Why donors keep asking for sustainability

October 26, 2026 Leave a comment

I have often been asked by the funding partners, ‘How will this project be sustained after the funding ends?’ While it is a reasonable question, it is also often the wrong one. The development sector has turned ‘sustainability’ into a synonym for ‘what will happen when the donor stops paying?’ The donors ask NGOs to build lasting solutions while often funding them through short-term, restricted projects that make long-term institutional and financial resilience harder to achieve. The real test of sustainability is the possibility of value created by the funding that can continue beyond the project cycle, and whether the economic, institutional or public systems exist to carry that value forward.

If a donor spends money on training women entrepreneurs, establishing community institutions, improving health services or creating livelihood opportunities, it is entirely reasonable to ask what happens when the grant ends. Nobody wants an intervention to disappear the moment the donor’s logo disappears from the last banner. But before asking how a project will survive without the donor, we should ask what exactly is supposed to continue, who is expected to take responsibility for it, and whether the conditions exist to make that possible.

A three-year project can be financially unsustainable but socially transformative, and it can end because its purpose has been achieved. A community institution can survive without the NGO but require continued public or market support. A livelihood intervention can become sustainable because participants increase their incomes, while the organisation delivering it remains dependent on philanthropy. And sometimes ‘sustainability’ simply means that the NGO promises to find another donor, which often is the least convincing of all. For years, development organisations have been encouraged to think about sustainability as an exit strategy. The donor funds the intervention often for 1-3 years, the NGO builds capacity, creates local ownership, establishes linkages and prepares an exit plan, and then the donor leaves and the model is expected to continue. While the logic is attractive, ending external funding and creating sustainability are not necessarily the same thing.

The OECD’s longstanding definition of sustainability in development evaluation focuses on the benefits of an intervention continuing after donor funding ends. That is a useful starting point, but it immediately raises a more important question of what will allow those benefits to continue? Government may take over, communities may contribute, users may pay, markets may generate revenue, or another institution may assume responsibility. Or the intervention may change behaviour or strengthen systems sufficiently that continued external support is no longer necessary. These are fundamentally different pathways, yet grant proposals often treat sustainability as a generic quality that can be added through a paragraph near the end of a concept note.

Consider a women’s entrepreneurship program that trains 5,000 rural women, organises producer collectives, provides business support and connects them to markets. If a donor asks how the program will be sustained after three years, the answer depends entirely on the model. Perhaps producer collectives will become commercially viable, or an anchor company will continue purchasing from the enterprises, while the financial institutions in the entrepreneurial ecosystem will provide working capital, and women will eventually pay for business services. Each possibility requires a different intervention design. If sustainability depends on markets, the project must build a viable market proposition. If it depends on government, public institutions need to be involved from the beginning. If it depends on producer collectives, those organisations need governance, capital and commercial capability. If another donor will be required, the project should be honest about that rather than presenting donor substitution as financial sustainability.

Donors increasingly expect NGOs to be resilient, adaptive and financially sustainable, while many NGOs are funded through short-term, restricted project grants that make precisely that difficult. Recent evidence from Bridgespan’s 2025 research, based on responses from 460 nonprofits and interviews with 51 nonprofit leaders, funders and intermediaries from India, found growing movement towards multiyear funding and greater recognition of core organisational costs, but continuing gaps in organisational development and financial reserves, particularly among smaller and non-metro organisations. Earlier Bridgespan research found that 83% of Indian NGOs surveyed had difficulty securing funding for indirect costs, while more than half had fewer than three months of reserves. Only 18% said they invested adequately in organisational development. Another analysis of 40 relatively well-funded Indian nonprofits found that actual core costs ranged from 5% to 51% of total costs and averaged 19%, while the average coverage provided by key donors was only 9%.

Funders ask organisations to be resilient while funding them as if their only legitimate expenditure is the activity that can be photographed and counted. Donor grants fund the field worker but not always enough of the management system that supports the field worker, training but not necessarily the organisational learning required to improve it, and program delivery while hesitating to fund reserves. Funders ask NGOs to diversify their funding while providing little unrestricted money with which to build their fundraising capacity. Then, three years later, the funder asks why NGOs are not sustainable.

