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5 steps governments should do to foster social entrepreneurship Katherine Milligan, Director, Schwab Foundation for Social Entrepreneurship

For those who are familiar with the principles of social entrepreneurship, the dividends they create for society are obvious, and the case for encouraging more of this kind of enterprise development is intuitive. As Thulsi Ravilla, the Executive Director of the highly acclaimed social enterprise Aravind in India put it, “Whether you are talking about cardiac care or education, the fundamental question is: ‘How do you provide it for everyone?’”

With this value of universal access at its core, Aravind built its operational processes for volume, drove breakthroughs in low-cost technologies, and introduced a tiered pricing system where those who can afford to pay for its vision corrective services ensure the organization’s financial sustainability and subsidize the 55% of poor and extremely poor Indians who receive surgery for free. And this is not a couple of hundred people a year we’re talking about. Aravind conducts 15,000 outpatient visits and 1,500 surgeries per day.

What government would not want to encourage these kinds of entrepreneurial approaches to creating public good? The Thomson Reuters Foundation, together with GSEN and UnLtd, unveiled this week a global perception poll identifying the world’s best countries for social entrepreneurs. The UK, the US, and Canada topped the list, and Kenya and Chile emerged as social innovation hotspots in the global south.

While this is the good news, 60% of respondents across the 45 nations surveyed felt that the growth of social entrepreneurship in their country is hampered by a low understanding of the sector.

This is not surprising. As neither conventional businesses nor traditional charities, social enterprises blur existing boundaries and “fall through the cracks” of existing policy frameworks, forcing them to navigate a multitude of challenges along their path to scale. Corporate legal forms do not recognize dual-purpose business models, for example, and tax systems rarely distinguish between companies that benefit society and the environment and those that damage it.

GOVERNMENT SUPPORT VITAL

Overcoming these challenges is vital to moving beyond the goodwill of individuals and delivering on social entrepreneurship’s promise as a sector, and it simply will not happen without catalytic government support, as the Schwab Foundation for Social Entrepreneurship outlined in its framework for government action entitled Breaking the Binary: A Policy Guide to Scaling Social Innovation.

Here are five things government leaders should do to foster a thriving social entrepreneurship sector:

Leverage your convening power. Social enterprise crosses many sectors, industries and bureaucracies; a crucial role government can play is breaking down the existing silos that prevent growth and promoting the generation and sharing of ideas. Engagement can take various forms, from catalytic gatherings to longer-term initiatives, but a unifying component to any policy is the development of structures that allow communication and coordinated action between investors, entrepreneurs, civil society and policy-makers.

Let social entrepreneurs advise you, not the other way around. Your most important job is to really understand how these business models work and what social entrepreneurs actually need. It is incredibly hard to create business models that serve poor people cost-effectively, otherwise this would have happened by now and we could all celebrate victory! Changing behaviour is hard. Measuring outcomes (not outputs) is hard. Going up against vested interests that are not held accountable for providing inferior products – that’s really hard.

So put aside protocol and do not insist on being the one on stage speaking. Be the one in the middle of the circle listening and asking questions. What kind of support do you need that you’re not getting? How could we help you access the capital providers and mentor networks you need to scale? Also: if you want to create a government taskforce on social enterprise, please make sure there are some social entrepreneurs on it! (I’m not kidding. I’ve seen this happen more than once.)

Resist the temptation to launch a start-up competition. Sometimes it feels like everyone I know wants to launch a start-up competition. Really? Why? The amount of staff time and resources that must be invested in managing application processes, devising a communication plan, organizing an event where the winners are announced…well, you get the picture. They usually dwarf the amount of resources devoted to the start-ups themselves, which in their early stages need an intensive amount of hand-holding – something that many defunct start-up competitions found out the hard way.

Plus there are so many existing global networks that scout for, screen, and support start-ups, like Ashoka, Echoing Green, the World Economic Forum’s Global Shapers community, and many more. You want to know where the bottleneck is? Same place where their conventional start-up counterparts are withering away in the so-called “Valley of Death.” Krista Donaldson, the CEO of D-Rev, a social enterprise providing low-cost medical technologies, explained it this way: “There’s a real gap of groups willing to support the unsexy part of product development and focus on that valley of death between proof-of-concept to commercialisation. But without it, there’s no impact at scale.”

Experiment with procurement mechanisms. Government procurement sounds about as exciting as watching paint dry, yet it is probably the most powerful and underleveraged tool in a government’s toolkit to direct resources at organizations that have a proven track record of creating superior outcomes. Procurement systems in most countries are set up to favor conventional approaches and existing relationships, i.e. large, longstanding government contractors that provide traditional services.

For that reason, according to Schwab Foundation Social Entrepreneur John Sargent, the Co-Founder of Broadreach Healthcare, “It’s incredibly hard for social entrepreneurs to break into those government funding sources unless there is an explicit emphasis on experimentation and opensourcing.” Mechanisms such as open competitions to solve a specific social problem are a great way to break through the procurement logjam and bring in new and innovative ideas and partners.

Collaborate with humility. As Schwab Foundation Social Entrepreneur Martin Burt said, “We all need to be a little bit more humble and work together, because right now everybody’s working in a completely uncoordinated way while the problems get bigger and bigger. How can we bring the talent and the passion of social innovators to government institutions so that innovations can be rolled out in the education sector, in the public works sector, in the health sector, in the housing sector? This is an opportunity to create alliances between people who have access to big budgets but are constrained by the bureaucracy in which they work and people who have the talent and the ideas and who are free to innovate.”

Katherine Milligan is the Director of the Schwab Foundation for Social Entrepreneurship, the sister organization of the World Economic Forum.The Schwab Foundation manages the largest late-stage network of social enterprises in the world. The Schwab Foundation defines social entrepreneurship as innovative, practical, sustainable, market-based approaches that achieve transformative social and/or environmental change, with an emphasis on underserved populations. Learn more about the principles of social entrepreneurship and our selection criteria.