What is preventing Indian youth from entrepreneurship?

Social entrepreneurship - profit is not everything

Social Entrepreneurship: Finding Solutions to Modern Challenges

Social entrepreneurship calls for a radical rethink in order to meet the social challenges of our time. “Quality Education”, “Sustainable Consumption and Production”, “Health and Wellbeing” and “Decent Work and Economic Growth” - these are the most important areas in which social entrepreneurs want to get involved and have a positive impact. They want to solve a social problem and that is exactly how their success is measured.

Plastic bottle and jute sneakers

Sébastien Kopp was 25 when he founded Veja in 2004 with his partner François-Ghislain Morillion. Both had studied economics - they had no idea about fashion design or the manufacture of sneakers. In return, they had convictions and the firm belief that they could make the world a better place. Veja sneakers are made from recycled plastic bottles, banana oil, castor oil, cane sugar, rice waste, jute, organic cotton and natural rubber latex. Almost 60 percent of the shoes manufactured in this way are biodegradable.

Investing in fair production instead of marketing

Veja sneakers are an example of unbundling, fair production and ethics of responsibility. The company pays far more for the raw material than what is customary on the world market; The wages of the workers in the factory in Porto Alegre are well above the Brazilian average. There is four weeks of paid vacation and pension insurance. Veja supports local initiatives and communities. It is also part of the concept that the containers for transport to Europe are managed by people with physical disabilities. The depth of production is high and the supply chain is short.

But why can Veja spend so much more on production? In order to be competitive despite higher costs, Veja does not spend any money on marketing. At Adidas, this item alone accounts for 10 to 15 percent of sales - in 2019, the marketing budget was 3 billion euros. At the end of the day, Veja shoes are available in the store for the same price as a shoe that was made under poor working conditions, says Sébastien Kopp.

Responsible ownership as a start-up alternative

But social entrepreneurship not only needs innovation and radicalism - it also needs capital. Start-ups in particular are often in a tight spot of capital. Savings and traditional banks hardly require affordable collateral and business plans well into the future. Risk investors often speculate on short-term profit maximization and thus ensure that plans for sustainable production or co-determination of the workforce are immediately buried in the start-up phase.

The alternative is to start a company that is responsibly owned. All profits are a means to an end and are reinvested or donated into the business idea.

Adrian Hensen is one of the founders of Purpose Ventures - a cooperative that supports other companies in developing responsible ownership. The companies that Purpose Ventures advises are not only traditionally owner-managed but also start-ups and social enterprises that rethink property and want to find suitable forms of financing, organization and cooperation.

Blocking minorities prevent hostile takeovers by unwanted buyers

It is important to preserve the meaning of a company and, for example, to rule out a buy-out or a "hostile takeover". A prerequisite for such protection is a partnership agreement that provides for a veto right for individual shareholders. This enables voting and profit rights to be separated, says Achim Hensen. With his brother Adrian, he not only founded Purpose Ventures, but also the Purpose Foundation, which is now involved in numerous companies. - But not to earn money, but to exercise your right of veto in critical cases. A sale or a hostile takeover is no longer possible because the Purpose Foundation has the blocking minority.

Many companies supported by Purpose serve a common good: Ecosia, the search engine that plants trees with its income; Arche, a supplier of certified organic food from Asia; or Einhorn, the manufacturer of sustainable condoms and period products. And Sharetribe from Helsinki, which started developing software for the sharing economy ten years ago.

The economy must serve people

Most of the social entrepreneurs in the start-up scene have a very good education, are technically, socially and internationally networked - and use their privilege. Many people know what they want early on, says Rainer Höll from his experience. Höll is a business coach and is one of the pioneers of social entrepreneurship in Germany. He built the German branch of Ashoka, an international network for social entrepreneurship.

Social entrepreneurship is also gaining acceptance, which is spreading through all layers of society. More and more are also economically successful. Social entrepreneurs are people who work with great dedication and a willingness to take risks on a new and profound solution to social problems. And set up organizations for this in order to disseminate the solution on a large scale - that's a social entrepreneur.

But can an entire economy be organized with such principles and rules? Rainer Höll sees that the distinction between social entrepreneurship and normal entrepreneurship must practically disappear completely. Because ultimately the economy has to serve people.

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