Instead of asking an NGO, ‘How will you sustain this project when our funding ends?’, donors should instead ask, ‘What needs to be true for the benefits of this intervention to continue, and what role should our funding play in creating those conditions?’ This question recognises that philanthropy is often most useful when it finances a transition between two states. A grant can demonstrate that an idea works, absorb early-stage risk, strengthen institutions, develop markets, improve technology or support innovations that government and commercial finance are not yet prepared to fund. The grant should help create the conditions for the next stage. That may mean public financing, market revenue, community ownership, institutional adoption, commercial investment or another form of philanthropy. The appropriate pathway will vary by intervention, for example, a rural entrepreneurship program and a community health program should not be expected to arrive at sustainability through the same route.

This also means donors should sometimes be prepared to fund the less glamorous parts of sustainability. Financial systems are not exciting, NGO reserves are not photogenic, good middle management rarely features in impact stories, and neither do information systems, HR, audit, leadership development or fundraising capacity. Yet these capabilities determine whether an organisation can survive shocks, retain good people, manage resources and deliver programs consistently. Flexible funding is therefore not necessarily the opposite of accountability. It can be an investment in the organisational capacity required to deliver accountability well. A strong organisation with adequate systems and reserves may actually be better positioned to manage restricted program funding, and respond to changing circumstances and protect donor resources.

Then there’s another very important aspect of development programs, where everything cannot be sustained. Some projects end and achieve the desired results/purpose during their lifecycle. A delivery model may become obsolete, a technology may get replaced, a program may fail to produce meaningful results, or a community may no longer need an external intermediary. Continuing to fund something simply because it has existed for five years is institutional inertia and not sustainability.

The objective should therefore be sustainable value, not sustainable projects. This matters because many development challenges are systemic. Poverty, women’s economic exclusion, malnutrition, tuberculosis, climate vulnerability and the lack of decent employment cannot generally be ‘solved’ by a three-year project. At best, a project can change part of the system like improve a service, strengthen an institution, alter incentives, demonstrate a model, influence policy or help people acquire assets and capabilities.

Sometimes the honest answer will be that an intervention requires long-term funding, and there is nothing inherently unsustainable about that. Governments continuously spend money on education, public health, roads, social protection and environmental management. We do not ask whether a public hospital will become financially self-sustaining after three years, but are more interested in it producing sufficient public value to justify continued investment. Perhaps philanthropy should adopt some of the same logic. A community health program that requires continued financing may still be highly valuable if it prevents disease at a cost society is willing to pay. A program supporting children with special needs may never generate revenue, yet its social value can be substantial. 

So sustainability cannot always mean, ‘Can this generate its own revenue?’ That is a business-model question. For many social interventions, the better question is that, Who has a legitimate reason and capacity to pay for this value over the long term? The answer is an appropriate combination of market, government, communities, and philanthropy as per the need. This also places a responsibility on NGOs to become more honest in how they answer sustainability questions. A reassuring paragraph about capacity building, community ownership and exit strategies is not necessarily a credible plan. It’s better to be honest about it and say that the interventions may require continued public expenditure, or a livelihood project would need several more years beyond the grant cycle before it can cover its operating costs, and show the pathway. If another donor will be required, explain why and what will be different by then.

Sustainability becomes more credible when it is treated as a theory of how an intervention will continue to create value, rather than as a promise that the NGO will somehow find money after the current grant ends. We have turned a ,legitimate development objective into a ritual of grant writing. Every proposal has a sustainability section, a sustainability framework, and an exit strategy. Yet none of these, by themselves, answers the fundamental question of what will make this intervention continue to work when the source of money ends. A serious answer requires thinking about incentives, markets, institutions, behaviour, public finance, community ownership and organisational capability. It may require more than one source of funding and more than one institution. It may take five years rather than three. It may require unrestricted funding rather than another tightly earmarked project grant. And sometimes it may require accepting that the value created by a program is important enough to warrant continued investment. Perhaps, then, donors should stop treating sustainability as the final question in a grant proposal, but should be one of the first. So, instead of ‘How will you survive without us?’, the donor should ask, ‘What will exist, who will own it, who will pay for it, who will maintain it, and what should our role be when the grant ends to make the impact sustainable?’ While these are harder questions, I think, they can also lead to better projects. The most sustainable thing a donor can fund is NGOs capability, institution, market, public system or community ownership that makes the original grant less necessary over time.

