Fragile Social Enterprises
A NEW generation of entrepreneurs is emerging. They are setting up enterprises not only to make money for themselves but also to make a difference in the world, attempting to tackle social problems that have been with us for a long time.
Known as social entrepreneurs, these idealistic individuals soon realize how hard it is to keep a business viable—something that typical profit-oriented entrepreneurs have always known. And then they find out that it is doubly difficult to do well (make money) and do good (make a difference) at the same time.
Over the past two years, I have done research on how Philippine social enterprises have attempted to balance, if not reconcile, their financial and social objectives. Together with my former student Patrick Aure, who is similarly fascinated by this emerging phenomenon, I looked closely into the strategies of three social enterprises: ECHOstore, Bayani Brew, and Jacinto & Lirio.
Our research reveals that these social enterprises face tensions in their attempt to attain their dual bottom lines. Without a sound and innovative business model, they could be caught in a constant tug-of-war on which to prioritize. This means favoring one bottom line at the expense of the other.
At the time of our study, Jacinto & Lirio, producer of luxury bags and leather journals made of water hyacinth fiber, seemed to move towards prioritizing its financial bottom line. Whereas it collaborated closely with its supplier communities in the past, it decided to deal with its suppliers in a more arms-length fashion. This allowed the company to source its raw materials without having to shoulder the cost of training its suppliers and engaging in community development.
According to one of its founders, Noreen Bautista, “we realized we can’t be all heart, but we can’t be just all money either. We needed to make some compromises.”
Bayani Brew, on the other hand, seemed to favor its social mission, which is to create sustainable livelihood opportunities for the residents of the GK Enchanted Farm. Known primarily for its award-winning native iced tea, the company sources its raw materials from the farm and nearby communities, and pays the farmers a relatively higher price.
According to co-owner Ron Dizon, this is the company’s way of “securing the supply chain.” Dizon admits, however, that he and his business partners Shanon Khadka and Xilca Alvarez have yet to draw a salary for the work they have done so far, thus effectively subsidizing the company’s operations.
ECHOstore, which serves as an outlet for products of cultural communities and other marginalized groups, was not exempt from this tension. As the pioneering retail store that focused on fair-trade products, ECHOstore began to attract community-based enterprises that wanted their products displayed for sale in the store.
However, ECHOstore’s owners Chit Juan, Jeannie Javellosa, and Reena Francisco (more popularly known as the ECHOtrio) had to reject majority of the products due to poor design and lack of visual appeal. They eventually worked closely with national NGOs, which requested them to critique the product design and packaging of these small producers.
“We were struggling at that period helping communities, selling products, and trying to manage the whole process of bringing products to the market,” Javellosa said.
The ECHOtriolater set up the ECHOsi Foundation, which received funds from external parties that wanted to support their social mission. This allowed the ECHOtrio to receive support from government, and to work in partnership with various groups.
For example, they have worked with the Peace and Equity Foundation (PEF) and the Partnership and Access Center Consortium, Inc. (PACCI) in setting up ECHOVILLAGE stores throughout the country; and also with the Department of Trade and Industry (DTI) and the Philippine Commission of Women (PCW) for the GREAT Women Program.
Clearly, many social enterprises are managed by people with good intentions, but not necessarily with the business acumen needed to successfully navigate the complexity and dynamism of the business environment. Thus, they can be considered as vulnerable or fragile organizations.
For young entrepreneurs, there must be mechanisms to speed up the learning curve (e.g. training programs, mentorships) that will enable them to gain the basic competencies needed to run various aspects of the business, from production to marketing; and from human resource management to finance. It also helps to be part of a community of like-minded people who can serve as their support group, something that is found in the GK Enchanted Farm.
Government can most effectively help by creating an ecology of support for enterprises that attempt to address specific community needs. The burden of creating social value is, thus, shared by several concerned players, making it easier for social enterprises to achieve their dual objectives.
Raymund B. Habaradas is an Associate Professor at the Management and Organization Department of the Ramon V. Del Rosario College of Business of De La Salle University, where he teaches Management of Organizations and Management Research. He does research on SME development, corporate social initiatives and social enterprises. He welcomes comments at firstname.lastname@example.org. The views expressed above are the author’s and do not necessarily reflect the official position of DLSU, its faculty, and its administrators.