Should social innovators like Arunachalam Muruganantham (aka PadMan) create for-profit or non-profit ventures? What should entrepreneurs and innovators do with social impact ideas, and should they be for-profit or non-profit ventures?
The idea of a for-profit social enterprise may seem difficult to comprehend. Making money and doing good for the underprivileged just don’t seem to go together. However, the new wave of social entrepreneurs have realized that innovative and sustainable businesses are the best way of doing social good. For social innovators like Arunachalam Muruganantham, who are working towards scaling up their idea to as many people as possible, to reach greater social good, a for-profit venture is the best possible path.
Non-profit organizations are very difficult to scale. They are mostly backed by donations and grants. In the long run, these grants will become difficult to obtain, and the organization’s functioning may be affected by this. Many say that non-profits could become sustainable from the income generated from their programs in the long-run, but data from even the biggest non-profit organizations in the world show differently. A report published in 2019 by NonProfit Times, on the top 100 nonprofits in the US, shows that only a little more than 25% of their total revenue comes from program revenues and less than 5% from investment income. As a social innovator, Arunachalam Muruganantham wants to rapidly scale up, and make menstrual hygiene products available to menstruators across the country. His dream was to bring access to these products for everybody irrespective of their economic and geographical background. Taking the route of a non-profit venture would be a harder path to accomplish this.
Making his venture a for-profit venture would also mean that he can attract investment funds from the private-capital markets. Some of them will also draw on private revenue sources to fund at least a portion of their activities. By serving markets for which the profit potential is high, for-profit ventures can free public and philanthropic resources to focus on those segments, and programs that need subsidies. In Muruganantham’s case, he can further use the revenue and funds to provide his equipment to communities in parts of the world where his product may not be affordable.
For-profit organizations are in other words, business ventures that work towards social welfare. Branding a business around a social welfare initiative can also be a great marketing strategy for brands. It has been shown that such socially-responsible branding is very effective, and customers are likely to be more satisfied by interacting with such brands. Footwear brand TOMS is one example of a social enterprise that has used its social branding as a marketing strategy also. TOMS has committed to donating one pair of shoes to an underprivileged kid for every pair of shoes purchased from the company. To date, TOMS has managed to donate over 60 million pairs of shoes, restore eyesight to over 400,000 people, and give over 335,000 weeks of safe water, and is a compelling case for the difference for-profit social enterprises can make.
Great employees and collaborators are essential to any organization, and the same goes for social ventures. The biggest merit about working in a for-profit setup is that for-profit ventures can attract best-minds with perks and monetary rewards. Unlike non-profit ventures, that find it harder to attract qualified and bright minds to work with them, skilled personnel can be attracted in a for-profit setup. In a non-profit structure, employees are unlikely to be highly motivated, as there is no incentive to be creative and efficient at their job, as nonprofits can never offer the perks a for-profit enterprise can provide. Hence, it has been seen that employees of nonprofits are likely to leave for professions with higher rewards in other sectors.
Social ventures are often associated with philanthropy and thought to be loss-making. Muhammed Yunus of the Grameen Bank in Bangladesh has changed this perception. Grameen Bank provides small loans to those living in poverty so that they will be able to become financially self-sufficient. Rather than operating like most banks or lenders, the Grameen Bank requires no collateral from its borrowers, whatsoever. Although it may seem like a fatal business plan, the Grameen Bank has proved otherwise. The Grameen Bank has managed to bring in a net income of $10 million. And proved its case; that you can make money while doing good.
No comments:
Post a Comment