Social Entrepreneurship, Social Value, and the Environmental “big Push”: Some Remarks
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The stable equilibrium requires an abrupt “leap” instead of gradual movement, the leap to a higher point requires a mix of policy incentives here termed the environmental “big push” and the environmental change lead US stuck at a low level equilibrium. Recent years the world has experienced growing environmental and social problems of many types. The oil price rise again had many experts speaking about energy shortages, while world population continues to grow despite the fact that we may be reaching a global peak in food production. Unemployment and underemployment remain out of control in many parts of the world. It is increasingly clear that such problems often adversely affect business profits.
There is an increase in number of social entrepreneurs and a growing theoretical interest in social entrepreneurship in recent years. Social entrepreneurs engage in ventures that seek to produce social value, in contrast to traditional entrepreneurs who only look to create economic value. Social value means that net benefits to business stakeholders instead of shareholders who only seek economic value. Shareholders are prominent among a companys stakeholders, but stakeholders also include employees, consumers, citizens, local and even national governments. The interests of shareholder not always in conflict with those of other stakeholders. For example, reducing material and energy intensity and converting wastes into valuable secondary products creates value for both shareholders and society.
Social entrepreneurship represents the idea that many of the existing environmental and social problems can be eliminated through the market system. What would be required is a switch from traditional bottom line accounting to triple bottom line accounting, which considers economic, environmental, and social net benefits. The US is stuck in a suboptimal long run state that characterize as a “Low Level Dynamic Equilibrium”. There is only a modest amount of social entrepreneurship present in society, and that economic value generated conflicts with the creation of social value. Social value refers to net social and environmental benefits that affect not only shareholders, but also a broader group of stakeholders that also includes employees, consumers, citizens, and governments. It is related to the idea of sustainable value added, which refers to the extra economic value-profits being created under the stipulation that adverse social and environmental impacts do not increase.
A high level dynamic equilibrium is a state in which there exists a substantial degree of social entrepreneurship, and where economic value creation may be more or even less than in the LLDE. The key difference is that far more social value is created, where economic value is a subset of social value and the former reinforces rather than conflicts with creation of “non economic” social value.
The term “stasis” is related to the notion of an orbit: circumstances change over time, but only in a circumscribed fashion. The latest period of stasis is the convention of profits or the pursuit of shareholder value. We exist in an orbit within which adaptation produces greater efficiency and higher profits. The institution of social or stakeholder value creation constitutes a higher level equilibrium, but that will require a historical punctuation of sorts.
Six characteristics of LLDE
1. Shareholder value and its limitations
Public owned companies have provide maximum value for their shareholders. Based on conflicts between the short and long run or managers whose interests supersede those of owners, there are many deviations from this and it has been the practice of maximizing shareholder value that has contributed to relatively consistent economic growth in mature economies.
Emphasis on shareholder value often disregards interests to the broader society. Benefits cut or layoff may serve shareholders but not workers. Continued production of fuel-inefficient automobiles may also benefit shareholders and consumers but not citizens concerned about resource scarcity, the environment, and global political conflicts. The present state is an LLDE in part because concerns outside the narrow focus of shareholders are often ignored, with resulting social or environmental costs to society. Social entrepreneurs aim to address the problem, but now the scale of social entrepreneurial ventures is inadequate to challenge the status of present.
2. Our fetish with quantitative indicators
The economic policy has been guided by quantitative indicators. Especially after the creation of the national accounts system, which defined the gross domestic product (GDP) as the value of all goods and services produced in a national economy. GDP growth has since become synonymous with progress, which makes GDP the macro-scale analog of the preceding item. While production of consumer goods is not undesirable, the external costs of production that should be considered in notion of progress.
Quantitative indicators are not a problem by themselves. A concern arises for convenience that we focus on the quantitative at the expense of other important variables are not as easily quantifiable. Market-driven production activities motivated by the generation of profits are easy enough to quantify, while indirect effects are in general disregarded because they do not influence cash flows. The bias in favor of the quantitative applies as much to shareholder value as GDP, and it is also a bias that social entrepreneurs must confront.
3. Belief in the linear stages hypothesis of economic development theory
The expectation is that any country that succeeds in attracting sufficient foreign investment will be propelled to the stage where economic growth becomes self- sustaining. Such thinking has been influential in the evolution of developing economies and the overall climate has been favorable to both trade and foreign investment. Developing countries are finding themselves at significant economic disadvantage vis-à-vis the industrialized economies.
It is widely believed that the world natural resources would not support the entire population of the world living at our present standard. Some believed that the world already consumes resources to an extent that exceeds carrying capacity. In linear stages, mass consumption is considered the highest stage. It is the primary goal of developing countries, and their success at approaching it is indicated by GDP growth. But other important indicators of development tend to be underemphasized. According to HDI introduced in 1990 by United Nations, many countries are failing to develop in a broader