The last decade has witnessed the fall of some poster boys of capitalism and the simultaneous rise of a new breed of enterprises that have embraced an integrative approach for advancing social change.
As Michael Porter, an authority on economic development puts it, capitalism is under siege and a new sophisticated model, one imbued with social purpose, is evolving. Emergence of revitalised entrepreneurial mindset, re-perceived value creation approaches and re-architected business models addressing the needs of majority seems to be manifestation of this transition.
On one end, many of the traditional profit-maximising commercial entities are looking at advancing the society as a business imperative. For these businesses, the conventional strategy of merely maximising profits seems to be a questionable way of sustaining competitive advantage. On the other end, the NGOs are shedding their sole dependency on charity in favour of sustainable approaches. Between these extremes, a new power sphere of social entrepreneurs has emerged. In short, entrepreneurial approach for social change is becoming ubiquitous regardless of the institutional nature.
This brings to question whether India's ecosystem is conducive at all for such an entrepreneurship to flourish. It is to be examined whether the policy frameworks encourage such an entrepreneurial culture, along with whether the capital markets and educational systems are effective and efficient.
Capital markets
The mechanisms for mobilising and monitoring funds towards developmental initiatives are not well developed in India. According to Bain and Company, the “lack of accountability” and “low awareness of channels for routing money” are holding back donations from high net worth individuals. But with the private giving in India totalling 0.4 per cent of GDP, the issue seems to be more the absence of reliable information, than the unavailability of funds. Even the lack of metrics that accurately reflect the impact of such organisations is a hindrance for comparative performance benchmarking.
Unlike in the private sector where the capital markets connect investors and worthy entrepreneurial ideas, the development sector lacks platforms for facilitating an effective flow of funds, leaving many genuine and high-performing organisations scrambling for funds.
Policy frameworks
A Companies Bill that mandates corporate to spend two per cent of their average net profits on Corporate Social Responsibility (CSR) activities is likely to be tabled in Parliament. This legislation is illogical and retrograde. Some businesses, such as the Tatas, have already been contributing more than their fair share to the society. It will not be a surprise if the other stream of businesses that despise CSR will find ways to work around such legislations.
Real change comes only when enterprises recognise that social value creation is a necessity for long-term sustainability. So, a better agenda for the government would be to legitimise genuine entrepreneurial pursuits for stakeholder value maximisation. Legislations similar to B-Corp in the US are needed to acknowledge entrepreneurial efforts that actively seek to integrate social performance into their missions.
Policy makers elsewhere are exploring new types of partnerships to address some of their societal concerns. The UK's Social Impact bond is one such attempt to provide long-term funds for ideas with promising social benefits. Similar experiments in India are needed to direct public resources towards transformative social innovations. Some of the schemes could be redesigned to transfer risk to entrepreneurs and to cost public money only if the stated social benefits are met by them.
Education
The quintessence of the new social economy is a breed of entrepreneurs willing and capable to experiment new ideas that further socio-economic change. Success of their entrepreneurial pursuits requires an empathetic understanding of societal issues, a new mindset of collaboratively creating shared value, distinct capabilities to “do more with less for more” and embedded principles of ethical responsibility and stewardship.
It is only through holistic education that such a nature of entrepreneurship can be fostered. Advancing the attitudinal and behaviour changes require that both schools and universities re-assess and re-define their curriculum, pedagogy and evaluation systems. Preparing entrepreneurs for social economy requires interdisciplinary and immersive approaches. This offers new opportunities for educators to play a critical role in effectuating social change.
Conclusion
Recent years have seen an emergence of entrepreneurs at the cross section of private sector and civil society in India beginning to synthesise commercial and social outcomes. To successfully engage these players of the new social economy requires a critical look at the effectiveness of current frameworks of policy, financing, education, innovation and governance. On all these fronts there are structural impediments that call for immediate and concerted actions.
( The author is Executive Director, Wadhwani Centre for Entrepreneurship Development, Indian School of Business, Hyderabad .)