Report: Analysis of Social Entrepreneurship and the Fairphone Company

This report provides an in-depth analysis of social entrepreneurship, focusing on the Fairphone Company in the Netherlands. It begins by defining social entrepreneurship and highlighting its key characteristics, such as ethical manufacturing of goods and services, assisting marginalized communities, using eco-friendly products, and manufacturing customer-friendly products. The report then delves into the Fairphone's operations, illustrating how it embodies these traits. Furthermore, the report identifies three crucial challenges faced by social entrepreneurs: balancing social and financial priorities, the lack of business acumen, and legal and tax implications. It explores these challenges in detail, providing insights into their complexities. The report concludes by emphasizing the significance of social entrepreneurship and offering recommendations for overcoming these challenges, such as increasing awareness of business aspects and maintaining a balance between financial and social priorities.

Running head: ENTREPRENEURSHIP
Entrepreneurship
Name of the Student
Name of the University
Author Note

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Executive Summary
Social entrepreneurship entails engagement in manufacturing activities, the outcomes
of which are directed towards the upliftment of society. Social entrepreneurs work in much
the same way that conventional entrepreneurs do, that is, creating goods and services for sale
in the market. However, a substantive portion of the returns from their investment is given
away for addressing social issues and cultural and environmental issues. This report provides
an overview of the essential characteristics of social entrepreneurs by referring to the
operations of the Fairphone Company in The Netherlands. The report also lists the three
important challenges faced by social entrepreneurs and concludes with recommendations
using which such challenges may be resolved.

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Table of Contents
Introduction................................................................................................................................2
1. Analysis of Essential Traits of Social Entrepreneurship with Special Reference to the
Fairphone Company...................................................................................................................2
1.1. Ethical Manufacture of Goods and Services...........................................................2
1.2. Assisting Marginalized Communities and Ensuring Fair Conditions for
Workers.................................................................................................................................3
1.3. Use of Eco-Friendly Products in the Manufacturing Process...............................3
1.4. Manufacture of Goods and Services that are Customer Friendly........................3
2. Understanding 3 Important Challenges to Social Entrepreneurship...................................4
2.1. The Challenge of Balancing Social and Financial Priorities.................................4
2.2. Lack of any Business Acumen..................................................................................4
2.3. Tax and Legal Implications......................................................................................5
Conclusion..................................................................................................................................5
References..................................................................................................................................7

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Introduction
Social entrepreneurship refers to the use of social entrepreneurs and start-up
companies for developing, funding as well as implementing solutions for cultural, social and
environmental issues (Chell et al. 2016). Such a concept is one that can be applied to a wide
range of non-profit organizations of different aims, beliefs and sizes. Social entrepreneurs
tend to blend profit goals by generating positive returns to society and use metrics that are
different to those used by traditional entrepreneurs (Dee 2017). This report identifies the
essential traits or characteristics of social entrepreneurs by analyzing the case study provided
of the Fairphone Company in The Netherlands. This report also identifies three essential
problems or challenges that are faced by social entrepreneurs.
1. Analysis of Essential Traits of Social Entrepreneurship with Special
Reference to the Fairphone Company
1.1. Ethical Manufacture of Goods and Services
Social entrepreneurs take recourse to ethically manufacture goods and services for the
market (Huda et al. 2019). This is evident from the workings of the Fairphone Company
in the Netherlands which resorts to ethical means to manufacture smart phones, which are
termed as Fairphones. Most smart phone companies across the globe use raw materials
such minerals derived from the Democratic Republic of Congo in order to manufacture
high quality and high tech phones for customers. Yet it is important to remember that the
DRC is a conflict ridden zone, and cannot afford to have its resources extracted in order
to address the profit goals of corporations. Fairphone is a company that markets modular
smart phones that does not entail the use of the minerals of the DRC and as such engages
in ethical ways of manufacture.

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1.2. Assisting Marginalized Communities and Ensuring Fair Conditions for
Workers
Social entrepreneurs assist marginalized communities while carrying out their
operations, and this is something the Fairphone Company does very frequently, as is
evident from the case study provided. The Fairphone company produces phones that end
up supporting people in the supply chain process rather than exploiting those living in a
conflict ridden zone like DRC, establishes fair and secure working conditions in the
factories that it runs in East Asia and reduces electronic wastes by engaging in the design
as well as building of phones in a particular modular format, thereby reducing any
negative impact whatsoever on the surrounding environment (Rawhouser et al. 2019).
1.3. Use of Eco-Friendly Products in the Manufacturing Process
Social entrepreneurs are especially careful of the products that they use in the
manufacturing process so as not to generate any adverse effects on the natural
environment (Phillips et al. 2015). This is evident in the operations of the Fairphone
Company which uses recycled and eco-friendly products in its manufacture and which
checks that production of phones is something that takes place without any sort of
exploitation in the manufacturing chain. Those working in factories are paid fair wages,
and raw materials are always mined in safe conditions.
1.4. Manufacture of Goods and Services that are Customer Friendly
Every effort is made on the part of social entrepreneurs to come up with products and
services that are truly user friendly in nature (Rey-Marti et al. 2016). This is also clear
from the workings of the Fairphone Company with the spare parts of the Fairphone being
those that can be easily assembled or removed, not requiring the help of any expert.
Repair costs are also significantly lowered for customers as they are able to upgrade the
components of the phone as and when technological improvements and innovations take

