Scaling and replication of social enterprises in India

In a nation with an estimated population of 1.37 billion people, an extensive range of social enterprises can make an impact. From public services to financial services, to technology, social enterprises can play a key role in a diverse economy like India. Ridley-Duff and Bull (2011) defined a social enterprise as an organization that applies commercial strategies to maximize improvements in human and environmental well-being, rather than maximizing shareholder profits.

The development of this study is for  entrepreneurs to evaluate scaling opportunities in social enterprises that want to expand. Indian social enterprises have large national and international markets where their services can be having moving impacts.

This framework is geared towards replication and scaling of programs commenced by Indian social enterprises in market expansions. It includes methods/strategies for scaling impact for a broad set of investors and entrepreneurs to build such projects.

A social enterprise is legally structured as a for-profit entity with a clear social impact goal defined. In India, there are five options to set up a for-profit social enterprise: Sole proprietorship, partnership, limited liability partnership, a private firm and as a co-operative. 80% of Indian social enterprises are structured as a for-profit private limited company (PLCs).

Support at various stages of incubation

Over the years, the main operational problems faced by social enterprises have been accessing resources and funds, management challenges, task and mission challenges, and social perception challenges.

• Idea/ seed stage incubation: Presently, social incubator UnItdIndia provides support to idea-stage social entrepreneurs that are looking to develop and pilot their social impact ideas, by providing capacity support, mentorship and small capital.
• Early-stage incubation: Villgro based in Chennai is a comprehensive social incubator providing seed fund, mentorship; working space and network to social enterprises. It is also working on building active ecosystems in metro and tier 2 and 3 cities by conducting workshops, offering fellowships and organizing mentorship/ networking events.
• Accelerator: Villgro also has an accelerator program. There are mainstream accelerators and programs that support startups and a small percentage (2-5%) of social enterprises.

 Corporate Structure, Competitive Analysis, and Market Entry

To understand the viability of a business model, we must understand whether the corporate structure allows for growth, requisite of licenses, participation and compensation of the board of advisors. Every social enterprise must assess competitors, make a market differentiator, and understand the customer’s perspective on the service rendered. Once the market entry impediments to startup are understood, we start building the business model of the enterprise.

Millennium Alliance, which is a consortium of public-private partnerships, has supported the scaling of social innovations in 22 states of India including low-income states such as Bihar, Uttar Pradesh, Odisha, Chhattisgarh, Madhya Pradesh, and Rajasthan. It funded Waterlife, which provides sustainable, affordable, and safe drinking water through Community Water Systems. Billions of people globally do not have access to safe water, leading to waterborne diseases. It built a successful operation in India in partnership with the government, NGO, Panchayats, SHG, Commercial institutions as well as international agencies. At present, this social enterprise has found a large market in Rwanda, where more than 60% of people do not have access to safe water.

 Business Models of Social Enterprises

 The business model is based on the social impact it wants to make or the social problem it is trying to solve. Key features of social enterprise are: the benefactors of the impact and target customers paying for the product or service might or might not be the same; enterprises can be structured for impact investments with options of debt or equity; and enterprises internally functions like any other commercial business in terms of management, operations, people and resources. A few business models operating in the social enterprise section are:

3.1. Self-Sufficiency Social Enterprise: Most self-sufficient social enterprises are brand-new social enterprises or companies that lack management talent. Such enterprises can merely break even and lack the resources to realize their social mission or create profits.

3.2. Mission-Driven Social Enterprise: Mission-driven social enterprises closely resemble non-profit organizations, and always work on a specific social issue more deeply than profit creating social enterprises do. Such enterprises have ideal social missions, but lack appropriate business models to realize those missions. Social Blood is an organization that helped the needy connect with blood donors through Facebook. Social blood has partnered with several blood banks in the U.S. and has helped over 300,000 people.

3.3. Profit Creating Social Enterprise: Profit creating social enterprises closely resembles for-profit organizations. The familiar problem faced by profit creating social enterprises is that they frequently can only help a small number of people, or only slightly mitigate a social problem. However, such enterprises create less social value than benchmark targeting social enterprises. Oorja Solutions is a relevant example of this business model. It is an energy services company in the business of replacing diesel engines with affordable, reliable solar energy systems for a productive power in rural markets. Their first service, Oonnati, provides irrigation water on a pay-per-use basis to smallholder farmers.