(Disclaimer: The opinions expressed are those of the author and do not purport to reflect the views or opinions of any organisation, foundation, CSR, non-profit or others.)

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Why change cannot be delivered

July 27, 2026 Leave a comment

Five years ago, I met Priyanka, a young woman from a small village in the Latehar district of Jharkhand. Like many women in rural India, her world was defined by invisible boundaries. Opportunities were limited, mobility was constrained, and the digital revolution that was transforming urban India felt very distant from her daily reality. When she joined a rural digital entrepreneurship programme, she did not see herself as an entrepreneur. She simply wanted to learn how to use a laptop and perhaps earn a modest income.

Today, Priyanka runs two digital service centres in her village and around. On any given day, she helps scores of people access government schemes, apply for jobs, update documents, pay utility bills, and navigate digital platforms that would otherwise remain out of reach. Villagers who once travelled long distances and spent an entire day completing simple administrative tasks now walk a few minutes to seek her assistance. More importantly, young girls in the village consider her as their role model and hold upward career aspirations. They see someone who looks like them using digital tools to build a livelihood and create value for her community.

What changed in Priyanka’s life was not merely her income but her sense of agency. She stopped being a passive recipient of charity and became an active participant in shaping the future of her community. Her story reminded me of a lesson that I have encountered repeatedly over the past twenty years in development. Lasting change does not happen when we deliver solutions to people. It happens when people gain the confidence, capability, and opportunity to create solutions for themselves.

After 20+ years in development sector, this is the lesson I carry with the greatest conviction that change cannot be delivered to people. It emerges when people discover their own power to create it. We often treat it as something that can be designed, funded, managed, monitored, and delivered. We create theories of change, strategic plans, annual targets, dashboards, and impact indicators. We write proposals describing how communities will evolve over the next three or five years and convince ourselves that social transformation can be engineered with enough resources, expertise, and discipline. Yet the longer I have worked in this sector, the more I have realised that change is far more organic, unpredictable, and human than our project documents suggest.

When I began my career, I believed what many young professionals entering the development sector believe, that poverty could be reduced through good Programs alone, that social problems could be solved through smart interventions, and that institutions with the right intent could create pathways for people to improve their lives. I still believe in all of those things. What has changed is my understanding of where transformation actually comes from. After working across livelihoods, entrepreneurship, environmental sustainability, women’s empowerment, public health, education, and digital inclusion, I have come to a simple conclusion that development succeeds when people gain the agency to shape their own futures.

One of the first assumptions I had to unlearn was the idea that communities are primarily defined by what they lack. Development discussion is filled with the language of deficits. We identify needs, vulnerabilities, gaps, and constraints, and catalogue problems and design interventions to address them. While these exercises are important, they can also blind us to a more powerful reality. Communities possess knowledge, resilience, social capital, aspirations, and capabilities that outsiders frequently underestimate. Over the years, I have met women who built successful enterprises despite social barriers, farmers who adapted to environmental challenges long before climate resilience became a policy priority, and young people who created opportunities where experts saw only limitations. What distinguished these individuals was not the assistance they received but the agency they exercised. The most successful development programs I have witnessed were those that helped people discover their own capacity to act.

This may sound obvious, yet much of the development sector still operates as though change originates from institutions rather than individuals. We often speak of empowering communities as if empowerment is something that can be handed over like a grant or a training manual. Experience has taught me that empowerment is not delivered, but is unlocked. People change their lives when they begin to see themselves not as beneficiaries of someone else’s program but as active participants in shaping their own future.

