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Can Entrepreneurship Solve Environmental and Social Issues?

Kauffman researcher Alex Krause discusses social and environmental sustainability in entrepreneurship with a different take at the “Three Ps” of Business: People, Planet, and Profit.

In traditional business schools, students learn the Three P’s of business: People, Process, and Product.

But at the annual Sustainability, Ethics, and Entrepreneurship (SEE) conference in Denver, Colorado, one speaker brought attention to SustainAbility founder John Elkington’s work on the new Three P’s of business: People, Planet, and Profit.

Based on years of social entrepreneurship research, Jeffery McMullen of Indiana University explained that a balanced business model—and a strong balance sheet—should be the sustainable entrepreneur’s aspirational goals.

The definition of social entrepreneurship has been heavily disputed within the research field—is it a nonprofit? A for-profit with social responsibility in mind? Is all entrepreneurship social entrepreneurship, because all business, in theory, supports positive economic development?

Cambodian Children
Photo courtesy of Asian Development Bank via Flickr

In a research paper from the Academy of Management Review, researchers note that “Social entrepreneurship – the process of employing market-based methods to solve social problems – continues to grow in popularity, but remains poorly understood.[i]

Stanford Social Innovation Review writes that “social entrepreneurship signals the imperative to drive social change, and it is that potential payoff, with its lasting, transformational benefit to society, that sets the field and its practitioners apart.[ii]

However we look at it, measuring an organization’s ethical impact deserves special attention.

So, what does social entrepreneurship look like from the for-profit perspective?

“Everything in Moderation.”

I believe there is a balance where people, planet, and profit can all prosper.

McMullen studies the concept of market failure as a call to social entrepreneurship in a paper published in the Journal of Business Venturing.[iii] He uses an example from economists Kenneth Arrow and Gerard Debreu in their 1954 model: “no redistribution of goods or productive resources can improve the position of one individual without making at least one other individual worse off.”

He sees an inefficiency in resource distributions in regard to the environment. We do not achieve an efficient balance when industries, such as non-renewable energy, affect the Earth with business activity that damages necessary environmental supplies for future generations.

“If I’m all things to all people, I can’t be the best at all things.”

To be at our best, we must support business development in such a way that we do not diminish supply by exploiting demand. Market equilibrium is market sustainability.

Likewise, in terms of social ventures, one business cannot solve all of the world’s problems in one fell swoop. We require a diversity of organizations to support an ecosystem that helps solve a myriad of problems.

Tom’s Shoes and Warby Parker come to mind as two companies who are doing their part to support social and environmental ventures, while still creating a hefty profit. Both are examples of one-for-one retail. Tom’s Shoes, while contributing to a number of social ventures, is most known for giving a pair of shoes to a person in a disenfranchised country for each pair of shoes they sell. Warby Parker is known for the same with glasses.

Both companies are doing socially positive things, but one-for-one retail is not the answer to all of our problems. We still need traditional businesses like Target to continue giving to education, SurveyMonkey to continue investing in community and youth organizations, Costco to continue treating their employees well, and all of the other non-buzzword companies and organizations who are doing amazing things for the world to continue to do their part.

People, profit, and planet are reliant on one another. Under this new standard, we avoid undesirable outcomes that could hurt us and our environment now and later, and entrepreneurs need to be cognizant of these barriers when considering in what direction to grow a company.

While the definition of social entrepreneurship remains blurry, entrepreneurs acting within a sustainable business model can have a major impact in support of these elevated Three P’s. Businesses can of course grow without attention to balancing people, planet, and profit.

However, for entrepreneurs who see the value in acting sustainably, thinking in terms of this balance is one way to focus business decisions. Perhaps entrepreneurship can solve environmental and social issues, but just a handful of businesses cannot do it alone.

i. Grimes, M. G., J. S. Mcmullen, T. J. Vogus, and T. L. Miller. “Studying the Origins of Social Entrepreneurship: Compassion and the Role of Embedded Agency.” Academy of Management Review, 2013, 460-63.

ii. Martin, Roger L., and Sally Osberg. “Social Entrepreneurship: The Case for Definition.” Stanford Social and Innovation Review, March 1, 2007.

iii. Dean, Thomas J., and Jeffery S. Mcmullen. “Toward a Theory of Sustainable Entrepreneurship: Reducing Environmental Degradation through Entrepreneurial Action.” Journal of Business Venturing: 50-76.