Social entrepreneurship: What lies behind social entrepreneurship

Social entrepreneurship is committed to solving social and environmental problems. Read on to find out what lies behind it, what difficulties arise, and what examples there are. By social entrepreneurship, it is not only meant that you plan social activities like playing Slotsgem, but more that the entire purpose of the company is a social one.

The principle of social entrepreneurship is not a new phenomenon. Back in 1983, Mohammed Yunus founded a bank in Bangladesh that enabled people with little financial security to take out loans. Since then, Yunus has been considered a pioneer in social entrepreneurship. In 2006, he received the Nobel Peace Prize for his work. 

In the following sections, you can find out what social entrepreneurship is, what it involves, and what criticism it faces.

Social entrepreneurship: no uniform definition

If you enter the term “social entrepreneurship” into a search engine, you will get countless hits – including both practical and scientific articles. But although the term is on everyone’s lips, there is still no universally accepted definition for the concept. Instead, there are various definitions in circulation, which vary in scope and sometimes focus on different aspects.

However, the fundamental principle is always that profit orientation takes a back seat in social entrepreneurship. Instead, according to Gabler’s Business Dictionary, social entrepreneurs strive for “entrepreneurial thinking and action for the benefit of society and to solve or improve social injustices.” The success of such companies is measured by their social impact, not their financial success. Social entrepreneurship aims to solve social and environmental problems at the local, national, and global levels.

Social entrepreneurship: Legal aspects

Various legal forms are suitable for social enterprises.

In principle, the process of founding a social enterprise is not too different from that of a profit-oriented company. Regardless of the type of company to be founded, entrepreneurs should always consider in advance which legal form is most suitable.

There are several options for founding a social enterprise:

• e. V.: Registered associations do not aim to make a profit, but to fulfill a social mission. At least seven members are required to found an association, and a board of directors must also be formed.
• gGmbH, gUG, and gAG: These legal forms are also not aimed at profit, but rather at a social mission. They can be founded by one or more persons. Liability is limited. The business purpose must be charitable, benevolent, or ecclesiastical. Profits are not distributed, but reinvested.
• UG, GmbH, and AG: Entrepreneurial companies, limited liability companies, and stock corporations pursue a social or commercial mission. They can also be founded alone or as a team. Liability is limited.

Tip: The non-profit legal forms gUG, gGmbH, and gAG have both advantages and disadvantages. Advantages include tax benefits and the option to collect donations. However, the tax office must re-recognize the non-profit status of the company every three years.

Examples of social entrepreneurship

To give you a better idea of what social entrepreneurship means, we would like to introduce you to five companies that have implemented it:

Serlo: Simon Köhl founded Serlo, a free learning platform for students, which gives them access to free learning materials. Materials are available for various subjects such as mathematics, biology, chemistry, and computer science.

Foodloop: Christoph Müller-Dechent’s Foodloop app informs consumers about discounted food that is nearing its best-before date and will soon be thrown away by supermarkets. The app helps save food from the trash and reduce food waste.

Ecosia: The green search engine Ecosia plants trees with its revenue. You can find all the information about Ecosia here: Ecosia: How does the sustainable Google alternative actually work?

Einhorn: Waldemar Zeiler’s company Einhorn, offers vegan and sustainable condoms and menstrual products. The company invests 50 percent of its profits in social and sustainable projects.

Viva con agua: Viva con agua is a non-profit organization whose main goal is to improve water supply in developing countries. To this end, it uses the income from two companies it has founded—the sale of mineral water under the Viva con agua brand and the rental of ecological sanitary facilities (e.g., for festivals) under the Goldeimer label.

Social entrepreneurship: criticism and difficulties

Social start-ups find it difficult to attract investors. Even though the whole idea sounds very positive at first glance, the phenomenon of social entrepreneurship also has to contend with difficulties and criticism.

Some believe that it is not possible to do good out of conviction and generate profits at the same time. Some are of the opinion that people who really want to do something for society or the environment should rather get involved in existing organizations. One example is Jan Böhmermann, who has spoken out against social entrepreneurs several times on his Twitter account.

Furthermore, it is difficult for social startups to find a balance between the benefits for society, for their own employees, and for the entrepreneurs themselves: Should the salaries of the workforce be increased, or should a few more goods be donated instead? Should money be invested in new furniture for the company’s office, or should it go directly to a social project? Normal companies do not have to ask themselves such questions, or at least much less frequently than social entrepreneurs.