Another lesson that I took years to fully appreciate is that projects produce outputs, while ecosystems create change. Development organisations have become increasingly sophisticated in measuring activities and outputs. We know how many people attended training programs, how many households received services, how many entrepreneurs were supported, and how many villages were covered. These numbers and accountability matter as funders and stakeholders deserve evidence that resources are being used effectively. Yet some of the most transformative changes I have witnessed had little to do with what was captured in a monitoring framework.

I have seen projects with impressive numbers disappear almost entirely once funding ended. I have also seen relatively modest initiatives continue creating value years after external support had ceased. The difference was rarely the size of the budget or the quality of the project design. More often, it was whether the intervention had strengthened the local ecosystem or not. Sustainable change emerges from relationships, institutions, markets, networks, and leadership. It emerges when communities develop the capacity to solve problems collectively, and when local actors begin driving progress themselves. 

This is particularly true in the field of livelihoods and entrepreneurship, where I have spent much of my professional life. For decades, development programs have focused on training individuals, providing assets, or facilitating access to finance. These interventions are valuable, but they are rarely sufficient. Entrepreneurship does not flourish simply because someone acquires a skill. It flourishes when an entire ecosystem supports risk-taking, innovation, market access, mentorship, and growth. The future of development, especially in rural economies, lies in building environments where success becomes possible for many.

One of the more surprising lessons from my career concerns money. Having spent years raising resources for social programs, I have a deep appreciation for the role of funding in creating impact. Without resources, good ideas often remain aspirations. Yet after helping mobilise hundreds of crores for development initiatives, I have come to believe that development is rarely constrained primarily by money. That may sound like an unusual statement coming from someone whose responsibilities have included fundraising and partnership development, but experience repeatedly points in that direction.

Many social challenges that appear to be funding problems are, in reality, leadership problems, institutional problems, capability problems, or trust problems. Additional funding can accelerate progress when strong systems exist. It can also magnify inefficiencies when those systems are weak. Some of the most effective organisations I have come across were not the wealthiest. They were the ones who built credibility, nurtured talent, fostered partnerships, learned continuously, and remained deeply connected to the communities they served. Development ultimately depends on institutions, as strong institutions outlive projects, preserve knowledge, adapt to changing circumstances, and create platforms through which future generations can continue the work. Sustainable change requires institutions capable of sustaining momentum long after a grant agreement expires.

Another belief I have gradually become sceptical of is the sector’s fascination with innovation. Few words are used more frequently in development conversations today. Every conference, funding call, and strategy document seems to emphasise innovation as the pathway to impact. New technologies, new models, and new approaches are often celebrated as solutions to deeply entrenched social challenges. Innovation undoubtedly has value, and many important advances have emerged from creative thinking. Yet the longer I work in development, the more I believe that adaptation is often more important than innovation.

Communities do not need solutions that look impressive in presentations; rather, they need solutions that work within their realities. The most successful initiatives I have known were not necessarily the most innovative. They were the most adaptive and respected local contexts rather than attempting to impose external models. The development sector is full of examples where brilliant ideas failed because they ignored the realities of the people they were intended to serve. It is also full of examples where relatively simple approaches succeeded because they were grounded in local ownership and practical wisdom.

Perhaps the most important lesson of all is that ownership is the ultimate measure of impact. For many years, I believed that scale alone represented the highest aspiration in development. Reach more people, expand into more geographies, and increase the numbers. Scale is important, and the magnitude of global challenges demands ambition. Yet scale without ownership is fragile. Programs that depend indefinitely on external actors are vulnerable by design. Lasting change occurs when communities begin to see an initiative as their own, when local leaders emerge, when institutions take root, and when progress continues without constant external direction.

This requires a profound shift in how we think about our role as development practitioners. Too often, organisations position themselves as providers of solutions. A more useful role may be that of a catalyst, connector, facilitator, and investor in human potential. The objective is not to become indispensable, but to create the conditions under which communities can thrive independently. Success is not measured by how long people depend on us, but by how effectively people progress without us.

