business is not antinomic to making profits, on the opposite “the dual mission of social and economic value creation acts as an essential criterion to delineate social entrepreneurship from other related phenomena” ( Saebi et al, 2019) [iii]. But profits made should be re-invested in the cause, as making profit out of a social problem is not morally acceptable; like having to choose between profit or social problem solving in hard times; and because, from a systemic standpoint, one need to ensure social businesses are true alternatives to standard businesses or charities and encourage new ways of thinking.

For some years now, conceptual tools are made available openly to develop new ways of thinking and “think out-of-the-box.”

To start with, Social Entrepreneur must make sure they have embraced the whole complexity of the problem they want to tackle and avoid the “blind men and the elephant effect,” a parable about a range of truths and mistakes. the need for communication and the need for respect for different perspectives (Meadows, Donella H, 2008)[iv].

Cartoon courtesy of G. Renee Guzlas

System Thinking

To do so, they can use the System Thinking approach and its tools to capture the different components of the system they are willing to change, their interactions, the cause and effects, and the feedback loops. Such an approach helps avoiding worsening a situation when genuinely wanting to solve a problem like destroying biodiversity by replanting trees.

Once the system identified and defined, it is wise to consider how it evolves in the future. Is the problem to tackle a systemic problem or a conjunctural situation. How will the system evolve: will it worsen or self-regulate?

As there is no crystal ball, especially not for entrepreneurship, one can use a methodic approach to capture uncertainties and make strong choice, possibly made on feelings or beliefs, but backed by a solid approach like, Scenario Thinking.

Scenario Thinking

Scenario Thinking is a methodology used to help building long term previsions based on a structured process. Stakeholders from diverse horizon identifies the key drivers of change for a considered system. All the drivers are positioned and clustered according to their likelihood to happen and the significance of their potential impact if happening. Once listed, the two most important clusters are selected to build four scenarios based on the extreme situations (maximum and minimum) of each cluster. The outcome is a quadrant highlighting the possible high-level scenario for the future of a system, which can be used as first input to base a strategy and decisions which go along.

This approach has been used for example by Shirin Elahi and Leila Varley to develop the four scenarios of the Corset Future [v]:

When they have capture what their environment is made of, and how it can potentially evolve, social entrepreneurs can start designing solutions to the social problem and invent innovative business models.

Systemic design: Integrating the mindsets and toolsets of systems thinking and design thinking to encourage innovative systems change (source: learningforsustainability.net)

Service Design

Service Design approach and the Business Model Canvas developed by Alex Osterwalder, and collaboratively enriched, are popular tools and easy to use to help entrepreneurs to develop and validate their ideas. It helps innovators to put the human being, a consumer, a beneficiary, rather than profit and return-on-investment at the heart of the company.

These approaches are widely used by startups from all business sectors and world area, as it helps to define their mission, the customer or social value delivered and how it is created, as it is the essential foundation of any company (Kevin Laws, HBR, 2015)[vi].

Nevertheless, Social Businesses still differ from usual businesses, the type of mission they onboard for. And to be impactful and successful social businesses must capture and focus the local social challenges to tackle, otherwise they face the risk too last only the time for which the problem they address is trendy (Defourny et al. 2012)[vii].

If one can admit that social business is a purpose-led matter (social problem solving) designed to fit the profit-driven economic model, the importance of being “economically sustainable” raises the risk of monetizing what makes our social cohesion like solidarity and empathy, as illustrated by the booming sector of private childcare supported by public money in Luxembourg (Honig et al., 2016)[viii]. Furthermore, social businesses are required to be compliant with a profit-driven system that has created the social problems they want to solve and that public bodies in charge of regulating this system have failed to prevent from happening and failed to solve. “If governments had already solved the world’s most pressing problems, we would not need social business” (Yunus, “Building Social Business,” 2010).

Notwithstanding, the business model chosen, social innovation is about solving social problems by developing new products or services to develop a better and sustainable future.

But better for whom, better for what?

[i] A Friedman doctrine‐- The Social Responsibility Of Business Is to Increase Its Profits – The New York Times (nytimes.com)

[ii] Yunus, M. (2010). Building Social Business (Introduction and Chapt.1) Published in the U.S. by Public Affairs TM pp.1-33.

[iii] Saebi T, Foss NJ, Linder S. Social Entrepreneurship Research Past Achievements and Future Promises. Journal of Management. 2019

[iv] Meadows, Donella H (2008) Thinking in Systems A Primer. Sustainability Institute

[v] Corset Futures – Corset Economy

[vi] Successful Startups Don’t Make Money Their Primary Mission (hbr.org)

[vii] Defourny, J., Nyssens, M. (2012). “The EMES approach on Social Enterprise in a comparative perspective”

[viii] Michael-Sebastian Honig / Anett Schmitz / Malou Wagner / Martine Wiltzius, Ouverture d’une « boîte noire », Un aperçu de l’organisation et de la pratique des structures privées d’accueil de jour des enfants au Luxembourg (https://orbilu.uni.lu/bitstream/10993/28064/1/Forschungsbericht_2016_franz_druck.pdf)

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