The Key For Social Enterprise Success In Making Meaningful Change

July 29, 2024 Impact Team

Impact in Numbers

1920+ social enterprises supported by PLUS through various services to improve business management capacity, financial sustainability, and impact implementation.
17250+ hours of mentoring with an approach tailored to the profile of each social enterprises.
650+ hours of mentoring sessions for NGOs: Assisting NGOs in program planning, fundraising, and project management.
270+ MSMEs participating in intensive capacity building programs in 2023 to optimize economic potential in the regions.
152 free learning materials for social enterprises and 35 for non-profit organizations to improve knowledge and skills in operational management to strategic organizational finance.

Key Insights

Make sure you can identify and differentiate between your social enterprise’s clients and beneficiaries.
Know the other players in your ecosystem - running a social enterprise is not easy. Identifying organisations that can help can ensure you get the right support.
While the beneficiary story is important, a good social enterprise business is built on quality product.
Focus on what you can do in the short term - just like building any business, prioritize and allocate your efforts and resources to what is doable and will have the most impact.

Impact Interview is our initiative where we explore the stories of changemakers and the initiatives they have developed to support sustainable development in Indonesia. This time, we are joined by Rintis Mulyani (Mbak Rintis), Business Development Associate at PLUS.

Mbak Rintis, before the recording we talked a lot about social enterprises. The question that often comes up and is probably the most fundamental is: What is the definition of social enterprise, and how is it different from for-profit or non-profit businesses?

At PLUS, we believe that social enterprise is not just a business, but a movement to create social or environmental change through responsible and fair business practices. Social enterprises have several key differences; they not only deal directly with consumers, but also with various stakeholders. Social enterprises start by looking at a problem, setting goals that they want to achieve, and thinking about how to solve the problem sustainably.

From the various types of social enterprises that we have encountered, there are six differentiating factors, two of which are about the purpose of impact and use of income.

First, social enterprises have a mission, goals, and impact that they want to achieve in society or the environment.

Second, related to the use of their sources of income; when social enterprises make a profit, the profit is not only returned or distributed to shareholders, but also reallocated to beneficiaries.

Their income can come from business operations, but they can also get funds through grants.

Why are social enterprises able to get grants? Although we call them businesses, the legal entity of social enterprises in Indonesia has not been specifically regulated by the government. Therefore, most social enterprises have two legal entities, namely PT and foundations, but there are also those in the form of cooperatives.

The positioning of a social enterprise is not entirely on the very business oriented or very non-profit oriented at all. They are positioned in the middle, trying to make their business while having a sustainable impact.

Additionally, because they can receive grants, they must be accountable to supporting grant-providing organizations such as foundations and must provide transparent reporting to the public.

What metrics are used to measure the success of a social enterprise?

Social enterprises are not only measured by profit, but also by looking at the changes they bring to society. Usually, there are several frameworks used by social enterprises – we usually use what is called the Theory of Change.

For example, let’s say we have a goal to improve literacy of school children in an area. When trainings is carried out, we measure how many participants attended, and the changes in their understanding through the implementation of pre- and post-tests.

Impact measurement is an important component that must be carried out by social enterprises, not only as a form of accountability but also for marketing purposes. When seeking support, it can be conveyed that they are not just a business, but also have real tangible impact.

In this impact ecosystem, there are social enterprises, foundations, and the government. How do all these players collaborate, especially in the Indonesian context? What is the role of each of these bodies?

One interesting thing in this impact ecosystem is the spirit of collaboration, which may not be as common in the for-profit industry. In this ecosystem, there are several stakeholders who support social enterprises. The first is an organization like PLUS, which we call enablers. This organization enables social enterprises to run their businesses and impact. In addition to PLUS, there are many enablers based in Jakarta and in the regions. PLUS also assists local enablers in the regions.

The second is from the funding side, such as impact investors or organizations that have the capital and mission to support funding for social enterprises.

There are also policy-makers and governments who often hold audiences and advocacy with PLUS to understand what social enterprises are, the challenges they face, and the support they need.

In addition, there is legal support from many NGOs that provide pro bono services for social enterprises in need because their funds are limited. Of course, there are also academics and media friends with their respective roles.