As I reflect on my 20+ years in this sector, I remain optimistic despite the scale of the challenges before us. Climate change, inequality, unemployment, public health crises, and social exclusion remain formidable problems. Yet I have seen enough examples of human ingenuity, resilience, and determination to believe that meaningful progress is possible. I have seen individuals transform their circumstances, communities build collective solutions, and institutions evolve into powerful vehicles for social change. These experiences have reinforced my conviction, which has only grown stronger with time.The future of development will not be determined solely by larger budgets, more sophisticated frameworks, or more ambitious programs. It will be determined by our ability to strengthen local institutions, nurture entrepreneurship, build resilient economic ecosystems, and trust communities to shape their own destinies. If twenty years have taught me anything, it is that change is not something we deliver to people. Change is something people create when they have the opportunity, confidence, and freedom to act. Our responsibility is not to direct that process. It is to help create the conditions that make it possible and then have the humility to step aside.

Disclaimer: The opinions expressed are those of the author and do not purport to reflect the views or opinions of any organisation, foundation, CSR, non-profit or others.

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How sustainable is Sustainability?

September 15, 2025 Leave a comment

Few words have travelled as far and wide in recent decades as “sustainability”, and has certainly surpassed another overused (in recent past) term ‘social capital’ in usage! It has become synonymous with progress in corporate boardrooms, multilateral summits, government policies, NGO goals, and grassroots movements alike. From ESG scorecards to climate pledges, from net-zero roadmaps to community-led conservation, the language of sustainability has become universal. Every government strategy, corporate report, and grassroots initiative seems anchored in the promise of a more sustainable future. Yet beneath this consensus lies a paradoxical and uncomfortable question: ‘is the sustainability agenda itself sustainable?’

The modern sustainability agenda rests on a powerful proposition that economic growth, social equity, and environmental stewardship can be reconciled. This “triple bottom line” has mobilized unprecedented investment in renewable energy, green finance, and inclusive business models. It has inspired younger generations to demand more from institutions. And it has reframed long-term resilience as a competitive advantage, not a trade-off. But the very breadth of the agenda also makes it fragile. Sustainability risks becoming a catch-all phrase, diluted by overuse and co-opted for public relations more than systemic change. “Greenwashing” scandals, short political cycles, and the uneven costs of climate transitions all threaten to erode public trust. Without credibility and consistency, the agenda risks collapsing under its own ambition.

Sustainability requires commitments that extend far beyond the horizon of electoral politics. Yet in many countries, climate targets or ESG mandates are vulnerable to reversal when governments change. Contrast this with the European Union’s legally binding climate law, a structural safeguard that makes sustainability less of a political preference and more of a shared contract. Unless sustainability is institutionally embedded, it remains hostage to short sightedness.

Green growth advocates argue that economies can decouple prosperity from resource use. The rapid expansion of renewable energy, circular economy models, and impact investing provide evidence of possibility. Yet sceptics highlight that global consumption continues to outpace planetary boundaries. The sustainability agenda will endure only if it reconciles with the fundamental question of growth Vs limits. Can infinite growth coexist with finite resources?

No agenda, however well-intentioned, survives if it is perceived as unjust. For sustainability to be sustainable, it must embody fairness that includes redistributing costs, creating inclusive opportunities, and acknowledging diverse voices, particularly from the Global South. Social justice and legitimacy must go hand in hand.

Ultimately, sustainability is not just a strategy, it is a cultural shift. The more it embeds in consumer choices, organizational values, and educational systems, the harder it becomes to reverse. Yet cultural fatigue is real. When “sustainability” is reduced to a buzzword on every product label, development projects, and corporate brochure, it risks losing meaning. The agenda must therefore move from rhetoric to demonstrable impact, measured transparently and communicated honestly.

The sustainability agenda is both fragile and resilient. Fragile because it depends on long-term alignment across politics, markets, and societies, an alignment often in short supply. Resilient because it has transcended niche environmentalism to become a mainstream expectation that governments and corporations cannot ignore.

