What is a social enterprise?
A social enterprise, or social business, is a business designed to achieve a specific social goal as its primary objective. Social enterprises aim to maximize profits while maximizing their positive impact on society and the environment. Profits generated are primarily used to fund social programs. Social enterprises often focus on benefiting marginalized or economically disadvantaged groups by permanently improving their socio-economic conditions.
Key Takeaways
- A social enterprise is a business that uses a market-driven approach to address an unmet need or solve a social or environmental problem.
- Unlike traditional businesses, a social enterprise’s primary objective is not to maximise profits.
- Social enterprises generate revenue through their efforts to fund social causes, differentiating them from charities.
- When it comes to hiring, they tend to give priority to job seekers from at-risk communities.
- Social enterprises are often funded through the sale of services or products.
- As organizations like NeighborWorks America demonstrate, social enterprises often innovate their business practices to maintain sustainability and increase social impact.
Understanding social enterprises
The concept of social enterprise was developed in the UK in the late 1970s as an alternative to traditional for-profit businesses. Social enterprises exist at the intersection of the private and voluntary sectors, balancing financial activities with social objectives, such as providing housing or job training to low-income families.
Funding comes primarily from the sale of goods and services to consumers, with additional support from grants. Social enterprises operate differently to traditional businesses because maximizing profits is not their primary objective. However, generating revenue is still essential for sustainability, which sets them apart from traditional charities that rely solely on external funding.
Sustainable profitability is what distinguishes social enterprises from traditional charities that rely on outside funding to fulfill their social mission. This goal doesn't mean that social enterprises can't be profitable — rather, they prioritize reinvesting profits in their social mission rather than using them to pay dividends to shareholders.
Social Enterprise and Social Entrepreneurship
Don't confuse social enterprises with social entrepreneurship. A social enterprise is a business established to fulfill a business objective and solve a social need through commercial activities. In contrast, social entrepreneurs use existing business methods and strategies to develop solutions to social and environmental problems. While social entrepreneurs seek innovative ways to drive change, social enterprises fulfill a business objective and solve a social need through commercial activities.
Social entrepreneurship is a rapidly growing field that is attracting attention from a variety of sectors, including the media, civil service, universities, and prominent social organizations such as Ashoka and the Schwab-Skoll Foundation. Its appeal comes from inspiring stories of individuals who have created solutions to various social and environmental issues. They are similar to business entrepreneurs but with a focus on social impact. One prominent social entrepreneur is Bill Drayton, founder and current chairman of Ashoka, an organization that aims to identify and support social entrepreneurs around the world.
Examples of social enterprises
Many social enterprises have been successful in maximising social welfare gains. Here are some notable examples:
- Warby Parker is an American eyewear retailer that donates one pair of glasses to someone in need for every pair sold.
- California-based retailer TOMS has pledged to donate one pair of shoes or sunglasses for every one sold.
- Radicle trains companies and provides them with software tools to track and reduce greenhouse gas emissions.
- Grameen Bank is a microfinance community development bank established in Bangladesh that provides small loans without collateral to the poor.
These are just a few examples of how social enterprises can make a big social and environmental impact while running a sustainable business.
Special Considerations
Social enterprise employees come from diverse backgrounds, but priority is given to employees from at-risk communities, including long-term underemployed workers who have often been paid informally in the past.
Social enterprise opportunities may aim to offer a living wage, typically above the minimum wage in most cities. Some social enterprises may aim to employ individuals from particularly at-risk groups as part of their mission.
What are some examples of social enterprises?
Social enterprises are typically a blend of the private and voluntary sectors. A credit union, a coffee shop that sells fair trade beans and hires candidates from at-risk communities, or a neighborhood food co-op are all examples of social enterprises. Examples include Navy Federal Credit Union, Warby Parker, Grameen Bank, and Radicle.
How do I start a social enterprise?
If you run a business, you can partner with a nonprofit, food pantry (if applicable), or other charitable organization to donate your time, money, or products. If you're starting from scratch, the first step is to identify the problem and solution, explain your plan of action to potential funders, and secure experts to support and validate your efforts.
How do I get hired to work for a social enterprise?
Start by researching organizations that align with your values and skills, networking with experts in the field, and gaining relevant experience through volunteer work. You can customize your resume to highlight your passion for social contribution and apply for jobs on specific job boards or organization websites. Finally, you can prepare for interviews by understanding the social enterprise's mission and values and showing how your skills align with the organization's goals.
Conclusion
Social enterprises have the primary objective of achieving social goals. They combine financial profitability with positive social and environmental impact, and reinvest profits in social programs rather than distributing them to shareholders. This approach helps to address unmet needs and has the potential to improve the situation of marginalized groups.
Social enterprises such as Warby Parker, TOMS, Radicle and Grameen Bank show that businesses can successfully address social and environmental issues while remaining financially sustainable.