Navigating Challenges faced by Social Enterprises

Written by Kanishka Selvakumar

Social enterprises. Big word, right? Before diving into the challenges faced by social enterprises, let’s unpack the term. Social enterprises are essentially businesses with a primary purpose of achieving specific social objectives. They aim to address social or environmental problems while generating a financial return, which can be used to amplify their impact further. They differ from traditional businesses in that the maximization of profits isn’t the central goal. Examples of local and international social enterprises include Bettr Barista Coffee Academy, Dignity Kitchen, Grameen Bank, and Aravind Eye Care System.

Like any business, social enterprises face unique challenges, including insufficient funding, establishing credibility, navigating complex regulatory environments, overcoming unsustainable practices and competition, and managing costs effectively. In this article, we will explore possible solutions to three such problems and spotlight successful Southeast Asian social enterprises as examples that have made efforts to overcome these obstacles. 

1. Navigating Regulatory Environments

A regulatory environment encompasses the framework of laws, regulations, and guidelines in place to oversee and guide industries, organizations, and social enterprises. It presents both opportunities and challenges for social enterprises. However, regulatory environments can be stringent and outdated at times, hindering innovation and creating barriers to progress. Furthermore, complex legal requirements for business registration can ultimately delay the launch of new social enterprises. 

A classic strategy to tackle this challenge would be to make educational workshops and digital platforms accessible, especially for young, budding entrepreneurs. These can provide step-by-step guidance by incorporating checklists, video tutorials, and direct access to legal advisors. Importantly, these tailored guidance platforms can open up new mentorship opportunities, fostering connections with existing entrepreneurs. This way, entrepreneurs can connect with like-minded peers to expand their collaborative network.

The Singapore Management University stands out as a strong example of this strategy in practice. Their Institute of Innovation and Entrepreneurship (IIE) offers targeted training in different areas for aspiring business students. Established in 2009, IIE offers research, innovation, and entrepreneurship training to students. Some examples include the Innovation Academy, Protégé Ventures, and Incubator programs. Their goal is to empower entrepreneurs to bring their ideas to market by providing valuable guidance and support. Beyond these programs, there are also other opportunities, both online and offline, for greater accessibility. Hence, providing educational workshops and platforms is a holistic approach to navigating regulatory environments. 

2. Unsustainable Practices

Although social enterprises are built to address social or environmental issues, they are not immune to challenges such as waste generation, carbon emissions, and resource management. Like traditional businesses, social enterprises can unintentionally contribute to environmental harm if the right solutions are not in place. 

A robust approach to these issues is sustainable supply chain management through partnerships. In other words, social enterprises collaborate with green and sustainable organizations to upcycle their waste materials into valuable products. What more? This practice reduces long-term costs and appeals to increasingly eco-aware customers. In some cases, the products created can even be merchandised to generate revenue, which can then be used meaningfully to fuel existing initiatives of the social enterprise.

To give a real-life example, the Biji Biji initiative from Malaysia partnered with Publika Shopping Gallery to create festive lanterns from recycled materials. These lanterns were used for Chinese New Year celebrations in Publika Boulevard, Kuala Lumpur. To provide more background, Biji Biji is driven by the aim of sustainable development through technology and education. Beyond Bins, a program by Biji Biji, enables small-scale plastic recycling, thereby creating an additional source of income for marginalized communities. When it comes to mutually beneficial partnerships like these, everyone wins—beneficiaries, communities, consumers, and the planet—all while contributing to a shared vision. 

3. Insufficient Funding

One of the significant challenges faced by social enterprises is a lack of sufficient funding. As mentioned, social enterprises are required to balance their financial objectives with their social aims due to their distinctive business structure. Since they prioritize social causes over profit, they may struggle to maintain a sustainable source of income and fund their projects. This financial strain limits their ability to invest in new equipment, develop their products, expand their impact, or even cover day-to-day expenses.  

Here is where an innovative funding strategy comes into play. These approaches include crowdfunding, working with angel investors, social impact bonds, and variable payment obligations. Fundamentally, these allow social enterprises to secure capital to meet basic costs as well as expand to achieve their social objectives.

A prime real-world example of this strategy is the Aravind Eye Care Hospital, a hospital chain in India that provides affordable eye care treatment to people from diverse socio-economic backgrounds. By showcasing its high-quality medical care, results, and social focus, the organization successfully attracted investors aligned with its social mission. This has empowered them to raise funds to continue supporting low-income patients through medical treatments. 

In closing, social enterprises face challenges such as navigating regulatory environments, offsetting their unsustainable practices, and receiving insufficient funding. However, as always, every challenge has a solution if there is innovation.