Lessons from Israel's growth of social enterprise

Hannah attended the 2012 AICC delegation to Israel where she represented Macquarie University. Hannah is studying a Bachelor of International Studies (European Languages) with a Bachelor of Laws Degree.

Introduction

Social enterprise is now one of the fastest growing sectors of the Australian economy.1 While on an international scale, Australia has often been outperformed and outnumbered in terms of social enterprise engagement, in the past 5 years the number of domestic social enterprises has increased by 37%.2 Universities and higher education institutions are also offering an increasing number of courses in the area after the success of international institutions such as the Skoll Centre for Social Entrepreneurship at the University of Oxford, UK.

This paper seeks to discuss the current status of social enterprise development in Australia, particularly in comparison to the Israeli experience of the subject. Since its inception, Israel has been a hub for technological innovation with developments such as the development of the electric car3 and modern computer chip processing technologies.4 In recent years, it has also become focused on the development of the social sector, and has used its solid history of innovation and its entrepreneurial culture to rapidly invest and emerge as a world leader in this field.

This paper will examine examples of both Israeli and Australian social sector innovation and suggest further actions which may be implemented to further the development of the social enterprise sector in Australia. This includes increased publicity and advertising of social enterprise programs and the instigation of young social entrepreneur competitions as seen across Israel.

What is social enterprise?

Social enterprise as an entity reached recognition during the early twenty-first century and has rapidly emerged in recent years on an international level as an increasingly popular and indeed, necessary, business format.5

Global wealth disparity, movement towards corporate social responsibility, market, state and institutional failures and technological advances may be seen as the four key factors which have contributed to the globalisation of social enterprise development.6

Essentially, social enterprises are business which trade for a social purpose.7 It is largely accepted that in order to qualify as a social enterprise, the business may have explicit social aims combined with a commercial orientation. Typically, social enterprises import innovative approaches historically employed by the commercial market to solve social problems which were once the realm of the not for profit sector.8 It is this concept of innovation which is central to the growth of the social enterprise sector.

In the ‘Finding Australia’s Social Enterprise Sector’ (FASES) Report, it was clarified that social enterprises were regarded as organisations that:

  1. Are led by an economic, social, cultural or environmental missions consistent with a public or community benefit;

  2. Trade to fulfill their mission;

  3. Derive a substantial portion of their income from trade; and

  4. Reinvest the majority of their profit/surplus in the fulfillment of their mission.9

The definition of social enterprise will however vary particularly in according to the usage of the funds created from the venture. Some commentators argue that income derived from a business must be wholly contributed to the not for profit or community sector in order for that business to qualify as a social enterprise.10 Other scholars however, emphasise that a social enterprise must have the end result of social value and impact to qualify, rather than focusing on the destination of resulting income.11

In response to the notion that social impact is a species of recognisable value similar to monetary income, organisations such as the Roberts Enterprise Development Fund have created tools for assessing social value output, including the ‘Social Return on Investment’ (SROI) analysis scale.12 Such techniques are based on traditional cost-benefit analysis, and assign monetary values to social and environmental returns.

Such tools have assisted in the definition of a results based definition of social enterprise, in that both income (which may or may not be put towards community benefit) and social value will be recognised as acceptable results for a social enterprise to call itself as such.

In definitional terms, what is clear is that a social enterprise will use business knowledge and tools to create a social value, whether that is through monetary income or social impact. This will usually involve great innovation and, most importantly, the participation of social entrepreneurs.

Social entrepreneurs

Social entrepreneurs are seen as visionaries who work to change society and create radically new solutions to social problems by utilising traditional business principles of innovation, creativity, determination and pragmatism.13 The connected idea of social entrepreneurship embodies three key characteristics: sociality, innovation and market orientation.14

Essentially, a social entrepreneur provides innovative leadership in a social enterprise, which results in the social enterprise achieving a sustainable competitive advantage and allowing it to maintain fidelity to its social mission.15 The survival of many social enterprises is dependent on the sustainability of the enterprise as a business, and therefore values of risk management, pro- activeness and leadership are of significant importance in a social entrepreneur.