Its endurance will depend not on visionary statements but on institutional embedding, equitable policies, and a relentless focus on credibility. At its best, sustainability can serve as the organising principle of a new social contract, aligning business, government, and citizens toward long-term collective wellbeing. Sustainability will only be sustainable if it delivers, not someday, but today.

The next frontier is not about asking companies, governments, or communities to “do more” on sustainability. It is about demanding structural integrity – mechanisms, institutions, and accountability frameworks that ensure sustainability survives political shifts, economic pressures, and cultural fatigue.

Disclaimer: The opinions expressed are those of the author and do not purport to reflect the views or opinions of any organization, foundation, CSR, non-profit or others.

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Economic impact of Tuberculosis in India

September 17, 2024 1 Comment

Tuberculosis (TB) exacts a significant economic toll in India, affecting individuals, households, and the nation’s economy as a whole. Despite being preventable and treatable, TB continues to pose formidable challenges, impeding economic development and exacerbating poverty. By delving into the economic dimensions of TB in India, we can better understand its impact and the urgent need for concerted action to address this burden.

The economic burden of TB encompasses direct costs related to healthcare services and indirect costs stemming from productivity losses and premature mortality. According to a report by the World Health Organization (WHO), TB costs India an estimated $24 billion annually in terms of lost productivity and healthcare expenses. This staggering figure underscores the magnitude of TB’s economic impact on the nation.

Direct costs of TB care include expenses incurred for diagnosis, treatment, and management of the disease. These costs can be prohibitive for affected individuals and households, particularly those already grappling with poverty. According to the Global Tuberculosis Report 2021, approximately 39% of TB patients in India face catastrophic health expenditures, pushing many families into poverty.

Indirect costs of TB are equally significant, primarily attributable to productivity losses resulting from illness, disability, and premature death. TB often strikes individuals during their prime working years, disrupting employment and income-generating activities. A study published in The Lancet estimated that TB-related productivity losses in India amounted to $340 million annually, reflecting the substantial economic impact of the disease on workforce productivity.

Moreover, TB-related stigma and discrimination can exacerbate indirect costs by impeding social integration and employment opportunities for affected individuals. Fear of transmission and discrimination in the workplace further compound the economic hardships faced by TB patients and their families.

  • India bears the world’s highest burden of TB, accounting for approximately one-quarter of global TB cases.
  • In 2022, there were an estimated 2.8 million incident TB cases in India, with 342,000 TB-related deaths.
  • TB disproportionately affects economically vulnerable populations, including the homeless, slum dwellers, migrants, and marginalized communities.
  • The economic impact of multidrug-resistant TB (MDR-TB) is particularly severe, with higher treatment costs and lower treatment success rates compared to drug-susceptible TB.
  • According to the India TB Report 2021, the economic burden of TB in terms of lost productivity and healthcare costs is estimated to be $32 billion annually, representing a significant drain on the economy.
  • According to The Economic Times, the total cost of TB treatment from the onset of symptoms to one year post-treatment ranged from $330-$375 per PwTB, despite free diagnosis and treatment provided by the government.

Efforts to mitigate the economic impact of TB require a comprehensive approach that integrates health system strengthening, social protection measures, and poverty alleviation strategies. Investing in accessible, affordable, and high-quality TB care services is essential for reducing the financial burden on affected individuals and households. Additionally, addressing social determinants of health such as poverty, malnutrition, and overcrowded living conditions is critical for preventing TB and breaking the cycle of disease and poverty.

Furthermore, enhancing TB control efforts through innovative financing mechanisms, public-private partnerships, and community-based interventions can help alleviate the economic burden of TB while advancing progress toward elimination goals. Prioritizing TB within broader health and development agendas is essential for mobilizing resources, galvanizing political commitment, and fostering multisectoral collaboration to tackle this pervasive public health challenge.