How do these stakeholders collaborate? At PLUS, we aspire to be an orchestrator – uniting all these stakeholders. These stakeholders are likened to music that has its own characteristics.

For example, if a social enterprise is experiencing difficulties related to exposure, collaboration with the media, both mainstream and new media on social media, can be the solution. PLUS will be the connector that enables this collaboration to happen, including with the government and academics. Many lecturers want to share their knowledge and we accommodate this.

What are the characteristics of social enterprises in Indonesia based on PLUS's experience?

Earlier we talked about the value of mutual cooperation in Indonesia. This is very beneficial for social enterprises and all of us who want to have an impact – it turns out that there is a common spirit among the community.

For example, in terms of collaboration and involving the community, they are very open. At PLUS, as exemplified, when Impact News contacted us, we were very open and enthusiastic if there was something that could be done together.

In Indonesia, many social enterprise approaches are community-based, which means that this interaction is two-way – it’s not only social enterprises that want to provide solutions, but there is a willingness from the beneficiary community to empower themselves and collaborate.

You mentioned the community-based approach earlier. What is that, and what is the context in a social enterprise?

For example, we once assisted a salt farmer community in Amed, Karangasem in Bali. The community-based approach here means that we bring together farmers who may not have had clearly documented goals.

We gather the aspirations of the farmers, map their respective conditions, and identify their needs and challenges. Do they need to understand financial literacy or improve their business model?

We cannot just lecture them and share knowledge without context – but first understand the values and approaches that suit the community.

What are some examples of the different approaches that a for-profit business and a social enterprise would take?

For-profit companies usually do business with the main objective of seeking profit. They focus on cost efficiency, minimizing expenses as much as possible, and the profits earned are usually returned to shareholders or owners.

In contrast, social enterprises have a different approach. First, in determining costs, they try to ensure fairness. For example, if the workers (in Amed) are mothers who may not have strong bargaining power, social enterprises still pay attention to whether the wages given are fair and sufficient, not just offering to pay the lowest price.

In addition, when social enterprises make a profit, most of it (according to general principles in the UK), 51% must be reinvested for impact management and empowerment of beneficiaries. So, not all of it is returned to shareholders or capital owners. Part of the profit must be used for activities that benefit the community or beneficiaries.

For example, at PLUS, which is also a social enterprise, when we make a profit, not all of it is distributed to the shareholders. Part of the profit is used for community activities, such as free consultations, so that there are real actions of giving back to the community.

For social enterprises that come to consult with PLUS, what stage is their business usually at? Is it still in the ideation stage or do they already have a business with product-market fit? And what challenges do they usually bring to PLUS for consultation?

PLUS usually assists businesses that are still in the early stages, even from the ideation stage or even aspiring social entrepreneurs. Many of them have just started and their businesses are still under two years old.

The challenges that are often faced by these social enterprises are because their teams are still small, one person has to handle many tasks. As a result, they are often confused about prioritizing and managing their workload. Therefore, at PLUS, we often ask what can be done in the near future, so as to prevent them from being overwhelmed.

In addition, they are also often confused about who to seek support from. Therefore, the Hello PLUS session is very helpful because they can discuss and have someone to consult with.

Another challenge is that they often need capital, but their business model is not yet clear, and the documents required to obtain funding are also not yet qualified. So, they often have to bootstrap from their own pockets and try to do what they can with limited resources. We at PLUS try to be their thinking buddy and help them untangle their confusion.

PLUS also offers a network, so if they need specific support, we try to look at the PLUS network to connect them with parties who can help.

Many social enterprises start their businesses with a passion to solve social or environmental problems, but have not thought about the business side of it. Therefore, we try to provide a more realistic perspective and help them see that if they want to empower people, they also have to consider the ability of those people to pay, or find other sources of income.

We introduce concepts such as the social model canvas as a tool that can transform their ideas into sustainable businesses.

For example, one time, I had a session with someone who wanted to reduce the unemployment rate in their area through courses. The question is who is the client? Who is the beneficiary? At that time, the social entrepreneurs claimed that their clients were the unemployed people – they were the ones who would take the course, they would pay.