3.4. Benchmark Targeting Social Enterprise: Benchmark targeting social enterprise is the ideal form of social enterprise. Benchmark targeting social enterprises not only achieve profits from their products or services but also reinvest those profits into realizing their social mission. An example of such a social enterprise is Science for Society, another startup backed by Millenium Alliance. SCD is an electricity-free solar-powered food dehydrator that reduces moisture content in agro-produce so that it can be stored up to 1 year without any chemicals and earn additional income through the sale of such products. This leads to the creation of a scalable ecosystem of producers, local administration and monitoring partners and buyers of dehydrated products.

Case Studies on Expansion

1. Expansion Strategy of One Acre Fund in South Africa: More than 50 million smallholder farmers in Sub-Saharan Africa are locked in annual cycles of hunger because they’re unable to grow enough food to feed their families. Malnutrition can have serious, lifelong effects, especially for children, robbing them of their full potential as they grow up. One Acre Fund has catered to millions of such farmers to diminish such social issues. They appointed one manager who managed 5 staff recruited in South Africa who further managed 5 farmers. This model helped to scale One Acre Fund, at a very large and replicable model serving more than 800,000 farmers.

2.  Expansion Strategy of Robin Hood Army: India based Robin Hood Army is a zero-funded organization which helps to get surplus food from restaurants to serve less fortunate people. It has successfully served more than 20 Million people across 140 cities.

Untapped Potential Scope in Energy Market for Social Enterprises

According to the International Energy Agency, 77 million households in India still use kerosene for lighting. 280 million people in rural India and 24 million people in urban India are without access to electricity. Hence, more innovative social solutions need to come up with replicable and scalable models. Enterprises can provide electricity through micro/ mini-grids that use technologies such as biomass-gasifier, small hydro, solar photovoltaic and wind to supply power to unelectrified and under-electrified communities.

Many parts of India receive 300 days of annual sunshine which presents an opportunity for constant solar power generation. At present, solar only covers 3% of 100 GW potential capacity. Providing clean energy products (solar lanterns, solar home systems (SHS), solar pumps, solar photovoltaic water heating and energy-efficient cookstoves) for efficient lighting and heating/ cooking is one of the ways of using solar energy to generate power and heat.

Recommendations

At present, India has a large untapped potential in the social sector for an extensive range of services like Medtech, Agritech, EdTech, Skilling, Employability, Cleantech and Renewable Energy. In terms of scaling up impact,  the number of individuals and organisations benefiting from social enterprises can be substantial.

1. Finding Funds which support such social causes – Impact and Venture Capital funds are increasingly investing capital in such enterprises. In India, the social impact startups are growing at 20 per cent annual rate while there are more than 400 such startups The Indian government is planning to have its own stock exchange for social or impact startups, in the lines of Social Stock Exchange in the UK, SASIX in South Africa, Impact Investment Exchange in Singapore, SVX in Canada.

2. Understanding Economic Indicators – Social Enterprises may consider hiring a consulting firm to understand the international economic indicators impacting their market. Consultants may refer to Risk Mitigation Techniques which may help to improve trade in specific markets. Understanding the various political, economic, social, technological and legal factors impacting the market, is crucial for the success of a business.

3. Conduct Competition Analysis – Market share of each competitor, and the services rendered by them are one of the key elements in a market entry strategy. Enterprises stand a chance to have sustained success when bringing in innovation, which is scalable and impactful. Entrepreneurs must see if they can have intellectual property rights on such products and services innovated by them.

4. Investing in Potential Industries – As mentioned in this report earlier, solar power energy utilisation can lead to several impactful innovations. Moreover, with the graduation of thousands of engineers in India every year gives the nation the human capital we require to  meet this milestone. Further, the healthcare industry in India has grown to $81.3 billion (Rs 54,086 lakh crore) in 2013 and is now projected to grow to 17 percent by 2020, up from 11 percent in 1990. This industry promises huge potential to impact.

5. Build for A Cause – Entire ecosystems are collapsing. Animals are endangered because of climate change. Global warming is increasing precipitation, melting glaciers and expanding seas leading to an increase in floods, hurricanes, and storms. We should nurture a society of entrepreneurs, who will grow up to change thoughts to things because in a world where you can grow up to be a lot many things, grow up to be kind.

Author: Anisha Aditya