The economic impact of TB in India is substantial, exerting profound consequences on individuals, households, and the nation’s economy. Addressing this burden requires concerted action and sustained investment in TB prevention, diagnosis, and treatment services. By leveraging evidence-based interventions, strengthening health systems, and addressing social determinants of health, India can mitigate the economic impact of TB while advancing progress towards achieving health equity and sustainable development goals. As India strives towards a TB-free future, addressing the economic dimensions of the disease is paramount for fostering inclusive growth and improving the well-being of its citizens.

(First published on LinkedIn on 28th March 2024)

Disclaimer: The opinions expressed are those of the author and do not purport to reflect the views or opinions of any organization, foundation, CSR, non-profit or others

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Social Innovation & Enterprise

October 27, 2010 Leave a comment

All innovation involves the application of new ideas – or the reapplication of old ideas in new ways – to devise better solutions to our needs. Innovation is invariably a cumulative, collaborative activity in which ideas are shared, tested, refined, developed and applied. Social innovation applies this thinking to social issues: education and health, issues of inequality and inclusion, and environment.

Read the full article at: http://www.stratessence.com/blog/social-innovation-enterprise/

SE offers a new way to do business that is animated by a social purpose. Although most SEs are small and many are fragile, the sector has attracted growing interest from policymakers, young people, entrepreneurs, funders and established businesses. That interest is testimony to the way that social enterprise addresses weaknesses in the operation of both markets and government. SEs trade products and services to further social and environmental goals. They are led by a sense of social purpose and aim to show that businesses and markets can deliver social benefits and tackle intractable social problems.

SEs deliberately adopt an uncomfortable position: they are in the market and yet against it at the same time. This ambiguous position is based on a recognition that solutions to many problems – poverty and employment, environment and fair trade development – depend on changing the way markets work. There can be no long-term solutions to many of these problems based entirely on government grants, subsidy or charitable donations. Long-term solutions have to be self-sustaining, and in a market economy, that usually means finding a way to make money from them so producers can sustain themselves.

The products and services offered by companies that are sold through the market only succeed by addressing social needs, from soap to keep us clean, to mortgages that pay for our housing, to heating in the winter and smoke alarms that keep us safe. SEs are based on the recognition that innovative solutions to difficult social problems are unlikely to come from markets left to their own devices. Some social businesses operate much like a mainstream business but covenant their profits to social causes. Many SEs, however, internalise their social mission. They make it central to the way they operate. A business that focuses on employing people long disconnected from the jobs market or ex-offenders needs to make an additional effort to do so. Extra time and costs are involved.

SE is sometimes a more complex, difficult and costly way to run a business. There are often easier ways for a business to make a profit. A framework is required for social innovation in which SE is likely to play a critical role. Social enterprise policy needs to be framed within a more comprehensive strategy for social innovation that is designed to deliver social impact by finding new ways to address unmet social needs. Open markets promote choice, make transactions efficient, stimulate competition and enable profit-driven innovation.

Prices may take little account of externalities – the impact a transaction might have on people not involved in it. A classic example is pollution. Markets often take more account of obvious and short-term costs and benefits and are less effective in accounting for long-term factors, such as climate change. Not everything that has a value can be traded. True personal care, for example, involves more than just labour; it depends on the quality of the relationship between the person caring and the person being cared for.

The value of many cultural experiences cannot be captured by the price we pay to access them. So although SE make up only a small part of the total enterprise sector of the economy, they matter in the overall business ecology because they are pioneering approaches to show how business can operate successfully while also taking into account social and environmental issues. SEs are one vital source of new business approaches to fair trade, social inclusion, community regeneration, creating jobs for those most marginalised in labour markets and environmental sustainability.

Most businesses would claim to have a social mission: they create jobs for people; provide consumers with products they need; pay taxes that support public services; donate to charities and foundations; and often the best play a role in their communities. The challenge that SE poses is whether businesses could be doing more to internalise social and environmental costs, to do business differently, not just to donate to charity or pay taxes. SEs increasingly share common ground with more socially responsible mainstream businesses that sell fair trade products, for example. SEs sustain themselves within the market, but often they do so by relying on non-market resources and motives.

More social entrepreneurs = more social enterprises + well managed growth of social enterprises = more social impact

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