Social Entrepreneur Approaches (HL IB Geography)

Microfinance

• Social entrepreneurs are interested in starting a business for the greater social good and not just for profit

• There are 4 types of social entrepreneurship

  • Community, where the entrepreneur works within a specific community

  • Non-profit is where the profits of the business is reinvested back into the business

  • Transformational is when an entrepreneur forms an organisation to address issues or needs that the government does not

  • Global is where the non-profit or transformational organisation expands globally

• The number of adults without access to a bank account has steadily declined, from 2.5 billion in 2011 to 1.7 billion in 2017 to 1.4 billion in 2021

• As of 2021, 76% of the world's adult population had an account

• That leaves 24% of the population with no access to financial services

• Around 700 million people live on less than $2.15 per day, the extreme poverty line and have no bank account

• In 1974, microfinance lending schemes began to provide finance to help reduce poverty, address social issues, including gender discrimination, and enable small businesses to access markets

• 1983 saw the the formation of the Grameen Bank in Bangladesh by Dr. Muhammad Yunus

• Since then, microfinance has grown and participating banks provide microloans as small as $50 to under $50,000

  • In 2006, the Nobel Peace Prize was awarded to both Dr. Yunus and the Grameen Bank for their efforts in developing the microfinance system

• The majority of microfinancing operations occur in rural areas of developing countries, such as Bangladesh, Cambodia, India, Afghanistan, Democratic Republic of Congo, Indonesia, and Ecuador, among others

• The global microfinance market was valued at an estimated $187 billion in 2022, and is expected to exceed $488 billion by 2030

• The lack of access to banks has forced many people to use loan sharks who charge large interest rates, making it virtually impossible for people to pay back the loan

• Microfinance schemes often focus on women, who, in some societies, are unable to own land or borrow money

• Repayment of the loans is more likely as members are usually part of the community and it is the community that lends out the money

The Advantages and Disadvantages of Microfinance

Advantages

Disadvantages

Small but meaningful loans can be made to poor households to help them start a business Security and capital are not needed to get a loan The loans can be targeted at women Running a business improves human capital and also raises income Loan repayment helps to build self-esteem Microfinance has given communities loans and services, which has improved their livelihood

Some loans are not repaid or used to pay off other loans rather than for business purposes Some microfinance organisations raise money from private donors and have been criticised for charging high management fees and salaries Schemes have been accused of having interest rates higher than commercial banks Loans have been used to pay for food or healthcare rather than to start or improve businesses Not all people are natural entrepreneurs and the money is wasted

   

  

Fair Trade Enterprise

• Fair trade, fair trading or fairly traded is a general term that refers to the attempt to address the shortcomings of the global trading system

• Fair Trade is a global movement made up of producers, companies, consumers and organisations working towards social and environmental sustainability

• The World Fair Trade Organisation (WFTO) is a global membership organisation that advocates and verifies fair trading standards

• Fairtrade (one word) refers to primary products, including tea and coffee, where farmer organisations have undergone certification and labelling of products

• The Fair Trade system allows consumers to identify products (now Fairtrade goods) that have met internationally-agreed standards

• Approximately 5 million people benefit from Fair Trade 

• The Fair Trade system works with over 2 million farmers in over 100 countries

• In 2020, £169 million was paid in Fairtrade premiums

• There are over 6 000 Fairtrade items now available, ranging from coffee to gold to footballs

• It does have disadvantages that impact sustainability, including:

  • Fairtrade is usually for goods which have a limited value

  • It relies on people being prepared to pay higher prices for Fairtrade-certified goods

  • Communities, rather than regions or countries, benefit from the system

  • There is a limited range of Fairtrade products

Principles of Fair Trade

• Fair Trade sets social, economic and environmental standards that anyone involved in the supply chain must follow

  10 Guiding Principles of Fair Trade

Principle	Explanation
Create opportunities for economically disadvantaged producers	Supports marginalised, small producers to move towards a secure income, self-sufficiency and ownership
Transparency and accountability	To have open communication at all levels of the supply chain and management Transparency with commercial relations Accountable to all stakeholders Involve employees, members and producers in the decision-making processes
Fair trading practices	Trade with concern for social, economic and environmental well-being of marginalised small producers No maximising profits at their expense Conduct trade in a fair and transparent way Protect cultural identity and traditional skills
Payment of a fair price	Through discussion and participation, all parties mutually agree on a fair price Pay the producers fairly so the market can support them
Ensuring there is no child labour or forced labour	Adhere to the UN Convention on the Rights of the Child and national and local laws on the employment of children Ensure there is no forced labour in its workforce, including home workers
Commitment to non-discrimination, gender equality, and freedom of association	No discrimination in hiring, remuneration, access to training, promotion, termination or retirement based on race, caste, national origin, religion, disability, gender, sexual orientation, union membership, political affiliation, HIV/AIDS status or age Gender equality is promoted All employees’ rights are respected, including the right to form and join trade unions of their choice
Ensuring good working conditions	Providing safe and healthy working conditions for all, working hours and conditions that comply with national, local and international conventions Raise awareness of health and safety issues to improve practices
Providing capacity building	Increase positive impacts for small, marginalised producers through fair trading Develop skills and capabilities of its employees or members
Promoting Fair Trade	Raise awareness of the aim of Fair Trade and the need for greater justice in world trade
Respect for the environment	Maximise the use of raw materials from sustainably managed sources and buy locally where possible Reduce energy consumption Use renewable energy when possible Use organic or low-pesticide production methods wherever possible Use recycled or easily biodegradable materials for packing Goods dispatched by sea, wherever possible

Corporate Social Responsibility (CSR)

• Corporate Social Responsibility (CSR) refers to the concept that businesses have a responsibility to consider and positively impact society beyond their economic interests

• It is a framework through which companies voluntarily integrate social and environmental concerns into their business operations and interactions with stakeholders

• CSR involves taking into account the impact of business activities on various stakeholders, including employees, customers, communities, the environment, and society at large

• CSR goes beyond legal compliance and strives for companies to actively contribute to sustainable development and societal well-being

Examples of Socially Responsible Activities 

Socially Responsible Activity	Example
Sustainable sourcing of raw materials and components	High street retailer H&M has a goal of using only recycled or sustainably sourced materials by 2030 It also publishes a list of the majority of their supplier’s information, which is updated regularly, allowing stakeholders to verify and hold the company responsible for their suppliers’ conduct
Responsible marketing	Marks and Spencer ensures that it never actively directs any marketing communications to children under the age of 12 and does not directly advertise any products high in fat, sugar or salt to children under the age of eighteen
Protecting the environment	Café chain Prêt à Manger offers discounts to customers who bring their own coffee cup, reducing the number of single-use plastic containers it dispenses
Responsible customer service	John Lewis's famous 'Never Knowingly Undersold' slogan refers to the company's commitment to checking competitor prices regularly to ensure that the price its customers pay is the lowest available in the local area at that time

The Benefits of CSR

• CSR can:

  • Enhance the business's image and reputation

  • Is attractive to many stakeholders

  • Be very profitable, as it adds value for many stakeholders

  • Improve employee motivation and productivity

  • Help recruit strong candidates for jobs advertised

  • Help to solve social problems, e.g. resource depletion

Greenwashing

• Greenwashing is when businesses make claims that they are environmentally friendly when they are not

• Greenwashing includes making broad sustainability claims without evidence

• Businesses overstate positive environmental impacts in their advertising, such as:

  • Marketing products as eco-friendly while sourcing raw materials from unsustainable suppliers