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Social Entrepreneurship Toward the Sustainable Development Goals

2018.12.21




Hiroki Nakamura
Associate Professor, Faculty of Commerce, Chuo University
Area of Specialization: Social systems engineering

Economic Development and Sustainable Development

Employment and job creation are essential for economic development. Entrepreneurs who help create jobs and the act of starting businesses play a major role in economic development. The economic perspective that views entrepreneurship and startup companies as the catalysts to economic development and economic growth is called the Schumpeterian view, derived from the name of economist Joseph Schumpeter. Based on this perspective, entrepreneurship can be considered one of the factors of production function in economics that affects economic growth, along with land, labor, and capital.

After the industrial revolution, humans succeeded in achieving population growth and economic development. However, this has also led to the emergence of various problems including the shortage of arable land, the exhaustion of resources and energy, the destruction of ecosystems, and environmental pollution. Various social problems also arose within the social system, such as the unequal distribution of resources and food, wealth disparity, government corruption, paralysis of urban functions, and intensification of civil wars and tribal conflicts.

In the midst of these global circumstances, various international conferences are held where the world's social problems, in particular those related to the environment, are discussed. In October 1984, the first meeting of the World Commission on Environment and Development (WCED), which was originally proposed by Japan, was held in Geneva. This commission, which was named the Brundtland Commission after the former Norwegian prime minister who became the first chairperson, concluded that we can pursue both economic development and environmental protection simultaneously. The concept of sustainable development first emerged from these discussions and is defined as "development that meets the needs of the present without compromising the ability of future generations to meet their own needs."

The Sustainable Development Goals (SDGs) described in the 2030 Agenda for Sustainable Development were adopted in the September 2015 UN Summit as the successor to the Millennium Development Goals (MDGs). As the name suggests, it would not be an overstatement to claim that SDGs would not exist without the concept of sustainable development. Specifically, the SDGs lay out 17 goals and 169 targets for solving social problems around the globe.

What is Social Entrepreneurship?

The term "entrepreneurship" refers to a type of determined mindset or approach that is used to take on the challenge of creating a new business or organization. Social entrepreneurship is a type of entrepreneurship that emphasizes the importance of solving social problems. In other words, the concept of social entrepreneurship refers to the efforts of creating businesses and organizations that aim to solve various social problems while also securing profits by applying business and management skills.

The Global Entrepreneurship Monitor (GEM), which has been researching the state of entrepreneurship around the world for many years, studied the state of social entrepreneurship in investigative reports published in 2009 and 2015. In these reports, social entrepreneurship is briefly defined as entrepreneurs or entrepreneurial activities that seek to address social issues both on organizational and individual levels, and is further classified in detail. The classification standard and process are determined by the following three criteria: 1. Prioritization of the social mission over economic activity or profits, 2. Profitability of the main business activities and projects, and 3. Engagement in social innovation and transformation. Based on those three criteria, businesses are classified into the following four categories: 1. Traditional, voluntary NPOs or NGOs; 2. nonprofit social enterprises or business-type NPOs or NGOs; 3. hybrid social enterprises; and 4. socially committed regular enterprises. According to GEM's 2009 report, the most common categories are nonprofit social enterprises (24%) and hybrid social enterprises (23%).

Social Entrepreneurship and Social Businesses

In recent years, the term "social business" has come up frequently in discussions. However, social entrepreneurship is not always synonymous with social businesses. The term "social business" originates from a type of financial services called microcredit services, which aim to help the poor by supporting their transition to becoming financially independent. The concept is said to have been first proposed by Muhammad Yunus, a Nobel Prize recipient who helped combat poverty in Bangladesh by spreading microcredit services around the country. Muhammad Yunus defines the following three factors in proposing social businesses.

First of all, it must be understood that in economics, humans are defined as egotistical beings, and that corporations, which are collections of people, operate on the basis of pursuing personal profits. However, while it is true that humans are egotistical, we also have a sense of altruism. Companies and organizations must therefore incorporate the following two factors to accommodate these two behavioral motives. On one hand, a company must generate profits and pursue the conventional concepts of personal profit and profit maximization. On the other hand, it must be a social business that is devoted to the interest of others. In a capitalist society, it is necessary for the latter to be systematically introduced.

Secondly, in order for social businesses to achieve their goals with certainty, they must incorporate several characteristics in their organizations that do not exist in conventional companies. Specifically, this means that dividends are not always paid to the owners of corporations (shareholders and investors). This is based on the idea that the profits gained from the activities of social businesses are required for future activities. In other words, the remuneration that investors receive are not in the form of dividend payments, but in the form of helping others.

