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How social enterprises are giving governance a facelift?

Social enterprises are slowly taking up the responsibilities of the state. Is this good? Let a 2007-batch IRS officer, Samrat Rahi, break it down for you

New Delhi: Social enterprises, with their distinct identity, strong moral fabric, innovative designs, and sustainable economic models, are taking up the responsibilities of the state. These changemakers are looking for solutions to provide clean water, affordable housing, zero poverty, a literate and employed world, greener earth and a sustainable future. They are venturing into areas that are considered to be dominant government territory. Their mission does not end at geographical boundaries, they give equal voice to forgotten communities and the problems planet earth is facing. Their growing influence and the shrinking role of the government make us think whether “the nation-state has become too small for the big problems in life and too big for the small problems.” It’s a matter of debate whether social enterprises are providing an alternative, acting as a substitute or complementing the government in its mission. Some people also question the niche created by social enterprises in the ideological and practical spheres. There is a tendency to see it as a social tool of ingrained neoliberalism or a new and influential key player of network governance and co-production.

What are social enterprises?

To elucidate the debate, it is very important to understand the traditional, contemporary and transitional meaning of social enterprise. There are contesting views, concerning the definition of social enterprise. Due to the lack of an agreed definition, the majority of thinkers present it as a hybrid between non-profits and for-profits. They explain this either as a move towards the markets by non-profits or an attempt by profit-centric enterprises to engage in issues related to social and civil society matters.

Governments across the world are trying to find answers to the sufferings of the poor and marginalised and brainstorming to deal with ecological challenges but they have also realised that the government should not be the only solution for everything.

However, the definition of social enterprises is multifaceted, and it is constantly evolving. Its interpretation depends on the developmental stage of society and also there is economic, political and humanitarian side associated with it. It can be seen that social enterprises are emerging at the intersection of traditional sectors.

Rise of social enterprises and changing role of government

The rise of social enterprises and its constant takeover of duties of a welfare state should not be perceived alone as a reaction to market forces, policy of laissez-faire, slowdown in economic growth, unsustainable models of the third sector or failure of bureaucratic models. But this is also an awakening of the citizens of the world, the next stage in their cerebral development to think unitedly to the problems that are threatening human species and hindering an equal development of human civilisation. Definitely globalisation, liberalisation and privatisation have shrunk the domain of government, but it will be a hasty judgment to conclude this as government failure. Still, governments across the world are trying to find answers to the sufferings of the poor and marginalised and brainstorming to deal with ecological challenges but they have also realised that the government should not be the only solution for everything. Moreover, some issues are geographically constrained and context-specific in a way that one universal design cannot be implemented to eradicate it. So, the government has shifted its focus to ‘governance’ and started believing in acting as a regulator. To put this into perspective, the role of the government has transformed. Sometimes it is a funder; sometimes it integrates all the players; sometimes it’s the market maker; sometimes it’s just one of the many contributors to the solution. Sometimes all it has to do is provide a space for these solution markets to work.

Process of finding solutions by social enterprises

It is fascinating to know how social enterprises are finding a solution for the same social problems, the government has been struggling with for decades. It’s a matter of study — the mechanism they adopt to develop efficient public services and how they are emerging as the most trustworthy agents of change for the public and government both. Social enterprises believe in social innovation. They believe in positive deviance and introduce a context-specific design most suited to local needs. They do not look for a traditional solution or conventional design. For example, they know that curing the symptoms of poverty through the donation of food, cloth, medicine, and service will never change the system that gives rise to poverty. They are the persons who have grown up with problems or spend considerable time in understanding the problem closely. They recommend behavioural, institutional, digital and lifestyle changes to the society to come out of the trap of the problem.

Social enterprises like Grameen Bank, GoodWeave, Ashoka, Amazon Conservation Team are some of the examples which have brought radical transformation in global social, political and economic landscape; by establishing emotional connect with people, believing in the power of an individual and harnessing the human energy to win, influence and change the system.

They find out newer ways of resource allocation and service delivery mechanisms and contribute more productively to social development in a human way. Their solutions and models are unique to a situation but their method and process of discovery of a solution are replicated across boundaries in a varied environment. Social enterprises like Grameen Bank, GoodWeave, Ashoka, Amazon Conservation Team are some of the examples which have brought a radical transformation in a global social, political and economic landscape; by establishing emotional connect with people, believing in the power of an individual and harnessing the human energy to win, influence and change the system in a revolutionary way.

Government’s growing reliance on social enterprises

Social enterprises impress the key players in government and outside because instead of a problem they talk about the solutions. The government’s reliance on it to find answers to the problems of a welfare state has increased in recent decades. It is realised there is no better instrument available for poverty alleviation, employment creation, progressing human rights, bridging gender inequality, improving accessible and affordable healthcare, fostering sustainability and to generate a highly skilled workforce.