Social entrepreneurship as a career prospect has become increasingly popular, particularly through the development of institutional courses offering study in the area and a first-world movement towards sustainable business. As social enterprises add value beyond traditional economic measures, they undoubtedly have a role in sustainable development.16 The fact that social entrepreneurship allows prospective entrepreneurs to exhibit their innovative skill, develop their own ideas and businesses while maintaining moral values of social care and sustainability has seen an influx of interest in the area.

Israel in particular, has seen ever-increasing interest in the area by young entrepreneurs following the success of its entrepreneurs in the technological sphere. Examples and experiences of entrepreneurship and social entrepreneurship in Israel will be considered in the following section.

The Israeli experience

The culture of the entrepreneur

Since its inception in 1948, Israeli has been a world leader in entrepreneurial growth and success. Indeed, Israel has the second highest number of companies listed on the NASDAQ than any other state,17 and boast 4.5% of Nobel Prize laureates since 2001 (it is also claimed that 21% of Nobel Prize laureates are of Jewish faith or ancestry18): an impressive figure given that the Israeli population accounts for less than an estimated 0.12% of the world’s population.19

In the Start-Up Nation, a text which has become a symbol of the modern Israeli experience, the authors describe the incredible technological developments which have stemmed from Israeli entrepreneurs, and attempt to reason for the startling figures and successes of the young nation.20 As with any good question, there a number of answers.

The authors make particular reference to the nature of the Israeli military system, and the culture which exists therein. All young Israelis from the age of 18 are conscripted into the Israeli Defence Force (IDF), and serve a mandatory two years or more dependent on gender. Not only do the youth participate in active service in an often active conflict zone, but they are placed into positions of leadership. Innovative thinking and independent decision making is encouraged, a concept very far from the norm of most Western military forces. Senor and Singer argue that this cements in Israeli youth a culture of innovation, independence and self-knowledge, which are essential ingredients for business.21

The existential crisis of the Israeli state is also cited as reason for higher levels of risk-taking and consequentially higher rewards. Senor and Singer find that Israelis are less preoccupied with risk analysis and reserved investing than their Western counterparts: “when an Israeli entrepreneur has a business idea, he will start it that week... too much time can only teach you what can go wrong, not what could be transformative”.22

Indeed, during my own experiences of Israel, the risk adverse culture of Australia in comparison to the risk-taking culture in Israel was often cited as a fundamental point of difference in the entrepreneurial culture. During talks with one Israeli entrepreneur, the following statement was put to the AICC delegation: “In Australia the question is: ‘Why’? In Israel, the question is: ‘Why not?’” The entrepreneurial culture and success of Israel is widely acknowledged. Perhaps however it is the forces of an entrepreneurial focus combined with a history of social support which has seen social enterprise grow so quickly in the Israeli landscape.

The ‘social entrepreneur’

Within Israel, Judaism remains the dominant religious adherence; and arguably, values stemming from this faith have impacted on the business culture of the state. The kibbutz is of course, arguably an example of socialism, where concern for the community is paramount to sustainability and survival.23 Combined with the memory of the Holocaust and the profound community emotions stemming from this part of the Jewish history, as well as the existential crisis of the state and collective fear among citizens, Israel’s Jewish community in particular has reason to be interested in social issues.

The fact that Israel is in fact highly multicultural, with a large Muslim population as well as Christian, Bedouin adherents, means that social issues including gender discrimination, dropping education levels in poorer communities and continued segregation are very identifiable and high on government agenda.

The interest of young Israelis in social issues combined with the entrepreneurial Israeli culture has seen a definitive establishment of social entrepreneurship as a driving force behind social change in the state.

Social enterprises at work

Israel has an expansive range of social enterprises at work, many of which address segregation issues between Jewish and Muslim communities.

The Nalaga’at Theatre and Nalaga’at Centre was established in 2002 by social entrepreneur Adina Tal, who opened a theatre group for deaf, blind and deaf-blind actors. The first performances of the group were received to international critical acclaim, and as a result the centre was established for permanent paid performances, as well as a cafe employing deaf waiters and a ‘black out’ restaurant without lights, served by blind waiters. This enterprise is a self sustaining business which uses income from the restaurant, cafe and theatre performances to ensure continued employment for deaf, blind and deaf-blind persons from all over Israel and prevent welfare dependency.24

Enterprises such as the Nalaga’at Theatre, which combine business with a strong social mission, are prevalent throughout Israel. They depend greatly upon the ideas and momentum of visionary social entrepreneurs, as well as on community support and spirit. Enterprises such as these indicate not only the depth of community vision among the Israeli people, but also their innovative mechanisms for addressing social problems.

