Responsible Business - Social Enterprise - Literature review Example

Responsible Business – Social Enterprise ID) [Words: 2194] Table of contents 0 Introduction 3 2.0 Responsible Business 3 3.0 Social Enterprise 6 3.1 Nature of Social Enterprise 6 3.2 Significance and impact of Social Enterprise 7 4.0 The Role of Government 9 5.0 Conclusions 10 6.0 References 11 1.0 Introduction The role of businesses in the market is not limited to the achievement of profits for owners. Rather, businesses should secure the interests of the groups related to business activities. This report aims to explore the nature and the characteristics of a responsible business, as reflected in a specific mode of business, the social enterprise, and the ways in which the above mode of business is supported by government. The report is based on a high range of sources, such as academic books and journals, government’s reports and news published online. Models and theories developed in the literature, as related to the issues under discussion, are used in this study aiming to show both theoretical and practical aspects of responsible business as a key element of the modern market. 2.0 Responsible Business Business, as an entity, is related to a series of interests. Therefore, when referring to the responsibility of a business, the interests of various groups, such as shareholders, employees, customers and the community need to be taken into consideration. This view is aligned with the stakeholder theory of organization. This theory is reflected in the work of Freeman (1984) who noted that a responsible business should address the interests not just of its shareholders but of all groups related to its activities, such as the state, the employees and so on (Crane & Matten 2010). The responsibility of businesses is commonly described by referring to the concept of Corporate Social Responsibility (CSR). Different views have been stated as of the characteristics of a business that promotes CSR. For example, for the managers of Starbucks, the popular coffe-shop chain, a business is responsible when ‘it listens to its stakeholders and responds to their concerns’ (Starbucks, CSR Report 2004, in Blowfield & Murray 2001, p.8). At the same time, CSR has been related to the obligation of businesses to publish their achievements not only in terms of profitability but also in terms of sustainability and of social responsibility (Confederation of British Industry 2001, in Blowfield & Murray 2001, p.8). Through a similar point of view it has been noted that CSR denotes the obligation of businesses to keep a balance between ‘profit maximization and stakeholders’ needs’ (PricewaterhouseCoopers, in Blowfield & Murray 2001, p.8). Figure 1 – The five dimensions on which a definition of CSR can be based (source: Dahlsrud 2008, p.4) According to Dahlsrud (2008) a definition for CSR could be related to a series of issues. In fact, for the above researcher there can be five dimensions of CSR, each of which could be used for describing CSR. These dimensions are presented in Figure 1 above. A popular model explaining the concept of CSR is Carroll’s Pyramid of CSR. The specific model is presented in Figure 2 below. Figure 2 – Carroll’s Pyramid of CSR (source: http://www.csrquest.net/default.aspx?articleID=13126&heading) The Carroll’s model of CSR, as presented in Figure 2, leads to the following assumption: a business supports CSR only if it responds to five types of obligations, as these types are described in the Pyramid developed Carroll (Cheng et al. 2013). A similar concept is the concept of Sustainable business, a business that denotes ‘the ethical thing to do’ (Rogers, Jalal & Boyd 2012, p.185) and the concept of Social enterprise which has been described as an enterprise that it is able ‘to balance economic and social goals’ (Ridley-Duff & Bull 2011, p.56). The above two concepts do not require, as a term, the protection of the interests of all groups related to business activities, as the concepts of responsible business and CSR do. 3.0 Social Enterprise 3.1 Nature of Social Enterprise In the context of the modern market, the responsible business can be promoted through different business modes. Particular reference should be made to social enterprise, a business mode that reflects a business activity positioned ‘between state and the market’ (Riddley-Duff & Bull 2011, p.57). For Banks (1972) a social enterprise could reflect a business that highly emphasizes on the development of local community; the above theorist refers to Robert Owen, a businessman who had a key role in the development of ‘the concept of cooperative communities in 1820s’ (Riddley-Duff &Bull 2011, p.57). Different approaches have been used for defining social enterprises. In its most common form, a social enterprise can be characterized as an enterprise governed by its employees or by local residents and which emphasize to the promotion of the interests of the community (Riddley-Duff &Bull 2011).From a different point of view, a social enterprise has been related not just to the achievement of social purposes but also to ‘autonomy and entrepreneurial risk taking’ (EMES 1996, in Riddley-Duff &Bull 2011, p.62). In the social enterprise of the above form other groups, apart from employees, can participate (Riddley-Duff &Bull 2011). In other words, a social enterprise is not limited to the promotion of social purposes but it can be used for commercial purposes also, under the terms that social interests will be also addressed (Riddley-Duff & Bull 2011). The potentials of social enterprise to serve both social and economic needs are reflected in the following example: Cadbury, the popular UK firm, was established for helping towards the limitation of alcohol consumption, a target that would be achieved through the chocolate drinks that