Entrepreneur & Innovation Exchange

Published online at EIX.org on March 12 2020

DOI: 10.32617/459-5e69faa31fceb

How Social Entrepreneurs Can Create Impact for a Better

World
Ozlem Ogutveren Gonul (Drexel University)
Zuhal Senyuva (Baskent University)

KEYWORDS: social entrepreneurship, Social impact.

Climate change, income inequality, injustice and other (or a set of solutions) to address it; the evaluation of the
vexing social and environmental challenges are social impact, the business model and the sustainability
changing our thinking and the way businesses operate. of the venture; and the creation of a social mission-
As social media helps good and bad news about oriented for-profit or a business-oriented nonprofit entity
business practices travel fast, established for-profit that pursues the double (or triple) bottom line”
companies are taking corporate responsibility seriously. (Robinson, 2006:95). The tendency in the field seems to
And increasingly, young and socially aware shift from a non-profit orientation towards a profit-
entrepreneurs are aspiring to set up new ventures that oriented approach, with a focus on the social problem
address these problems while making money, and and with the realization of increasingly high financial
social entrepreneurship has become a rapidly growing strains. Non-profit organizations relying on donations,
field. However, despite the good intentions of social grants and governmental support can struggle to
entrepreneurs, it remains challenging to measure how maintain financial sustainability to continue their efforts
much of a difference they are making. In this article, we and operations towards solving critical social problems.
provide an overview of social entrepreneurship and However, a financially stable and sustainable business
show options for capturing its impact -- a key part of may allocate all its time, effort and resources to create
making the venture sustaining and attracting impact innovative solutions in solving the social and
investors who want to channel their money into ventures environmental problems of a society instead of focusing
with strong results. on providing financial resources.

Defining Social Entrepreneurship Scope of Social Entrepreneurship

People have different definitions of social Social entrepreneurship is all about creating a positive
entrepreneurship and how it should be practiced. Some change in the society, and social entrepreneurs play the
include social activists, non-profit organizations and role of a change agent and a catalyst for social
philanthropists in the social entrepreneurship category, transformation (Banodia and Dubey, 2017). Peter
while others include any profit-oriented organizations Drucker indicated that social entrepreneurs change the
that produce social outputs for the good of the society. A performance capacity of a society (Gendron, 1996, p.
third view limits social entrepreneurship to profit- 37). With such large-scale goals, social entrepreneurs
oriented organizations that are founded with the primary target highly intractable social problems (MacMillan and
goal to contribute to the solution of a specific social Thompson, 2013) such as poverty, hunger,
problem, with specific business models to serve this homelessness, unemployment, environmental issues,
mission. All these distinct types of organizations have sustainable energy, human rights and others. Social
different business models and financial sustainability entrepreneurs often choose their causes from areas of
approaches. society that are underserved by government policy and
financial support. As a result, they usually work in
In this article we will work with Robinson’s (2006) difficult conditions involving high risk and limited
definition of social entrepreneurship, since it is one of resources in underdeveloped markets, high-risk areas
the most comprehensive definitions addressing many with unreliable infrastructure and even untested
aspects of the term. Robinson defines social technology (MacMillan and Thompson, 2013). Difficult
entrepreneurship as, “a process that includes: the conditions and insufficient resources require exceptional
identification of a social problem and a specific solution

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planning and an established process to make progress the "outputs," "outcomes" or "impacts" of their
towards scalable, innovative solutions to these organizations. Outputs are the activities listed in an
extensive social problems. action plan or the objectives defined by an organization,
such as providing specialized education for students
Social entrepreneurs may have a geographic focus with specialized needs. Outcomes are the intermediate-
when defining their scope. Many social problems are term observed effects of the outputs, which initiate the
local, and social entrepreneurs working on local real changes in the society, such as increasing the
problems may need to operate within their defined employment rate of the students with special needs
territory with specific tools and strategies authentic to (Mulgan, 2010). Impacts are the long-term results that
the nature of the problem. Other social ventures may be reflect the mission of an organization through systematic
international in their scope and attempt to solve change. Social impacts determine whether a social
environmental, conservation or sustainability issues venture’s approach to solving a social problem is
across several regions. Some social entrepreneurs aim actually working (Wolk and Kreitz, 2008). Figure 1
to develop strategies and movements to impact public shows the social value proposition model for social
policy and funding priorities, with a mission to create ventures incorporating inputs, activities, outputs,
national and global solutions to certain social problems. outcomes and impacts together.

