NEW YORK/LONDON (Thomson Reuters Foundation) - The United States is the best country for business leaders seeking to tackle social problems, according to the first experts’ poll on the top nations for social entrepreneurs, but their work is still a mystery to most people, hampering growth.
Canada and Britain came second and third in the Thomson Reuters Foundation survey of almost 900 social enterprise experts in the world’s 45 biggest economies, with Singapore and Israel rounding out the top five.
Turkey ranked as having the worst environment for social entrepreneurs, scoring poorly in most of 12 indicators used to measure political, economic, regulatory and cultural factors. Ireland and Venezuela also fared badly.
Most experts, 85 percent, said the number of social entrepreneurs finding ways of combining business with social purpose was growing although there is little data tracking the sector.
They cited ventures such as U.S.-based Pipeline Angels that runs bootcamps to teach female investors how to fund women social entrepreneurs.
“If someone’s interested in financial return on investment, that’s not a good fit,” Natalia Oberti Noguera, Pipeline Angels’ founder, told the Thomson Reuters Foundation. “We’re about so much more. We’re about doing good, we’re about doing well.”
But nearly 60 percent of the experts surveyed cited three major challenges in the growing sector - people do not know what social entrepreneurs do which makes raising funds difficult and selling to governments is an uphill struggle.
“There are still too many people who view social entrepreneurs as a bunch of hash-fuming utopian people in knitted sweaters. They couldn’t be more wrong,” said Anne Katrine Heje Larsen, founder and CEO of Denmark-based KPH, an incubator for start-ups focused on social innovation.
CONFUSION OVER WORK
The poll, carried out in partnership with Deutsche Bank, the Global Social Entrepreneurship Network (GSEN) and UnLtd, foundations for social entrepreneurs, was conducted online between June 9 and July 15, polling 20 experts in each country.
It included social entrepreneurs, academics, investors, policy-makers and support network staff in the 45 biggest economies in the World Bank’s 2014 ranking. Iran had to be dropped as it was impossible to get enough respondents.
Experts said the lack of public understanding is exacerbated by varying definitions of social entrepreneurs. A common definition is someone using a business to solve social problems.
The fact social enterprises can be non-profit or for-profit businesses also confused people, according to experts, as did the fact not all countries yet define social enterprises as a business with specific legal and tax treatment.
An example cited of a for-profit social enterprise was United Arab Emirates’s fashion firm Palestyle, known for its luxury handbags, which employs Palestinian refugee women and reinvests part of its sales into social projects for refugees.
“People do not understand social entrepreneurs create money making businesses like any other business, and they question the philosophy of it if the entrepreneur ends up making profit,” said Ayşe Sabuncu, co-founder of Impact Hub Istanbulin Turkey.
The experts said boosting public understanding could build greater awareness and put pressure on governments and financial institutions to support social enterprises which only have specific legal status and tax breaks in some countries.
Andy Carnahan, a Swedish social entrepreneur, said a greater understanding of how for-profit businesses can be a driving force for social good would help.
Carnahan launched a sharing economy platform in 2015 that allows users to post what they need and bid for goods and services from other users.
“We need this (awareness)... among the public who don’t realize how much good can be done by a for-profit business that has a social good built into its business model,” he said.
Despite the lack of public understanding and 58 percent of experts saying it was hard to get investment, data shows investors are looking at such enterprises with growing interest.
According to the 2016 Annual Impact Investor Survey by Global Impact Investing Network (GIIN) and JP Morgan, impact investors – who want to create positive impact alongside financial return – chipped in more than $15 billion in 2015 to finance businesses tackling social and environmental problems.
This was expected to rise to $17.7 billion in 2016.
MILLENNIALS AND WOMEN
Not surprisingly, given their well-established social enterprise sectors, Canada, Singapore and the United States were found to be the nations with best access to investment.
But India, the Philippines and South Korea also were among those where social entrepreneurs were finding it easiest to access investment, according to the poll - although local experts said these funds were often coming from offshore.
“A lot of people see India as an opportunity overseas, especially in America,” said Prashanth Venkataramana, head of operations of Essmart Global, which brings innovative products such as solar lanterns to mud-and-brick villages.
While traditional investors may be skeptical about social businesses, there is strong involvement by women and millennials, those between the ages of 18 and 34.
A 2016 survey by Bank of America found 85 percent of millennials were interested in having a social impact through investment. It also found that women were more interested in impact investing than men.
The Thomson Reuters Foundation poll found 68 percent of experts said women are well represented in management in social enterprises - but only 48 percent said women were paid the same as men.
Women in Asia were found to play a greater role in leading social businesses than in other regions.
The survey found the Philippines is the country where women were best placed in social enterprises, while Malaysia, China, Hong Kong, Indonesia and Thailand gave Asian economies five of the other top 10 slots.
“World-class social enterprises are run by women in Asia. They do a really good job balancing the social and financial objectives,” said Peetachai “Neil” Dejkraisak, who founded a rice social enterprise called Siam Organic in Thailand.
While social enterprises are gaining momentum worldwide, Canada and the United States are leading the charge, the poll found, with Singapore, India and Australia joint third.
The cities of Berlin, London, Hong Kong, Santiago and Nairobi were pinpointed as leading hot spots.
But the sector could use public support and government backing on procurement, experts said.
“Individual enterprises are finding a niche and finding they can engage the market and sell their products or services,” said Rosemary Addis, chair of Impact Investing Australia.
“But as a sector, the concept of social enterprise and purpose-driven business has not yet got mainstream awareness,” she said. “That’s a job ahead to educate the public.”
(For the full results of the 2016 poll on the best countries for social entrepreneurs go to poll2016.trust.org)