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place, with the life of such a phone being potentially increased far more than the life of
the average conventional smart phone in the market.
2. Understanding 3 Important Challenges to Social Entrepreneurship
2.1. The Challenge of Balancing Social and Financial Priorities
One of the most important challenges that are faced by social enterprises nowadays is
the balancing of both social as well as financial priorities (Stephan et al. 2015). The
necessity of meeting social priorities can require decisions to be taken that are not always
in the best interests of the company where financial returns are concerned, thus placing
the company in a certain amount of commercial risk. At the same time, decisions that at
times may have to be made in order to get a business to survive in the industry, such as a
reduction in the salary of staff or reduction of staff, are those that challenge the social
values and priorities of a non-profit organization. Maintaining a balance of priorities is
quite tough and social entrepreneurs often have to compromise one way or the other in
order to keep the enterprise running for the long term, either inviting a lot of social
criticism in the process, or financial loss (Dees 2017).
2.2. Lack of any Business Acumen
Social entrepreneurs often lack the type of business acumen which is needed to
determine the differences between profit and revenue (Zahra and Wright 2016). Social
entrepreneurs often fail to take operating costs into consideration at the time that they are
reporting the profits. Social entrepreneurs tend to be highly overoptimistic in their
approach to business and entrepreneurship and regularly discount the challenges that
come their way. Potential financial returns tend to be routinely over-estimated on the part
of social entrepreneurs, something that also puts the enterprise in a considerable amount
of risk financially, ,making its long term existence in the market quite a difficult affair.

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Social entrepreneurs need to spend a sufficient amount of time in studying and understand
the manner in which business actually takes place, in order to devise ways and means by
which they can keep their profits running smoothly while looking into social welfare
matters at the same given time (Zahra and Wright 2016).
2.3. Tax and Legal Implications
Legal as well as tax implications are issues that social entrepreneurs are often faced
with as well in the running of their enterprise (Chell et al. 2016). Examples in this respect
include compliance with the constitution of the organization, GST implications, re-
investment of profit as well as laws that are likely to have an impact on specific types of
industries. Debates also exist as to the tax concessions that ought to be made for social
enterprises or non-profit organizations as they are commonly known, especially with
regard to whether or not the profit that is generated by the social entrepreneurs is one that
ought to incur tax. For the most part social entrepreneurs like to keep their profit
exempted from taxation as this profit is used for the betterment of the society rather than
for serving the personal interests or profit goals of a few individuals (Rey- Marti et al.
2016).
Conclusion
Thus, while the essential traits and characteristics of social entrepreneurs are certainly
commendable and while social entrepreneurship is something that is definitely needed if
society is to progress and develop in the right direction, the challenges of social
entrepreneurship cannot be denied and require being addressed immediately. Social
entrepreneurs need to take cognizance of various matters such as the balancing of
financial and social priorities, development of business acumen and understanding of tax
and legal implications if they are to carry out their goals of marketing goods and services

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in the same way that traditional entrepreneurs but by giving back to society at the same
time. Being more aware of the pragmatic aspects of doing business can go a long way in
helping social entrepreneurs handle the challenges that come their way.

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References
Chell, E., Spence, L.J., Perrini, F. and Harris, J.D., 2016. Social entrepreneurship and
business ethics: Does social equal ethical?. Journal of business ethics, 133(4), pp.619-625
Dees, J.G., 2017. 1 The Meaning of Social Entrepreneurship. In Case Studies in Social
Entrepreneurship and Sustainability(pp. 34-42). Routledge.
Huda, M., Qodriah, S.L., Rismayadi, B., Hananto, A., Kardiyati, E.N., Ruskam, A. and Nasir,
B.M., 2019. Towards Cooperative With Competitive Alliance: Insights Into Performance
Value in Social Entrepreneurship. In Creating Business Value and Competitive Advantage
With Social Entrepreneurship (pp. 294-317). IGI Global
Phillips, W., Lee, H., Ghobadian, A., O’Regan, N. and James, P., 2015. Social innovation and
social entrepreneurship: A systematic review. Group & Organization Management, 40(3),
pp.428-461
Rawhouser, H., Cummings, M. and Newbert, S.L., 2019. Social impact measurement:
Current approaches and future directions for social entrepreneurship
research. Entrepreneurship Theory and Practice, 43(1), pp.82-115.
Rey-Martí, A., Ribeiro-Soriano, D. and Palacios-Marqués, D., 2016. A bibliometric analysis
of social entrepreneurship. Journal of Business Research, 69(5), pp.1651-1655
Stephan, U., Uhlaner, L.M. and Stride, C., 2015. Institutions and social entrepreneurship: The
role of institutional voids, institutional support, and institutional configurations. Journal of
International Business Studies, 46(3), pp.308-331
Zahra, S.A. and Wright, M., 2016. Understanding the social role of entrepreneurship. Journal
of Management Studies, 53(4), pp.610-629.

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