As a result of an extensive literature review, El Ebrashi Planning for and assessing the social impact created by
(2013, p. 203) proposes that an executable process of a social venture is critical for many reasons. First,
social entrepreneurship consists of the following steps: success of a social venture is measured through the
a) discovering opportunities to eliminate social and sustainable social impact and change it creates, unlike
institutional barriers and address market failures related the traditional for-profit businesses for which success is
to the provision of public goods and distributional equity, quantified by number of products produced, customers
b) experimenting ideas, c) establishing innovative served and financial return through dollars made.
social organizations, d) having clear social outcomes Secondly, social entrepreneurs need to attract social
and impact, e) performing activities to achieve the social impact investors to their cause to secure funding for
outcomes and impact, f) working on the social their ventures. A social impact investor is anyone who
organizations’ growth, and g) using specific indicators to provides resources to fund a business plan for enduring
measure the success of the organization through social impact (Wolk and Kreitz, 2008). They need
achieving social impact. Other critical steps in the evidence that their investment will create measurable
process of social entrepreneurship include building the social impact and change.
essential networks and securing the resources needed
to successfully obtain the social goals set by the social
entrepreneur (Thompson, 2002).

Creating Social Value and Impact

Social ventures produce two critical outcomes to create
and sustain social benefits: social impact and social
change (El Ebrashi, 2013). Social impact is the effect of
an organization’s actions and outcomes on the well-
being of its community and the society at large. Social
impact is a general term used to define all social and
cultural consequences to human populations of any
public or private actions that alter the ways in which
people live, work, play, relate to one another, organize
to meet their needs, and generally cope as members of Challenges in Measuring Social
society (Burdge and Vanclay, 1996, p. 59). Impact
There are many challenges and problems in developing
Social value and social impact address the value added
an efficient social impact measurement and assessment
to the community by an organization. Social
approach. Difficulty in quantifying the impacts,
entrepreneurs make attempts to differentiate between

Copyright © 2020 Ozlem Ogutveren Gonul, Zuhal Senyuva, Published by Entrepreneur & EIX.org (2020)
Innovation Exchange DOI:
10.32617/459-5e69faa31fceb
(Ogutveren Gonul & Senyuva, 2020) Page 3