Social enterprise in Israel also operates on a broad scale, as seen in the case of the Tel Aviv-Yaffo Academic College. The foundation of the Tel Aviv-Yaffo Academic College in itself was for the dual purpose of academic excellence and pursuing social change, as the college was established purposefully in one of the poorest neighbourhoods in northern Israel. The social aim of this project was to integrate previously isolated Jewish and Muslim communities as well as raising the education levels in the area. In addition, the college runs several community outreach programs, as well as a ‘Training Social Entrepreneurship’ program, which focuses on recruiting local Yaffo youth to act to bring about social change in their own community.25 This program provides a scholarship to selected participants to design, budget and implement their own social entrepreneurial ideas.

Large scale social enterprises such as the Tel Aviv - Yaffo Academic College are again, highly innovative in the way they seek to address problems and achieve both social and business aims. Essentially, social enterprise in Israel effectively utilises commercial options and entrepreneurial ‘know how’ in order to sustain its social impact.

Furthermore, it is significant that the development of social enterprise in Israel not only exists at a local or community level. In many other states, social enterprises run because of the beliefs of individuals and organisations in their work. In Israel however, there is widespread community knowledge about the complexities of social enterprise and their relationship to entrepreneurism. Perhaps this is due to the large number of organisations dedicated to furthering awareness and promotion of such enterprises as ‘businesses of the future’.

There are numerous venture capital funds, social enterprise networks and agencies in Israel which seek to promote and support domestic social enterprise. For example, the Israeli Social Enterprise Research Centre (ISERC),26 run through the Beit Berl Academic College and the Israel Venture Network (IVN), a social investment organisation addressing social gaps through high impact programs,27 are prominent organisations engaging in the promotion of the social enterprise sector.

Perhaps the most notable concept however is the development of youth-orientated programs to encourage awareness among university students, young entrepreneurs and high school children as to the benefits of a society of social entrepreneurs.

Social enterprise advocacy organisation Ashoka Israel has instigated a ‘Youth Venture’ program, which inspires and invests in teams of young people to start and lead their own social enterprise ventures.28 Youth Venture also aims to create powerful international networks of young social entrepreneurs across the world in order to create widespread social betterment.

Ashoka also organises online competitions through its ‘Changemaker’ program: an open invite to put forward solutions to social problems and collaborate with other participants to enrich their ideas. Competition sponsors, including National Geographic and the Bill and Melinda Gates Foundation are then able to invest in new social ventures.29

In partnership with the Israeli Ministry of Environmental Protection, Ashoka has also launched the ‘Social Environmental Entrepreneurship Competition’ in Israel, aimed at encouraging young entrepreneurs to engage in the environmental field.30 There are also numerous other competitions for social entrepreneurs in Israel, including the Schwab Foundation for Social Entrepreneurship ‘Social Entrepreneur of the Year’ Award.

Youth interest in social enterprise was also seen in entries to the recent Young Entrepreneurs Competition held by the Interdisciplinary Centre Herzliya, which saw high school students in the Sharon area submit entries such as the ‘Peace Tree’: an idea for a company set up in affiliation with the Jewish National Fund for Planting Trees (JNFPT) which was to sell miniature olive trees in attractive packaging. It was proposed that for every 10 mini trees purchased, the JNFPT would plant a tree in Israel.31

This focus on youth in the development of Israeli social enterprise is constant and omnipresent in the social enterprise sphere. Whether this is through the involvement of youth in large organisations or the specific targeting of youth development through innovation competitions, it is clear that both the young and experience are encouraged to participate in the social enterprise drive in Israel. Indeed, perhaps it is not the achievements of the Israeli social enterprise sector which are the most relevant to development of social enterprise in Australia, but the widespread knowledge and information sharing on the subject among citizens of all ages. The vast range of social enterprises, social entrepreneur competitions and university programs means that social enterprise in Israel is a well recognised and well oiled machine in many cases. Taken from both the historical social culture and modern entrepreneurial culture, social enterprise in Israel is well and truly operating.

