Social Enterprise Definition

A social enterprise, often referred to as a social business, operates with distinct social objectives as its primary purpose. Unlike conventional businesses that primarily focus on profit maximization, social enterprises aim to achieve a harmonious balance between generating profits and serving the greater good. The profits generated by these enterprises are channeled back into funding various social initiatives and environmental causes.

The origins of the social enterprise concept can be traced back to the late 1970s in the U.K., where it emerged as a response to the traditional commercial model. Positioned at the crossroads of private enterprise and volunteerism, social enterprises strive to bridge financial success with societal well-being. They engage in endeavors that encompass both financial gains and socially impactful objectives, such as providing affordable housing or offering job training to marginalized communities.

Financing for social enterprises predominantly comes from the sale of goods and services to consumers. While grants also contribute to their funding, the key distinction lies in their focus on sustainable revenue generation. Unlike charities that rely heavily on external funding, social enterprises sustain themselves through revenue while redirecting profits to their social missions.

Although profit is not the primary motivator, it remains a vital aspect of a social enterprise’s viability. Their approach distinguishes them from standard corporations, as social enterprises prioritize reinvesting profits to advance their social goals rather than distributing dividends to shareholders. The Organisation for Economic Co-operation and Development (OECD) underscores the participatory nature of social enterprises, involving stakeholders and a limited number of paid employees.

It’s essential to differentiate between a social enterprise and social entrepreneurship. Social entrepreneurship centers on individuals who leverage existing business strategies to address social and environmental challenges. These individuals seek innovative solutions to drive change. In contrast, social enterprises are established with a fundamental business purpose, aimed at fulfilling societal needs through their commercial operations.

Several successful examples illustrate the positive impact of social enterprises on social well-being. For instance, Warby Parker, an American eyeglass retailer, operates on a “buy one, give one” model, donating a pair of glasses to those in need for every pair sold. Similarly, TOMS, a California-based retailer, commits to donating shoes or sunglasses with each sale. Radicle is another exemplar, equipping businesses with software tools and training to reduce greenhouse gas emissions.

Within the realm of social enterprises, employees hail from diverse backgrounds, but priority is accorded to individuals from vulnerable communities. This includes individuals who have been historically underemployed and informally compensated for their work. Many social enterprises strive to offer a living wage, which surpasses the minimum wage in most areas. Some may specifically target hiring individuals from at-risk groups as a core hiring criterion.

Social enterprises encompass a blend of private and volunteer sectors. Examples include credit unions, fair-trade coffee shops employing individuals from marginalized communities, and neighborhood food co-ops.

If you currently own a business, collaboration with nonprofits or charities through donations of time, resources, or products can align with social enterprise principles. For those starting anew, identifying a societal challenge, proposing a solution, outlining your action plan to potential funders, and seeking expert support constitute the initial steps.

To secure employment within a social enterprise, a comprehensive understanding of both its financial and societal impact is crucial. Diverse backgrounds, including those from at-risk communities, are common among social enterprise employees. Qualifications are often based on experience and education, as with any job.