complications regarding long-term predictions of social Measurement is costly and difficult; measures
impacts and limitations in resources needed to measure are actually misleading and dysfunctional; and
social impacts are the most common issues faced by sometimes the people behind the initiative do
social entrepreneurs. not know how to measure the impact (Epstein
and Yuthas, 2014). Deciding on what to
1. Difficulty in quantifying: Social change and measure and how to measure it requires special
social good are not easy to quantify and knowledge and expertise, and most of the small-
formulate for concrete measurement. For scale social organizations lack the skills needed
example, think about a social venture focused to measure and interpret results (Epstein and
on training uneducated women to help them Yuthas, 2014). An additional problem is that
learn certain skills and become employable. At measuring long-term impact requires time and
the end of a determined time period we can money. Furthermore, uncertainty and vagueness
quantify the outcomes of the training program as in determining the limits of what is measured
“number of women who participated in the and figuring out what portion of the change is
program” or “number of women who were created through the activities undertaken by the
placed in a job with the skills learned from the organization adds to the level of complexity. For
program.” Similarly, a social venture employing example, referring to the above example, if (and
and training only former inmates gives this when) the recidivism rate of a country declines,
disadvantaged group an opportunity to have a it is challenging to ascertain how much of the
fresh start and a second chance in life. The positive societal change can be associated with
social outcomes of the venture may be the activities of a specific social venture.
measured as “the number of former inmates
employed in a year” or “the number of former Approaches to Measuring Social
inmates who stayed on the job for three
consecutive years.” However, such an approach Impact
of quantifying social outcomes merely measures Social entrepreneurs are constantly looking for the most
the short-term results of the social venture and appropriate social value and impact measurements for
do not reflect the depth of the impact. activities undertaken by their ventures. But they
2. Difficulty in predicting the long-term impact: If disagree on what to measure and how to measure it.
we can observe the results of the above Most social entrepreneurs use the common form of
examples over an extended period of time, we “measurement,” which is conveying anecdotical stories
would be able to see the deeper effects of these presenting success examples to their funders and other
social ventures on the society. For example, if, stakeholders. Although anecdotical stories are critical in
as a result of the training program for the disclosing qualitative insights, quantitative data is
uneducated women or the employment program needed too.
for the ex-convicts, their families' standard of
living improved, their children could have better It is important to understand how different stakeholders
education and find better and higher-paying place value on social and environmental assets in order
jobs. Such results would have additional positive to develop appropriate measures to assess impacts
changes in the society. At a macro level, (Epstein, 2008). Mulgan (2010) summarizes four
improvement in economic and social indicators common methods used by social entrepreneurs in
like the “unemployment rate of women” and measuring social value and impact:
“recidivism rate of a country” reflects long-term
social impact and the positive change in the Cost Benefit Analysis
society. Such results and changes are difficult to Cost Benefit Analysis (CBA), lately called Social Cost
predict and quantify to measure the long-term Benefit Analysis in the scope of social ventures and
results of a social venture. projects, is used to determine a project's viability and
3. Cost, time, accuracy and knowledge limitations: whether investing in it is a sound decision. The goal in
A noticeably large number of nonprofits, impact using CBA is to monetarize the value of benefits
investors and social ventures do not attempt to expected from a project and compare them to the
measure their success in terms of their impact. expected costs. It is often used by investors in

Copyright © 2020 Ozlem Ogutveren Gonul, Zuhal Senyuva, Published by Entrepreneur & EIX.org (2020)
Innovation Exchange DOI:
10.32617/459-5e69faa31fceb
(Ogutveren Gonul & Senyuva, 2020) Page 4

comparing projects with one another and deciding impact.

where to invest, based on which option will create the
maximum benefit for the society (Mulgan, 2010). In addition to the methods summarized by Mulgan
(2010), many new and discrete measurement
Social Accounting approaches have been developed by social
Social accounting refers to all "accounts which go entrepreneurs, external auditors, governments and non-
beyond the economic" and is used interchangeably with profit organizations. For example, Social Impact
terms such as social responsibility accounting, social Assessment (SIA) is used at a rather macro level,
audits, corporate social reporting, stakeholder dialogue usually by nations, to assess or estimate the social
reporting, environmental accounting and reporting consequences forecasted to follow a specific policy
(Gray, 2002). Social accounting requires the action or a project prior to implementation (Burdge and
implementation of systems to monitor and report Vanclay, 1996). Various other approaches such as
processes accounting for creation of social impact. The trained judgment methods (discussions, observations
goal is to build systems to report social performance and expert analysis) or qualitative methods (structured
and make action plans to improve that performance. interviews and field visits) have been explored to gather
The system relies on clarifying social objectives and in-depth data to extend the measures to a different level.
collecting and evaluating qualitative and quantitative Despite all the efforts, social entrepreneurs still struggle
data on its outputs. It is important to note that social with visualizing the bigger picture and forecasting all the
accounting is a method for continuous improvement on consequences of their ventures.
the results produced by an organization (Mulgan,
2010). Next Steps
Measuring and reporting social impact is found to
Social Return on Investment (SROI) strategically “improve performance, access to
SROI is a financial tool to assess the socio-economic resources, and building organizational legitimacy”
value created. It compares the net social benefits (Nicholls 2009) and to increase a social venture’s
created by a venture to the investment required to competitiveness. Most social entrepreneurs face the
generate those benefits over a determined period of dilemma to decide whether they should devote time and
time (Millar and Hall, 2013). SROI is a quantitative money to measure social impact or to use those
measure of a company’s social and environmental resources towards serving their mission. More often
impact (Olsen and Lingane, 2003) and the social impact than not, they don't channel enough resources into
investors usually demand SROI figures to understand measurement. Entrepreneurs should think about how
and evaluate the results of their investment with a much of their budget should be allocated to developing
quantifiable approach. There are two types of SROI. affordable and appropriate measurements to increase
The Evaluative SROI is conducted retrospectively and long-term social impacts.
is based on actual outcomes of an organization; and the
Forecast SROI refers to predicted social value to be There is always room for improving social impact
created if (and when) the intended outcomes are measurements and developing more systematic
obtained (Mulgar, 2010). assessment procedures. Following our analysis of the
current trends in social entrepreneurship, we have some
Basic Efficiency Resource (BER) Analysis suggestions for how social entrepreneurs can measure
BER analysis seeks to provide a simple framework for impact.
evaluating complex multicomponent programs, to
evaluate a unit's impact compared to its resources and First, we believe that conducting a Social Needs
to offer a relative perspective on performance where the Analysis prior to taking social action is crucial.
units analyzed are judged in comparison to other peer Entrepreneurs often can successfully define a social
units (Cugelmon and Otero, 2010). It is a cost-effective problem and develop action plans towards contributing
way of collecting data through interviews and surveys to the problem they deem critical. Although it is
conducted with staff members, partner organizations, important to frame the social problem, it is also
beneficiaries and other stakeholders (Mulgan, 2010). important to find the root causes and consequences of
BER is efficient in the sense that in involves many that particular problem. A systematic needs analysis
stakeholders and their views in the creation of social would be essential in determining the real needs or gaps

