Is Social Enterprise Sustainable?--Introduction

Social enterprise is a simple term with a complex range of meanings.  Some experts say that a social enterprise is any venture that generates earned income for public benefit; others argue that the term denotes nonprofits that utilize efficient business metrics; still more see it as a movement not intrinsically business-like at all, but rather, entrepreneurial in the sense of pursuing innovative solutions to social problems.  On the surface these definitions appear contradictory, yet each has a fair claim to the phrase.

Despite all the apparent differences, sustainability is a value that cuts across definitional lines.  Social entrepreneurs strive to promote a sustainable environment, a sustainable social order, sustainable nonprofit or for-profit enterprises—an array of goals often described as the triple bottom line.

In part we can ascribe the term’s ubiquity to the innate appeal of lasting effects; just as capuchin monkeys respond favorably to positive feedback, human cooperation seems to flourish when people sense that it will have meaningful results.  What makes sustainability particularly compelling in this regard is its inherent promise to avoid loss—after all, an enterprise that “meets the needs of the present without compromising the ability of future generations to meet theirs” would seem to embody the ideal of a fair return.

However, there is more to the perceived value of sustainability than equitable efficiency. Echoing the language of social networks and other complex systems, sustainability also seems to provide a scientific basis for adopting social enterprise as the new organizational norm. In the words of Paul
Hawken, one of the leading advocates for what he identifies as “the movement” emerging out of the natural order:

Sustainability is about stabilizing the currently disruptive relationship between earth’s two most complex systems—human culture and the living world.  The interrelation between these two systems marks every person’s existence and is responsible for the rise and fall of civilizations. . . . Today, for the first time in history, an entire civilization—its people, companies, and governments—is trying to arrest the downspin and understand how to live on earth, an effort that represents a watershed in human existence (12).

It is a noble sentiment—and an understandable draw to a rising generation steeped in network dynamics as a central part of daily life.  The notion that social enterprise is the first mode of organization to respect natural system ecologies provides a theoretical basis for the revolutionary rhetoric that has flourished in social enterprise circles since the movement’s rise to prominence in the late 1990s.  It also seems to be a killer app for persuading people outside the charitable world to give tangible support to the development of social entrepreneurship, whether through revenue-generating social ventures or donative corporate philanthropy.  Since the system will collapse without a commitment to sustainable initiatives, those who cling to obsolete notions of profit-maximization and centralized control are hurting only themselves.

Rather than providing a self-evident proof for social enterprise, however, the appeal to sustainable systems raises serious questions about its long-term viability.  Historians of systems theory with no stake in the success of social entrepreneurship have long recognized that earlier social theorists incorporated fundamental elements of system dynamics into their organizational models.  Not least among these precursors of modern theory is Adam Smith, whose image of the free market’s “invisible hand” has itself proven to be a sustainable model of how simple multi-agent interactions can produce a higher order without centralized control.  

Contrary to affirming the need for every business to be virtuous, many systems theorists support precisely the opposite claim:  every enterprise can pursue its own selfish ends confident that public virtue will emerge.  And we need not rely on the metaphors of Smith’s “invisible hand” or Bernard Mandeville’s “Fable of the Bees” to find support for such an argument; as physicist Neil Johnson suggests in his recent overview of complexity, the most basic levels of nature appear to utilize what one might call a “combination-of-errors approach,” in which collective efficiency results from the aggregation of suboptimal actions (210)

For social enterprise to be more than the latest passing fad in doing good, we need a rigorous re-assessment of the link between system dynamics and social institutions.  To that end this article has three distinct yet related aims.  First, I want to offer a new definition of social enterprise, one that is designed both to distill a concise explanation of the phenomenon and to explain the diverse values and ventures associated with the term.  The strategic shift in my approach is to move away from trying to identify either a prescriptive mission or an array of common characteristics. Rather, the key to understanding social enterprise lies in a fundamental principle of system dynamics: a simple rule can have complex results—and not all of them are favorable to social enterprise as a distinct and sustainable movement.

Besides re-defining social enterprise, my next goal is to provide an explanation for organizational altruism that goes beyond latching onto the latest popular fads.  Rather than asserting that social enterprise is a revolutionary disruptive innovation, I posit that social enterprise reflects the recurring tendency of the charitable community to engage in strategic symbiotic mimesis, adapting by adopting what it believes to be the traits desired by potential supporters—an approach, I will explain, that is, in the end, unsustainable.  In contrast, I see the root of social enterprise as lying within corporate identity itself—in particular, the historic function of organizational form as a means of modeling complex emergent patterns.  

This article’s ultimate aim is to explain why social enterprise is a transitional form, an important but ultimately temporary organizational technology.  The ethical imperative does not derive from any need to stabilize such external systems as “human culture and the living world,” nor does it require us to make unfounded and untenable assertions that all social enterprises are chaotic systems or that traditional markets are not networks.  Rather, it flows from the very nature of corporate identity.  Every enterprise is a social enterprise; the time has come to understand why.

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