the firm offered to the public (Wagner-Tsukamoto 2003, p.72). Through the years, the firm’s profitability increased at quite high levels without affecting, however, the role of the enterprise in serving specific social needs (Wagner-Tsukamoto 2003). The nature of social enterprise could be understood if referring to the characteristics of the social entrepreneur. According to Leadbeater (1997) a social entrepreneur is expected to have certain qualities: a) he is able to identify resources that have not been appropriate used and to employ them for covering specific social needs, b) he has excellent communication skills and he is able to inspire people around him, and c) he tends to establish ‘flat and flexible organizations’ (Leadbeater 1997, p.2) which are supported by full time employees who are highly creative (Leadbeater 1997, p.2). In any case, social enterprises can effectively replace organizations of the public sector promoting innovation, flexibility and communication with customers (Leadbeater 1997). In addition, social enterprises are not limited as their subject; they can rather be involved in different activities and can employ a variety of approaches for resolving emergent social needs creating a long-term relationship with their members/ customers (Leadbeater 1997). In a report published by the Cabinet Office of UK in 2013 it is noted that social enterprises aim to respond to problems referring to the society or the environment and tend to focus on the cooperation with communities for responding to the demands of such role (Cabinet Office UK 2013). 3.2 Significance and impact of Social Enterprise Social enterprise is important for covering a high range of social needs. In practice, organizations operating in different industries can develop social enterprises for responding to specific social issues. Reference can be made, for example, to the Social Enterprise Initiative of Harvard Business School (HBS, Social Enterprise Initiative 2014). The specific initiative focuses on the support of public and non-for-profit organizations; the support is based on the suggestion of innovative leadership techniques, the exchange of strategies and resources and on the incorporation in the university’s curriculum of courses aiming to support those who are interested in becoming social entrepreneurs (HBS, Social Enterprise Initiative 2014). A key issue when referring to social enterprises is the following: since its establishment a social enterprise needs to be able to increase its strength so that it can help more people who face the same social problem and to assess more effectively the various aspects of the particular problem (Bloom & Smith 2010). This means that the impact of a social enterprise cannot be standardized but it should be increased as time passes (Bloom & Smith 2010). In terms of its popularity to consumers, a social enterprise seems to have an important advantage towards conventional businesses. More specifically, it has been proved that consumers tend to prefer to buy products from social enterprises since they feel that in this way the help towards the promotion of social good, i.e. they believe that their buying decision is ‘moral and ethical’ (Choi & Kim 2013, p.242). In other words, social enterprises are more powerful than conventional enterprises in attracting consumers (Choi & Kim 2013). In addition to the society, a social enterprise impacts the individuals involved in its activities. For example, those who manage these organizations need to ensure the use of resources in such way so that social interests are covered at the highest possible level; also, the sector’s investors need to monitor continuously the balance between the investment made and the benefits involved, ensuring that resources are used as effectively as possible (Clifford, Markey & Malpani 2013). This means that social enterprise sets specific criteria that its managers and supporters need to meet so that the aims of the specific organization are achieved. 4.0 The Role of Government The power of the government to define the terms under which businesses compete within its industry is unique. In fact, as noted in the study of Porritt (2012) businesses cannot take initiatives for changing the rules that govern business operations; rather, they have to wait for the government’s relevant decisions and measures. Still, businesses need to use the rights given to them by the government and to develop strategies that are aligned, as possible, with the principles of sustainability and of social responsibility (Porritt 2012). The government can have a critical role in the promotion of social entrepreneurship. Reference can be made, as an example, to the Guidance published by the Cabinet Office (UK) in 2013 in regard to social entrepreneurship. In the above guidance important information is provided for the characteristics of social enterprises while explanations are given for the involvement of the British government in the development of social entrepreneurship. In the particular report it is explained that for the British government the value of social enterprises is high mostly because of the following reasons: a) they represent an important share of businesses in UK; it is noted that the number of social enterprises across the country reaches the 688,000; b) they highly contribute in the employment needs of British population; about 2 million people in UK work in social enterprises and c) their support in the growth of UK economy is significant; the income of these enterprises has been estimated to ‘£163 billion a year’ (Cabinet Office UK 2013). According to Clinton (2010) the government can have a key role in the development of social enterprises: a) the government can be an investor, either fully or partially, of projects developed by social enterprises; b) the government