What Social Enterprise Is
Social enterprise is fundamentally about using a market-driven business model to address important community issues - be they social, cultural, economic, or environmental. Just to keep things interesting, we use 'social enterprise' and 'community enterprise' interchangeably, but 'social enterprise' is the more commonly used term. Whatever you call it, this is an emerging field with diverse and shifting interpretations. In this article, we'll try to sort through all this, introduce you to the major players, and give you a launching pad for future inquiry.
Social enterprise is about using a market-driven business model to make the world a better place. But don't just take our word for it:
- The Centre for Community Enterprise defines social enterprise as..."revenue-generating businesses with a twist. Whether operated by a non-profit organization or by a for-profit company, a social enterprise has two goals: to achieve social, cultural, community economic or environmental outcomes; and, to earn revenue. On the surface, many social enterprises look, feel, and even operate like traditional businesses. But looking more deeply, one discovers the defining characteristics of the social enterprise: mission is at the centre of business, with income generation playing an important supporting role."
- In the opening line of the "Social Enterprise" page of Wikipedia, social enterprise is defined as... "an organization that applies commercial strategies to maximize improvements in human and environmental well-being, rather than maximising profits for external shareholders. Social enterprises can be structured as a for-profit or non-profit, and may take the form of a co-operative, mutual organization, a social business, or a charity organization."
- The Nova Scotia Social Enterprise Working Group defined social enterprise as... “a business or organization operated for the purpose of addressing social, economic or environmental challenges. All profits and surpluses are reinvested to support community needs.”
Many believe that a fundamental element of social enterprise - indeed, the "social" in social enterprise - is collective ownership...
Social Enterprise Lancashire Network states that..."many social enterprises are also characterised by their social ownership. They are autonomous organisations whose governance and ownership structures are normally based on participation by stakeholder groups (e.g. employees, users, clients, local community groups, social investors) or by trustees or directors who control the enterprise on behalf of a wider group of stakeholders. They are accountable to their stakeholders and the wider community for their social, environmental and economic impact. Profits can be distributed as profit sharing to stakeholders or used for the benefit of the community."
Some go so far as to stipulate a nonprofit legal structure for a social enterprise. For example, the enterprising nonprofits program defines social enterprise as "Social enterprises are businesses operated by non-profits with the dual purpose of generating income by selling a product or service in the marketplace and creating a social, environmental or cultural value.
Until we come up with a broader term than "social enterprise" (maybe "community enterprise"?), we'll advocate for a broad interpretation that does not limit it to collectively-owned businesses. If the overarching purpose of the business is to address a social and/or environmental issue, it's a social enterprise - regardless of its ownership structure. This is a pragmatic position; the world's problems are far too great to be creating arbitrary silos that limit participation and sharing.
A Few Great Social Enterprise Examples
Social enterprise comes in all shapes and sizes and can be found all over the world. Here are a few examples from our home province of Nova Scotia:
- Justus Coffee Roasters Co-op - www.justuscoffee.com
- The Flower Cart - www.flowercart.ca
- The Tatamagouche Centre - www.tatacentre.ca
- Community Association of People for Real Enterprise - www.capre.org
- The Hub Halifax - http://thehubhalifax.ca
- Car Share Halifax - www.carsharehfx.ca
In every case, these organizations are using a business model to address an important community issue.
What Social Enterprise Is Not
Social enterprise is not about balancing the "double bottom lines" of profit and community impact, as though they are equally important. The real bottom line for a social enterprise, the goal by which its success should ultimately be evaluated, is its community impact (social, environmental, cultural or economic), and being profitable (or at least financially sustainable) is the entirely necessary means to that end. Of course, there can be no social mission without money, but the first goal is mission.
Social enterprise is not the exclusive domain of nonprofits or co-operatives - See "What Social Enterprise Is" above. While nonprofits and co-ops are leaders in the social enterprise movement, social enterprise need not be limited to these organizational forms. Moreover, simply being owned by a nonprofit is not sufficient to make a business a social enterprise. The enterprise must have as its overarching purpose addressing some important social, cultural, environmental or economic issue.
Why Social Enterprise Matters
Social enterprise matters because it is focused on making positive change at a time when we desperately need it. Social enterprise is one important tool, among many, that is actively and directly making our world a better place.
Social enterprise is more responsive. Social enterprise doesn't rely on the shifting priorities of government and major foundations; it gets on with making the change that is needed within a community and (sometimes) grows to affect whole cities, countries, and regions.
Social enterprise is scalable. Like all businesses, social enterprise has, with investment and sales revenue, the ability to grow to meet needs and priorities of the communities it serves, as opposed to traditional nonprofit programs, which are often limited to the funds available from government and philanthropic funders.
Social enterprise actively engages stakeholders. Social enterprise gives the people it helps a direct voice in the operation of the business - as owners, employees and paying customers.
Related (But Different) Fields and Topics
Social Innovation In "Rediscovering Social Innovation" (Fall 2008 issue of the Stanford Social Innovation Review), social innovation is defined as "a novel solution to a social problem that is more effective, efficient, sustainable, or just than existing solutions and for which the value created accrues primarily to society as a whole rather than private individuals." So defined, social innovation is a bigger concept than social enterprise, which is not limited to enterprise-based approaches to addressing critical issues. Put another way, social enterprise can be a vehicle for social innovation.
Social Entrepreneurship Ashoka (www.ashoka.org) defines social entrepreneurship as "individuals with innovative solutions to society’s most pressing social problems. They are ambitious and persistent, tackling major social issues and offering new ideas for wide-scale change. Rather than leaving societal needs to the government or business sectors, social entrepreneurs find what is not working and solve the problem by changing the system, spreading the solution, and persuading entire societies to take new leaps." So defined, social entrepreneurship is concerned with the entrepreneurs who undertake large-scale social innovation - which may or may not involve a social enterprise. See www.ashoka.org/social_entrepreneur for a list of people who meet Ashoka's definition.
The Grameen Bank (www.grameen-info.org) is a great example of a social enterprise which, formerly led by social entrepreneur Muhammad Yunus, popularized the social innovation of microcredit.
Corporate Social Responsibility CSR is, for many, about maximizing shareholder value in a way that minimizes negative social or environmental impacts. To the extent that this is the case, profit is the first goal and minimizing harm (not making things better) is the secondary goal. CSR is better than business as usual, but it's not social enterprise.
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