Then we asked again, given that they are unemployed and don’t have any money, how can they pay for this course?

Sometimes, the concept of clients and beneficiaries are still not clearly defined and interchanged. As social entrepreneurs, we must also be able to pay attention to the payment capabilities of friends who want to be empowered. This ability to pay helps us determine whether they can become our clients or beneficiaries.

What kind of support programs are offered by PLUS?

PLUS offers various programs to support social enterprises, including capacity building such as mentoring, training, and coaching, as well as research to capture profiles and challenges of social enterprises in Indonesia.

We also provide a learning platform with materials tailored for social enterprises, especially outside Jabodetabek who may have limited internet access. In addition, there are community events to connect and collaborate with each other.

PLUS is currently also supporting NGOs who want to develop their business lines – seeing the increasing difficulty of getting donors. So these NGOs can not only rely on donors, and slowly develop into social enterprises.

From the examples of research results that PLUS has conducted, what are some examples of trends or insights about the state of social enterprises in Indonesia?

The results of research and mapping of social enterprises show that many social entrepreneurs start their business based on problems in their environment, for example the food nutrition, fisheries, and crafts sectors.

Another insight is that many leaders in social enterprises are women, although there is not enough data to draw conclusions about why this is happening.

In terms of challenges that often arise, include capital and networks, especially for those outside Jabodetabek area. Regarding support from the government, the government currently does not have a specific legal entity for social enterprises, so there is no special support either.

Currently, the government support is still generic in nature, such as through grants for MSMEs, and much assistance comes from the non-government organizations. Therefore, audiences and advocacy are important parts of raising awareness on the policy side.

From the government itself, there is only a 2022 Presidential Regulation that provides a definition of social enterprises, and article 2 regulates the 51% margin that must be returned to the community. It is important for social enterprises to gain recognition as an entity in order to receive incentives or assistance from the government.

PLUS develops a lot of support for social enterprises and NGOs, including advocacy to increase government awareness of the real conditions of social enterprises in Indonesia.

Can you share a story about the transformation of PLUS program participants? For example, what challenges did they face before joining and what did they get afterward

One of the significant changes is that they gain a wider network, which helps overcome the problem of access to knowledge. By having many peers, they can learn from the experiences of others in different regions who have faced similar challenges and have succeeded in overcoming them.

When these organizations also have a similar mission, they can collaborate, such as creating content together on social media. This is an example of a simple collaboration that usually occurs after they have participated in a short program.

This sense of togetherness is not only about helping each other, but also reminding each other to continue to develop.

One of our other hopes is that social enterprises can have not only stories from the side of supporting their beneficiaries, but also products that are strong and desired by customers.

One thing we often encounter is that social enterprises start marketing and branding by telling stories of the difficulties and problems they face. However, in the end, what is being sold is the product. We hope that the product can stand on its own, more than just the organization.

PLUS has helped many social enterprises grow in Indonesia. How can people help PLUS?

We at PLUS really need public support, and the simplest way is to help disseminate PLUS programs, so that the communities or social enterprises that receive PLUS support are wider and more diverse.

One of the difficulties we often face is when recruiting participants, we often get recommendations from the same people from the local government.

In addition, social enterprises often have not budgeted funds for training needs. Therefore, it is difficult to sell our training program to our beneficiaries.There needs to be a client that purchases our services.

Therefore, we at PLUS really need these beneficiaries to tell their stories and experiences in participating in the program designed by PLUS. So when PLUS pitches or has an audience with potential donors, testimonials from participants are very important.

So, dissemination of information and amplification of the benefits felt are very much needed.

What are your personal hopes for social enterprises in Indonesia?

In the end, we all want to be treated humanely. Social enterprises aim to address social issues by treating beneficiaries or stakeholders as well and fairly as possible.

My hope is, first, that more people will be aware, and second, let’s support these enterprises (for example by purchasing their product). If we give up on the current situation, we won’t be able to make changes together. So, I hope we can support a fair and sustainable ecosystem through whatever we can do.

If people want to learn more about PLUS and support the organization, where can they find you?

Learn more about PLUS by clicking their social links below

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