Social enterprise in Australia

While Australia may have lagged behind in past years in the development of the social enterprise sector, it has certainly attempted to make up for lost time.

Universities such as the Royal Melbourne Institute of Technology are now offering university subjects on social enterprise, while others including the University of Adelaide have established structured programs such as the Graduate Certificate in Social Entrepreneurship and Innovation.

The Australian government announced in 2010 that it would provide at least $20 million to seed the establishment of Social Enterprise Development Investment Funds (SEDIFs) to target seed and growth capital for social enterprises and to contribute to the development of social impact investment in Australia.32 Several State governments, such as the Victorian government (through Social Traders) have also pledged funding to initiatives such as the ‘Crunch Fund’, which aims to prepare start up social enterprises for investment pitches and business development.33 Social enterprise is also engaged at a local level, with councils such as the Brisbane City Council and Parramatta City Council introducing social enterprise support through purchasing arrangements and capacity building activities.34

There is also a wide variety of social enterprises operating in Australia, the depth of which cannot be succinctly summarised in this paper. A quite visible social enterprise however for the purposes of an example is the GoodStart Early Learning Centres, which use a new business model to achieve early learning and development in children, particularly in underprivileged areas and families.35 GoodStart Early Learning Centres have expanded on the previous ABC Learning Centre structure to introduce new innovation to ensure the survival of its purpose: to promote early childhood education for all children.36

In the recent Australian study, ‘Finding Australia’s Social Enterprise Sector’ (FASES), it was found that there are over 20 000 social enterprises operating in Australia. These enterprises operate largely in the fields of education and training (41.6%), and the arts and recreation services (31.7%).37 Surveyed social enterprises also reported greater use of business planning and performance measurement that mainstream business and not for profit organisations, reflecting the need for commercial vision with the social enterprise sphere.38 The data also suggested that these enterprises were well networked within their own fields.

Lessons to be learnt from the Israeli experience

One of the major points of significance drawn from the FASES Report is that despite the evident growth of the industry and the presence of a vast number of enterprises in the state, there is ‘a lack of a self-identifying social enterprise movement or coalition in this country’.39

Furthermore, as seen from a relatively large number of respondents in the FASES survey who erroneously believed their enterprise was a social enterprise (in fact these were either for profit businesses or charity organisations), it is clear that the term ‘social enterprise’ does not have a clear meaning in wider Australian society.40

Indeed, from my own experience in undertaking this research, the majority of my Australian university student peer group was unaware of the actual definition or purpose of social enterprise at first discussion.

Compare this to Israel however, where there is a much greater public knowledge base and understanding about the concept of social enterprise, the defining aspects of a social enterprise and the positive effects of an increasing social enterprise sector. The prevalence of the use of the term ‘social enterprise’ in rhetoric in the Israeli context was perceivably much more widespread than that seen in Australia.

It is this concept which is most integral to the Australian development of the social enterprise sector as drawn from the Israeli experience. We must seek to increase wider public knowledge on the topic to attract young innovators to the area: more university courses, state-wide competitions and rhetoric on the topic will only increase interest, awareness and participation in this sector.

Conclusion and recommendations

While Australia is certainly developing its social enterprise sector, there remains a lack of public knowledge and interest in the topic. This may be juxtaposed against the Israeli experience, where the vast number of social enterprises and social enterprise organisations act collectively in an identifiable ‘fourth sector’ of the economy. This is achieved through multiple actions and integrations of social enterprise into other facets of society, including youth competitions and a wide variety of university courses on the topic.

Although the Federal, State and local governments in Australia have each contributed monetary pledges to furthering social enterprise in the region, there must also be a new concerted movement to advertise the aims and achievements of social enterprises in Australia. In this way, the dual results of social enterprise – individual success for innovators AND social value – will be more fully recognised in our economy.

As a result of further recognition of this sector and the benefits of its existence, we will be able to attract a greater number of innovative and enthusiastic potential social entrepreneurs to further develop this important economic and social sector.

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