Making Profit And Doing Good

By Moyna Manku
Mint, New Delhi.

Social enterprises are for-profit entities aimed at creating a social impact. Vidya Shah, chief executive of EdelGive Foundation, the philanthropic arm of Edelweiss Group, believes that social enterprises fill the gap that governments and market mechanisms have failed to address. Even though EdelGive Foundation does not invest in social enterprises, Shah says they have a strong place in a country with vast inequalities such as India.

Prema Gopalan, founder and executive director of Swayam Shikshan Prayog (SSP), echoes Shah’s assessment that social enterprises have become one of the most innovative strategies in addressing the pressing needs of development.

SSP started out as a not-for-profit, helping bridge the gap between local community and government following the Latur, Gujarat, earthquake in 1993. After the tsunami in 2004, SSP worked to enable women from local communities to monitor the relief effort and act as intermediaries by giving feedback to the government on the progress of building work, selection of beneficiaries and what was needed on the ground.

In the past two decades, SSP has established a microfinance institution and a school of entrepreneurship and skill development for women and youths, and has become an entrepreneur enabler in rural India. Gopalan says it has equipped more than 70,000 women to partner with global and local businesses and develop sustainable rural social businesses in clean energy, sanitation, basic health services, nutrition and safe agriculture.

SSP, along with its group of social ventures, is one of the finalists at the 2015 India Social Entrepreneur of the Year (SEOY) Awards, conducted by the Jubilant Bhartia Foundation, a not-for-profit organization established by the Jubilant Bhartia Group, in association with the Schwab Foundation, a Switzerland-based global non-profit promoting social enterprise. The SEOY Award winners will be announced on 3 November in Delhi.

Gopalan believes that recognition, like an SEOY Award, will create the much-needed leverage with policymakers and corporations for the networks of grassroots women entrepreneurs. She believes that for social enterprises such as SSP, there is always a creative tension between their social mission and business model, as they operate at the base of the pyramid and function in a “hostile ecosystem, where financial institutes like the banks are unwilling to extend loans”.

Another finalist for this year’s SEOY Award, Suparna Gupta, founder of the Aangan Trust, a non-profit working with children in high-risk segments of society, says that an award like “SEOY is significant because it crosses barriers between business and the social sector and reinforces things like innovation and replicability or scale, which were not traditionally valued as much in the social sector”. According to her, for those entities which have been trying to infuse these aspects in their organizational framework, this award comes as acknowledgement of their effort.

For a decade, SEOY has selected a handful of social enterprises and non-profits that are known for their social interventions. The winners are taken to the annual World Economic Forum held in Davos, Switzerland, with the aim of helping them create larger networks.

Ajay Khanna, chief of strategic and public affairs, Jubilant Bhartia Group, says SEOY awards are dedicated to promoting social innovation. “We select late-stage social enterprises that have demonstrated large-scale systemic change and impact.” The enterprises are selected based on five critical criteria: innovation; sustainability; direct social impact; reach and scope; and replicability.

“Awards such as SEOY help create a significant meeting point and opportunity for dialogue and possible collaboration between the social, the public and the private sector,” says Ashraf Patel, co-convener of ComMutiny, the Youth Collective, which was born out of the not-for-profit Pravah, which works with young people on leadership programmes. Patel adds that such awards offer a great opportunity for peer learning.

The one big takeaway from recognition as offered by the SEOY Award is the exposure and possible networks it opens up for social entrepreneurs, according to Poonam Bir Kasturi, founder of popular Bengaluru-based Daily Dump, a social enterprise which sells low-cost waste-composting units to the public, and one of the finalists at the SEOY Awards.

“When an enterprise wants to retain a lot of autonomy then networks are not a given, especially if the culture of the organization is not ‘network’ savvy. In such a case, awards are the window to build new networks and connect with people who can grow the impact of the organization,” she explains.

That the social sector is facing many challenges–government and public distrust, reduction in grants, etc.–is known. Hence, the sector is looking for all the recognition and support it can get. According to Parul Soni, global partner at Thinkthrough Consulting Pvt. Ltd, a financial advisory firm focused on the corporate social responsibility and social sector, “Many not-for-profits see value in social enterprises and want to either start their own or promote such entities because funds through charity are slowly reducing, so a business angel would give such entities longevity. But the regulation surrounding the sector is ambiguous.”

The Securities and Exchange Board of India has a very broad definition of what can be considered a social enterprise, including trusts, foundations, societies, private incorporated entities and even Section 8 companies (not-for-profit companies formed with charitable objectives), but income-tax laws limit the scope. “The income-tax laws state that any not-for-profit with an income above Rs.25 lakh is not eligible for tax rebates,” says Soni. This creates a Catch-22 situation for enterprises like SSP which are focused on making a social impact through market mechanisms.

Megha Jain, social impact manager at Dasra, a strategic philanthropic foundation, says that though social enterprises start with the community and social impact as the focus, once the business starts to mature, the social impact aspect takes a back-seat. “The business aspect of social enterprises is spoken about a lot and get a lot of attention, but it is unfortunate that the social aspects at times gets de-prioritized,” says Jain.
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“A lot of capacity building, peer learning and common platforms are needed for the sector to fully mature.”

Many of the SEOY awardees over the years have not strictly been social enterprises. For example, two of the finalists this year are not-for-profits–Pravah-ComMutiny and Aangan Trust. According to Ajay Khanna, “SEOY India Award has always witnessed a mix of finalists from for-profit and not-for-profit organizations. Social entrepreneurs are innovators who implement practical and sustainable solutions to address challenges in numerous areas including health, education, environment, job creation and access to technology. Whether they are set up as for-profit entities, hybrid social ventures or not-for-profit organizations, their primary focus is transformational social change.”

The promoters of HT Media Ltd, which publishes the Hindustan Times and Mint, and Jubilant Bhartia Group are closely related. There are, however, no promoter crossholdings.

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