Copyright © 2020 Ozlem Ogutveren Gonul, Zuhal Senyuva, Published by Entrepreneur & EIX.org (2020)
Innovation Exchange DOI:
10.32617/459-5e69faa31fceb
(Ogutveren Gonul & Senyuva, 2020) Page 5

between current conditions and the desired conditions and sustainable social impact. Social Responsibility
in society. Needs analysis should be part of the project Journal, 9(2), 188-209.
planning process to enable the ideal allocation and use
of resources, and to reach the maximum level of Epstein, M.J. (2008). Making sustainability work: Best
expected and unforeseen social impact. practices in managing and measuring corporate social,
environmental and economic impacts (1st ed.). San
Most social ventures choose and use one single Francisco: Sheffield, UK: Greenleaf Pub.
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resources, skills and knowledge, and their dependence Improving Social Impacts: A Guide for Nonprofits,
on the impact measurement to manage their Companies, and Impact Investors. San Francisco:
stakeholder relations. However, a holistic approach to Berrett-Koehler Publishers, 2014. Print.
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methods, would present a better view of where they Gendron, G. (1996). “Flashes of Genius”, Inc. 18:
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Gray, R. (2002). The social accounting project and
methods such as trained judgment, qualitative research,
Accounting Organizations and Society Privileging
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engagement, imaginings, new accountings and
2014) together would give the social entrepreneurs a
pragmatism over critique? Accounting, organizations
bigger picture of what their ventures have achieved.
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Finally, the social entrepreneur should plan and account
MacMillan, I. C., & Thompson, J. D. (2013).The Social
for a layered social impact. As mentioned before, we
Entrepreneur's Playbook, Expanded Edition: Pressure
can only see the short-term (first layer) outcomes and
Test, Plan, Launch and Scale Your Social Enterprise .
results of the venture and depend on these outcomes to
Wharton Digital Press.
verify success. Difficult to measure and determine, the
longer-term effects (second and even third layer) should
Miesing, P. (n.d.). Measuring Social Impact
be taken into consideration when anticipating the actual
(https://www.albany.edu/faculty/miesing/teaching/socen
impact created by the organization. Only then we can
t/7%20Measuring%20Social%20Impact.pdf).(retrieved
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on 12/16/2019).

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Copyright © 2020 Ozlem Ogutveren Gonul, Zuhal Senyuva, Published by Entrepreneur & EIX.org (2020)
Innovation Exchange DOI:
10.32617/459-5e69faa31fceb
 (Ogutveren Gonul & Senyuva, 2020) Page 6

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Copyright © 2020 Ozlem Ogutveren Gonul, Zuhal Senyuva, Published by Entrepreneur & EIX.org (2020)
Innovation Exchange DOI:
10.32617/459-5e69faa31fceb

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