A social enterprise, much like the descriptors “NGO” or “non-profit” is a term you hear quite often.
Of course you know what it means. You know it’s a company that helps communities.
Sure, that definition is factually correct. Not a bad start. But let’s delve a little deeper; let’s unpack some of the specificities of a social enterprise. What officially makes an organization a social enterprise? How is it different from a traditional company or a charity? Is it still technically a business?
Let’s take a look:
A social enterprise is a business whose primary purpose to create positive change.
It is a balance between for-profit and non-profit organizations, using corporate methods and disciplines along with the power of the marketplace, in order to further charitable agenda (whether it be social, environmental or human justice).
Here are three major characteristics that collectively distinguish a social enterprise from for-profit firms, non-profit organizations, and government agencies:
1. Its commercial activity drives its revenue. It constitutes a significant portion, or all, of its revenue, depending on the specific enterprise.
2. It directly addresses an intractable need, either social, environmental or judicial. This is achieved either through the selling of a product or service, or through the disadvantage people it employs.
3. Its primary purpose is to serve the common good. This is ingrained throughout the entire organization and take precedent over all other aspects of the enterprise.
Is a social enterprise an entity similar to a non-profit that uses business models to earn an income in order to pursue their mission? Or is it similar to a for-profit that that at the same time has a driving social purpose?
To be clear as mud, a social enterprise can be either. In fact, social enterprises operate on a spectrum – some operate more like non-profit organizations and others operate in a manner almost identical to corporations.
But what does matter is the mission of an organization; it’s primary and fundamental reason for being there. A social enterprise’s organizational form is simply a means to achieve a way that can best advance its social mission.
What kind of missions do social enterprises have?
Social enterprises are just as diverse as non-profit organizations in the causes they support and further; the social needs they address are as diverse as human ingenuity. A 2009 study conducted by Social Enterprises Alliance found the top overarching missions of social enterprises were:
- Workforce development
- Community and economic development
What kind of business models do social enterprises use?
Business models used within social enterprises are just as diverse. They can operate as a:
- Manufacturing business
- Fee-based consulting service
- Catering operation
- Employment support consulting
- Arts organization
- etc. etc. and the list goes on
Let’s look at a community economic development social enterprise.
Let’s say this organization’s mandate to help poverty-stricken people gain employable skills. They match people with work in the community, as well as with their own organization, improving the downtrodden communities in the area. This entity produces direct, measurable public benefits, and often can serve at least three public aims:
1. Public Safety: By taking disadvantaged people off the streets, the community as a whole become safer. They break cycles of poverty, crime, homelessness, incarceration and chemical dependency.
2. Economic Opportunity: By training teenagers and adults for employment opportunities it improves the community’s pool of human capital. By providing opportunities for these people the social enterprise also creates jobs in communities, promoting economic prosperity.
3. Community Improvement: By hiring people to help improve the down-trodden communities, whether it be planting gardens, picking up trash or removing graffiti, the social enterprise is increasing the beauty and prosperity of the communities.
The bottom line about social enterprises is that they are organizations that produce higher social returns on investment than other business models.
They have a cause, they operate in a means to achieve fund to further said cause, they champion this cause, and in the end help its communities in a myriad of ways.
Two big thumbs up for social enterprises!