This book introduces a market approach that social enterprises can use to scale their impact. We show examples of how social entrepreneurs have successfully scaled the impact of their organizations by exchanging impact for resources [1]. i In this approach, social entrepreneurs connect buyers (such as impact investors) and sellers (such as social enterprises) in order to negotiate positive social and environmental impacts in exchange for resources. While the social enterprise model is often considered up-and-coming, in many countries it is well-established and has been promoted by business scholars since the 1980s [2]. ii What is new, however, is that emerging challenges such as global poverty, inequality, and climate change are driving a large number of social enterprises to scale their impact [3]. A growing number of actors are poised to support these efforts, such as government programs that foster entrepreneurial solutions to social problems, or organizations that provide standards related to impact measurement, investment, and production. Although many resources are available to social entrepreneurs in national and international arenas, this book focuses on impact investors as one of the most important drivers for scaling impact.
We introduce exchanging impact for resources as a practice that social entrepreneurs are already using to create new markets and scale their impact. This practice is an extension of the multiple books and articles that propose an “and” approach to social enterprises, meaning that social entrepreneurs and the organizations they lead set both economic and social objectives [4]. What social entrepreneurs now need, however, is guidance on how these objectives relate to one another—in other words, what the “and” means. We argue that the tension between economic and social objectives particularly increases once social entrepreneurs attempt to scale the impact of their enterprises, as this increases their need for resources. Thus, social entrepreneurs intending to scale their impact first and foremost need guidance on how to connect their economic goals with their social ones. Based on our observations of social enterprises that have successfully scaled their impact, we propose a market approach to scaling in which social entrepreneurs obtain the resources they need to scale by negotiating impact for resources.
Based on this approach, we propose three phases through which
social enterprises can sustainably scale their
impact:
Phase I: Negotiating impact for resources
Phase II: Designing operations
Phase III: Integrating financing and impact logics.
The knowledge presented in this book is based on seven years of research, including more than one hundred cases of social enterprises in the Latin American region that have successfully scaled their impact through a market approach. To show how each of the three phases above play out in the real world, we present examples in the form of illustrative, real-world cases that can be used for training and teaching purposes. Each includes a teaching note to help participants create solutions to the problems presented in the case. A summary of these teaching notes is included in this book, and the extended version of each illustrative case is available via an online platform in which instructors can access additional information, other cases, and discussion boards where they can converse with colleagues on classroom experiences.
This book is for entrepreneurs seeking to scale their impact, nonprofit organizations and for-profit companies that wish to shift toward a social enterprise model, and educators and students in classroom settings who teach or learn about social entrepreneurship in general and scaling impact in particular. We expect that many of our readers are already familiar with terms such as social entrepreneur and social enterprise, but perhaps need guidance on scaling impact in the face of new global challenges.
The origins of the market approach to scaling impact dates back to the 1980s, when a global economic crisis resulted in nonprofits receiving fewer government grants and private donations. This was a tricky situation for nonprofit organizations, as most had excluded a market approach from their organizational model. For many, their raison d’être was to address the social and environmental issues that government and companies were unable to address [5]. However, the nonprofit model failed to offer a solution to the scarcity of resources from grants and donations, and the need arose for new organizational forms and financing mechanisms that would create economically sustainable impacts on existing social and environmental issues.
The social enterprise model emerged, at first mainly in developed countries of North America and Europe, as a solution to this new challenge. These enterprises went beyond the nonprofit model, using a market approach to create impact. Their initial success fostered their growth, not only in developed regions, but also in developing regions such as Latin America. Since the late 1990s, a rising number of social enterprises have begun to explore how they can scale their impact both regionally and globally and, therefore, how they can access more resources. A Thomson Reuters Foundation survey shows that while Canada, Singapore, and the United States are considered the most likely places for social entrepreneurs to access impact investments, more than 60% of all respondents of all 43 countries surveyed report that social enterprises are gaining momentum. iii
Social enterprises with intentions to scale are part of a rising number of actors that support a market approach to scaling impact. At least four groups of such actors have emerged:
First, is the general public . Many populations are experiencing a rise in awareness of major global challenges such as climate change and poverty, which, in turn, creates a demand for economically sustainable solutions. Social networks are the driving force behind this public awareness. For many people around the globe, access to platforms such as Facebook, Twitter, YouTube, and Instagram has exponentially increased, fostering the visibility of social and environmental issues, as well as their potential solutions, on a regional and global scale. Social network commun...
