Soft Power and Social Entrepreneurship

According to Joseph Nye, A country’s soft power is its ability to make friends and influence people – not through military might but through its most attractive assets, notably culture, education, language, and values. In short, it is the things that make people love a country rather than fear it; things that are often the products of people, institutions, and brands rather than governments.

So, where does a social enterprise come in this discussion? In many ways. And I will explain using some examples from my book “Business with Purpose.” Look at the social enterprise continuum (given below). All forms of social enterprises are of value to governments for soft power.

Startups and MNCs which embed a philosophy of Profit with Purpose can be great brand ambassadors for their home country and hence contribute to soft power. The power of tech companies like Apple, Google (or Alphabet), Microsoft, and Meta are so well known that more governments are looking to close tax loopholes or hold them more accountable for governance issues like data privacy. Sometimes there is a strategic effort, as seen with Luxemburg and the space sector. Sometimes it is a founder – Steve Jobs (Syrian origin), Elon Musk (South African origin), though both are Americans.

A social enterprise like Body Shop makes its impact felt though its supply chain context (here, the primary purpose is profits, and the business model may be business with heart). Patagonia has a robust sustainability mission, though it needs profits to survive and would be an example of a social enterprise. The challenge here is the power of stakeholders like investors and shareholders who can put profits before purpose.

One good way of managing expectations is B-Certifications. This strategy is what Natura & Co. does with their commitment to social and environmental impact. This company includes Avon, Natura, The Body Shop, and Aesop. However, there are still tensions. This tension was brought up in Natura’s self-disclosure of the 68 infractions issued by the IBAMA (Brazil), on the company's access to genetic heritage and associated traditional knowledge regarding Brazilian biodiversity and raw materials. Grey areas like this will keep popping up, and the company needs to keep returning to its purpose.

The challenge in managing a soft power strategy with global companies like the above is the poor knowledge of the country of origin. So Body Shop was perceived as originating from the UK but now that it belongs to Natura – is it Brazilian or of UK heritage? So which country would benefit from the soft power strategy? It depends a lot on communication; unfortunately, not many countries do this well. Much of it is accidental.

When you move to hybrid forms of social enterprises, you can have non-profits, NGOs or IGOs that depend on grants, philanthropy, debt (like vaccine bonds), or other forms of country funding like Official Development Assistance (ODA). There are many organizations in this bracket. They can be IGOs like the UN, WHO, WB, Bill & Melinda Gates Foundation, Gavi, the Vaccine Alliance, and charities like Oxfam and Doctors Without Borders, which do not have a for-profit model. They need to raise funds and may also need a large number of volunteers or donations in kind. The challenge with these forms of enterprises is mission drift.

That they need to raise funds but when donors give the money, it may come with strings attached, so there can be mission drift. If there is no strong regulatory oversight, there are also areas where governance failures can happen. Scandals happened to Oxfam (sexual misconduct) and even the UN (Haiti with cholera), for example. Here accountability and governance play a vital role. These organizations often work in fragile places, so governance is challenging due to the fragmented information being collected and the lack of on-ground experience or oversight of board members.

On the one hand, Switzerland quickly attracted many leading IGOs, which increased its soft power. But on the other hand, this relationship is often a bit murky when you look at soft power. This is the situation with China's Belt and Road project and the current situation in Sri Lanka. Another example of a missed opportunity was found in a recent study we did in refugee camps. We found low or incorrect awareness of the brand's origin, even if the refugees had positive feelings towards the brand. Also, from a government's point of view, we have seen, for example, India putting more oversight on grants originating from outside the country and Kenya restricting an NGO from becoming a branch of, being affiliated with, or being connected to any political entity based outside Kenya.

The hybrid model has dual profit and purpose missions. So in some cases, in the examples given in the book, we can place some non-profit organizations like Sougha (UAE) and Sulabh (India) that have a dual mission. Sougha products are found in Etihad, the official carrier of Abu Dhabi, and the Sulabh model is replicated in many other countries that consult with Sulabh. Both organizations contribute to their country’s soft power.

So to conclude, soft power through social enterprises can be a tremendous tool in building a nation’s reputation, but if misused may give the impression of interference in another country’s affairs or can backfire and lead to a loss in reputation instead. The starting point developing social enterprises that have strong purpose that echoes through the organizational strategy, including funding and echoes with the country ethos. The country linkage can be beneficial, especially if there is a positive relationship.