The Banking Executive Magazine - April 2023 Issue

"dedicated to 'doing good,'" but also "realize that good intentions are no substitute for organization and lead- ership, for accountability, perform- ance, and results," according to management guru Peter Drucker. Micro, small, and medium-size en- terprises (MSMEs) are better equipped than large corporations to deploy the mission-driven manage- ment that social enterprises require. MSMEs account for 90% of all busi- nesses globally and 70-80% of total employment, despite often making little or no profit. Therefore, they are responsible for the livelihoods of bil- lions of workers, making them in- valuable repositories of knowledge about most people's needs and inter- ests. These interests include ecological imperatives, which are inextricably linked to economic and social con- siderations. The poorest and most vulnerable tend to be most affected by environmental hazards, from pol- lution to natural disasters. At the same time, poverty can drive com- munities to over-exploit natural re- sources, like forests and fish stocks, in a desperate search for income. Unfortunately, MSMEs lack access to formal capital markets and the holis- tic policy and institutional frame- work that would enable them to act as effective social enterprises. A 2015 UN Development Programme report found that these shortcomings signif- icantly impede social-enterprise de- velopment. Meanwhile, a small number of mas- sive firms enjoy enormous wealth and market power, often translated into policy influence. But even as multinationals tout their environ- mental, social, and governance goals, ESG considerations remain subordinate to profit maximization. Less connected to local communi- ties, these firms are not well-suited to provide the kind of bottom-up micro- solutions that, taken together, bring about systemic change. Effective social enterprises realize that good intentions are no substitute for organization, leadership, ac- countability, performance, and re- sults. They need access to formal capital markets and a consistent legal environment that would enable them to act as effective social enterprises. However, a UN Development Pro- gramme report found that these shortcomings significantly impede social-enterprise development. Large firms enjoy enormous wealth and market power, often translated into policy influence, but they are not well-suited to provide bottom-up micro-solutions that, taken together, bring about systemic change. They are less connected to local commu- nities, making them less effective in addressing ecological imperatives that are inextricably linked to eco- nomic and social considerations. Technology has enabled the creation of a "global knowledge commons" through which social enterprises can access the knowhow and financing they need through trusted accredita- tion. We have the tools, resources, and funding available to tackle the collective challenges we face. How- ever, more must be done to make the most of these assets. Existing technol- ogy, knowhow, and business models must be leveraged to help social en- terprises achieve sustainability and impact. In summary, a systemic, bottom-up approach that recognizes the inter- connected nature of our social, eco- logical, and economic systems is necessary to address poverty, in- equality, climate change, and envi- ronmental degradation. Social enterprises, particularly MSMEs, could play a crucial role in achieving this goal. Effective social enterprises require access to formal capital mar- kets, a consistent legal environment, and a holistic policy and institutional framework. Technology can enable social enterprises to access the knowhow and financing they need to achieve sustainability and impact. the BANKING EXECUTIVE 30 ISSUE 172 APRIL 2023