It’s no secret. It can be confusing to define social enterprise quickly.
Are we talking about a 100-year-old non-profit like Goodwill? A new technology start-up that sells a soccer ball that generates energy for entire villages? The coffee shop down the street that sources fair-traded, pesticide-free coffee beans but donates the profits to local charities?
Answer: Yes, Yes, and yes – a social venture can include all of these.
Two pieces are necessary for the puzzle.
Recently, there has been much debate about the definition of social enterprise. It’s a valid question. If both for-profit and non-profit organizations can be considered social enterprises, does this mean that any venture with social benefit qualifies? (No. (No.) (Yes.
It is true that there are two pieces of the puzzle required for the label to fit.
Part 1: The core purpose of the business or organization is to fulfill a social and/or environmentally responsible mission. As important as the economic return, social impact is prioritized. In fact, solving social issues is the reason that an organization exists. This is the “WHY” behind the business.
Part 2: A service, product, or other product is sold to make a profit that will sustain the work and help the social mission. This is the “HOW” to a business.
The tricky word “social” and the dangers associated with social washing
Perhaps now you will be able to understand the importance of this big deal. A straightforward but flexible definition of social enterprise makes it easy to understand what it is and allows for an incredible variety of them.
Some confusion can be caused by the use of the term “social”. Imagine a nonprofit that provides vocational training for the disabled but only accepts donations and grants. This non-profit serves a social purpose. It is not a social enterprise, however, because they do not sell any product or service at a cost that can sustain their efforts.
What about traditional companies like Target that donate 5 percent of their profits to educational or environmental initiatives? We support corporations acknowledging their social and ecological impact. Target is a big-box retailer that can make a profit. It wants to sell clothing, toys, and other fun stuff from dollar bins, not for social impact but to maximize shareholder return.
This brings us to “WHO.”
Selecting the suitable business model to support your social enterprise
Social enterprise can be defined to clarify who it benefits. These are the most common ways that social enterprise’s “Who” appears:
You are intentionally hiring people in relation to your social mission.
Conscious sourcing – Remember that corner coffee shop? It ensures that the beans are harvested by fair labor conditions and compensated farmers.
You can think of the actual product or service as that soccer ball. It is meant to be used by families who require reliable lighting to read, cook, and play.
Profit-sharing: The profits from the product or service are divided by communities, organizations, and people that you care about.
These aspects are important because they clarify the concept but allow for a wide range of organizational and operational options.
Towards a mission-driven economy
We care about social enterprise definitions because it is more than just changing one company. It’s about combining the best of business and social causes.
Social enterprises are part of the transformation from a market that only values financial returns to one that provides economic and social benefits for all.