The excessive dependence of the government on social enterprises is also seen as the government’s lack of interest to solve the deep structural problems within the social and political framework.

Accordingly, social enterprises firstly influenced the government to adopt favourable policies and suggested incremental institutional change, and later on, in some countries, it emerged as an influential department and core policy objective. However, in some studies, it was realised that while operating in the public sphere for securing contracts and delivering public services, there is increasing pressure on social enterprises to follow the principles of bureaucracy. This threatens the very identity of social enterprise and reduces the possible impact of social enterprise in the public sphere. The excessive dependence of the government on social enterprises is also seen as the government’s lack of interest to solve the deep structural problems within the social and political framework.

Evidence of entrenched neoliberalism debate

The promotion of social enterprise by providing fiscal incentives, increasing participation in the public procurement system, growing influence in public sector departments and the advent of multinational corporations as social enterprises is viewed by some scholars as evidence of entrenched neoliberalism. The genesis of this idea lies in mistakenly identifying social enterprises as a constituent of the free-market economy and considering it a subset of profit-driven corporates.  Ideologically, there is not much truth in this argument other than social enterprises are business-oriented, economically sustainable and professional organisations. Simply starting a business within a third world country or running a charitable foundation with a successful business or slight link to social conscience or social good does not transform a corporate into a social enterprise. It is important to understand that social enterprise is a much wider and pervasive term than corporate social responsibility or integrating social responsibility into the business operation. However, in reality, it creates a serious doubt when a platform like Skoll World Forum appreciates and applaud Coca-Cola and Hitachi for doing great things in social enterprise space. But this should not be considered more than a new marketing strategy of big corporates. It is important to remember that social enterprises, in its means and end, have emerged as an effective answer to the consequence of neoliberalist policies adopted by different governments.

A shift toward network governance and co-production debate

The scholars who analyse increasing the government’s reliance on social enterprises as a shift towards network governance and co-production have gone deeper into its meaning as compared to seeing this as evidence of neoliberalism. The existence and evolution of social enterprise as an instrument of change would not have been possible without the involvement of government and cooperation of citizens and other key players in the network system. Like co-production, it encourages citizens to innovate solutions and participate in the public delivery system. However, as compared to co-production, the reach of social enterprises is wider and varies in terms of end-users.

Their sole objective is social value creation, instead of acquiring financial and political gain. They do not operate in the system to secure contact or influence markets, but they advocate the voice of the people to whom development could not trickle down.

Further, social enterprises have a separate identity and distinct functions as compared to other key players operating in the network system. Their sole objective is social value creation, instead of acquiring financial and political gain. They do not operate in the system to secure contact or influence markets, but they advocate the voice of the people to whom development could not trickle down or for whom network government could not a find a solution. It is far from the shortcomings of network governance which grew up as a by-product of capitalism and growing privatisation, and power gets concentrated in the hands of political and business elites.

Examples to analyse the content of the essay

The topic can be well elaborated by taking up a particular sector and seeing its progression in different trajectories under the influence of discussed models. For example, if we take ‘education’ where social enterprises have done pathbreaking work, they came up with an innovative solution of creating digital platforms and educating millions of people around the world. It reshaped the perception of how education can be delivered with positive deviance, design thinking, and a human-centric approach. It influenced the government to adopt these changes into its curriculum, associate with them to provide a wider platform and by further providing them a fertile ground to prosper through incentives, awards, and participation.

Social enterprise has its own unique identity, mode of operation and mission to support the government in grassroots action without imposing a centralised structure.

Here the government did not fail but reinvented itself to fit in this changing environment more effectively. Evaluating this transformation as ingrained neoliberalism appears to be baseless where we see an education system developed on ‘consumer model’ meant for the classes, built on niche marketing and glossy promotional material. Also, it is not fair to compare it with the network model of development in the education sector, where excessive privatisation led to the concertation of power and decision making in the hands of a few elites. The above discussion coupled with relevant examples indicates that social enterprise has become an integral part of the contemporary model of governance. It has its own unique identity, mode of operation and mission to support the government in grassroots action without imposing a centralised structure. Based on the fundamentals of positive deviance and design thinking, it advocates the philanthropic way of doing business. It shapes itself as an organisational form that incorporates passionate individuals, revolutionary changemakers driven with the primary objective to create social equity and value through its specialised product and services for its stakeholders. They adopt a financially viable and sustainable business model to constantly support the humanitarian causes around the world. All these elements make social enterprises a fairly distinguishable entity in comparison with the dictates of neoliberal ideology or network governance and coproduction platforms in present-day governance.

(Samrat Rahi is a 2007-batch IRS officer. He's also a Chevening Scholar who is pursuing an MSc in Public Policy & Management from King's College, London, UK)