can introduce laws for increasing the attractiveness of social enterprises, as investment; for example, the introduction of tax-exemptions for those investing in social enterprises could be an important initiative for increasing the investment made on social enterprises and c) the government can provide to social enterprises the support required in the development of their operations, meaning non-monetary support, such as infrastructure or technology necessary for the development of these enterprises’ daily operations (Clinton 2010). The role of the government in the development of social enterprises can be also understood through the example of the Health Care sector in UK. In regard to this sector the following announcement was made in 2010 by the Cabinet Office: the sector’s employees would be able to form their own social enterprise becoming healthcare providers (Addicott 2011). The employees that would be involved in such initiative would be offered appropriate funding, access to relevant online support and consultancy so that they were able to respond to the demands of such project. 5.0 Conclusions The development of responsible business is related to a series of factors. Primarily, the willingness of the business creator to serve specific social needs, at lower or higher level, is required. Then, the support of specific groups is necessary so that critical problems are avoided while the resources required for the organization’s daily operations are secured. The review of the literature published in this field has proved that responsible business behaviour is encouraged by the following factors: a) the level of voluntary support available in the particular sector; b) the effects of the responsible business on local communities and c) the support provided by the government. In fact it seems that the role of government in the development of responsible business behaviour is extensive. In regard specifically to social enterprise, different political drivers seem to be powerful in initiating such entrepreneurial activity: a) social incentives; the respond to critical social needs of local community is a vital term for individuals to be involved in social entrepreneurship, b) economic incentives; the profit resulted from such activities is important but not critical. On the other hand, if appropriately managed, this profit can be used for financing other projects of similar characteristics. This use responds to the need of social enterprise for gradual development both in terms of the number of its beneficiaries and in terms of the aspects of the social problem addressed. From this point of view, social and economic interests can be used for increasing the attractiveness of social entrepreneurship but these interests can be addressed only through appropriate political interventions of various forms, as explained earlier. 6.0 References Addicott, R. (2011) “Social enterprise in health care: Promoting organisational autonomy and staff engagement.” The Kings Fund [Online] 2011 (URL http://www.lgcplus.com/Journals/2011/08/24/x/z/l/Social-enterprise-in-health-care.pdf) Site visited 7/1/2014 Bloom, P. & Smith, B. “Identifying the Drivers of Social Entrepreneurial Impact: Theoretical Development and an Exploratory Empirical Test of SCALERS”, Journal of Social Entrepreneurship, 1(1), pp.126–145. Blowfield, M. & Murray, A. (2011) Corporate Responsibility, Oxford: Oxford University Press Cabinet Office (UK). G8 Factsheet: social investment and social enterprise [Online] 3 June 2013 (URL https://www.gov.uk/government/publications/g8-factsheet-social-investment-and-social-enterprise/g8-factsheet-social-investment-and-social-enterprise] Site visited 7/1/2014 Cheng, K., Low, P., Idowu, S. & Ang, S. (2013) Corporate Social Responsibility in Asia: Practice and Experience, New York: Springer. Choi, E. & Kim, S. (2013) “The Study of the Impact of Perceived Quality and Value of Social Enterprises on Customer Satisfaction and Re-Purchase Intention” , International Journal of Smart Home, 7(1), pp.239-252 Clifford, J., Markey, K., and Malpani, N. (2013) Measuring Social Impact in Social Enterprise: The state of thought and practice in the UK. London. E3M. Clinton, L. (2010) “India Journal: What’s Policy Got to Do With Social Enterprise?” The Wall Street Journal India [Online], Dec 6, 2010 (URL http://blogs.wsj.com/indiarealtime/2010/12/06/india-journal-whats-policy-got-to-do-with-social-enterprise/) Site visited 7/1/2014 Crane, A. & Matten, D. (2010) Business Ethics: Managing Corporate Citizenship and Sustainability in the Age of Globalization, Oxford: Oxford University Press. Dahlsrud A. (2008) How Corporate Social Responsibility is defined: An analysis of 37 definitions. Corporate Social Responsibility & Environmental Management 15(1): 1-13 Gibson, B., Hassan, S. & Tansey, J. (2013) Sustainability Assessment: Criteria and Processes, London: Routledge. Harvard Business School (HBS). Social Enterprise Initiative [Online], 2014 (URL http://www.hbs.edu/socialenterprise/about/) Site visited 7/1/2014 Leadbeater, C. (1997) The Rise of the Social Entrepreneur, London: Demos. Lyons, T. (2012) Social Entrepreneurship: How Businesses Can Transform Society, Santa – Barbara: ABC-CLIO. Porritt, J. (2012) Capitalism as if the World Matters, London: CRC Press. Ridley-Duff, R. & Bull, M. (2011) Understanding Social Enterprise: Theory and Practice, London: SAGE. Rogers, P., Jalal, K. & Boyd, J. (2012) An Introduction to Sustainable Development, London: Routledge. Volkmann, C., Tokarski, K. & Ernst, K. (2012) Social Entrepreneurship and Social Business: An Introduction and Discussion with Case Studies, London: Springer. Wagner-Tsukamoto, S. (2003) Human Nature and Organization Theory: On the Economic Approach to Institutional Organization, Cheltenham: Edward Elgar Publishing. Read More