Thirdly, he believes that social businesses that incorporate the above characteristics should operate within the current capitalist system and emphasizes that these businesses are expected to operate under difficult situations. He identifies the importance of securing profits for covering expenses, as is true for the sustainable management of for-profit companies, and the necessity of having ambitious entrepreneurs who are capable of putting their ideas into practice establish these businesses.

The most important criterion for social businesses is the creation of social and economic value while reinvesting profits into the development of socially-conscious activities.

The Current State in Japan and Future Prospects

So far, we covered the topics of sustainable development goals and the concept of social entrepreneurship and social businesses. In this context, I would like to conclude by examining the current state in Japan, and the research and engagements that are needed in the future.

In the following paragraph, I will introduce the results of an online survey that I entrusted Rakuten Insight to conduct in Japan from November 22 to November 27, where 5,000 valid answer samples were collected (7,016 responses were collected in total out of the 66,636 survey forms that were sent out (10.52% collection rate)) (samples selected to accurately reflect the population proportion in terms of gender, age, and residing prefecture).

First of all, only 16.4% of respondents even knew of the term "social business," so we used the term "social entrepreneurship" and defined it as "the effort to start a business that provides products and services with the aim of solving social and regional problems." In Japan, the proportion of entrepreneurs (including those with experience) is 7.9%, while social entrepreneurs (including those with experience) only make up 4.4%. Furthermore, we found that among social entrepreneurs, the proportion of those who earn profits by selling services and goods as opposed to those who voluntarily operate without profit is 55.7%.

In addition, the proportion of those who strongly intend to engage in social entrepreneurship in the future is 7.8%, while the proportion of those who are interested in social entrepreneurship or supporting such endeavors is 21.7%, and the proportion of those who are particularly interested in investing in such efforts is 12%. Furthermore, as the main causes for concern with regard to social entrepreneurship, many respondents mentioned the risk of failure, the lack of personal funds, and insufficient revenue. On a related topic, when asked what kind of support for social entrepreneurship they would like to receive, many respondents mentioned fundraising support (loans, investments, subsidies, grants, etc.) and information related to such support.

Meanwhile, with regard to the SDGs, only 7.3% of respondents knew the details, and 74.7% said that they have never even heard of them. In addition, out of the 17 goals established in the SDGs, the top three goals that social entrepreneurs considered as being important are the elimination of poverty, good health and well-being for all, and clean water and sanitation all over the world.

As demonstrated by these results, it is clear that the recognition of the SDGs in Japan and the number of people engaging in social entrepreneurship and social businesses are still very low. However, there are many people who are interested in social entrepreneurship and would like to support such an endeavor, with actual activities being carried out in some places.

For example, at Kyushu University, there is a research group called Yunus and Shiiki Social Business Research Center that is named after Muhammad Yunus and engages in activities in collaboration with him. The Yunus and You (YY) Social Business Design Contest offers young people a chance to deepen their knowledge about social entrepreneurship. (Many students from Chuo University, where I belong to, took part in the 2018 contest, and one of the groups from our university won first place in the student division.)

Moving forward, I believe it is crucial to proactively promote these regular activities and related academic research efforts, and to build a coordinated network for those who are engaging in, supporting, and researching social entrepreneurship in the context of sustainable development goals, or in other words, a social entrepreneurship ecosystem.

References

Global Entrepreneurship Monitor (GEM), (2009), 2009 Report on Social Entrepreneurship.

M. Yunus, (2010), Building Social Business: The New Kind of Capitalism that Serves Humanity's Most Pressing Needs, Hayakawa Publishing, editorial supervision by Masaharu Okada, translation by Toshio Chiba.

Hiroki Nakamura
Associate Professor, Faculty of Commerce, Chuo University

Area of Specialization: Social systems engineering

Hiroki Nakamura was born in Fukuoka Prefecture. He earned his bachelor's degree in engineering from the Department of International Development Engineering, Tokyo Institute of Technology. He then earned his master's degree in engineering from the Department of Value and Decision Science at the same university. He completed his doctoral course in engineering from the Department of International Development Engineering at the same university. He assumed his current post as an Associate Professor at the Faculty of Commerce at Chuo University after working at the Japan Productivity Center, the University of Kitakyushu and Kyushu University.
He has published in peer reviewed journals such as Economic Analysis and Policy, Safety Science, Tourism Management, “ and book chapters such as in Takayuki Shimaoka et al. eds. (2016) Basic Studies in Environmental Knowledge, Technology, Evaluation, and Strategy -Introduction to Asia Environmental Studies, G. Van Calster and W. Vandenberghe eds. (2015) Research Handbook on Climate Change Mitigation Law, Edward Elgar Publishing, and Shunsuke Managi eds. (2016) The Wealth of Nations and Regions.