What is Social Enterprise?

What’s Social Enterprise and who is a Social Entrepreneur?

This article discusses what social enterprise is and the difference between social enterprise and business as usual. Normal for-profit businesses are not typically an example of social enterprise. 

what is social enterprise
Giving information. Female speaker giving presentation in hall at workshop. Business centre. Rear view of participants in audience. Conference event, training. Education, diversity, inclusive concept.

 

A Social Entrepreneur approaches business with the intent to implement and promote solutions to social, cultural, and/or environmental problems, among other categories of causes. Individuals, groups and start-ups can all be engaged in Social Entrepreneurship when selling a product, service, or otherwise engaging in commerce.

 

The Spectrum of Social Enterprise

 

As an unschooled student of social enterprise, starting in 1995, I hope this post helps you to better understand what is Social Enterprise. I’ll finish by sharing with you a lot about the only social enterprise that I know a lot about.

 

Let’s start with distinguishing between typical “business as usual” and “social enterprise”. 

 

Business as usual offers a product and/or service for sale. For this discussion, let’s also agree that typical business does not utilize deplorable practices, such as child labor, disregard for the environment, human health and safety, or basic human rights. In other words, just “doing things right” does not constitute social enterprise.   

 

Social Enterprise intentionally adds a component that benefits society, rather than the “social good” occurring as an afterthought or byproduct. I think this is what the following terms get at: mission-based, cause-driven, high impact, and impact business

 

Social Enterprise Examples

 

A Social Enterprise can be either a taxable or tax exempt business.

 

A Social Enterprise can be a very small (solopreneurs), small, medium sized, large, or very large-scale business.

 

Some familiar examples of social enterprises are Newman’s Own, Toms, Warby Parker.

Here are some that are less well known, ENVIROFIT, LuminAID, UPLIFT.

A Social Enterprise can, but need not:

  • employ people who are difficult to employ – the presently-homeless, formerly- incarcerated, handicapped, or individuals of a minority group;
  • sell a product or service that alleviates a societal problem, such as a solar-powered light, a water filter, care for the needy, a sootless indoor stove;
  • be formed expressly to alleviate a social problem.

 

“Social Enterprise – It’s a spectrum, not a label”, in the words of Seth Godin

 

I’ve come to that view over the last 25 years and I think the spectrum is broader than some definitions of it. I also think that social enterprise is fundamentally sustainable. For better or worse, the profit motive is the most powerful, or at least the most widespread motive. In the context of a world in which resources are finite, if profit can be created, it can, at least in theory, propel an enterprise indefinitely forward. If that enterprise has a social mission, that social mission will also be propelled forward, indefinitely.

 

Social Enterprise Organizations

 

Social Enterprise Alliance, a national organization of which I am a member in the Chicago chapter, uses a definition that, in my opinion, is narrow.

Organizations that address a basic unmet need or solve a social or environmental problem through a market-driven approach.”

Definitions of Social Enterprise

Here are some other definitions and characteristics of social enterprise. There is a broad spectrum of what social enterprise actually is.

 

What is A Social Firm?

Social firm is the British term for a work integration social enterprise (WISE), a business created to employ people who have a disability or are otherwise disadvantaged in the labour market. Its commercial and production activities are undertaken in the context of a social mission, with profits going back into the company to further its goals. A significant number of the employees of social firms will be people with a disability or disadvantage, including psychiatric disabilities. The firms grew out of disillusionment with mainstream businesses, and the failure to recognise or enable everyone’s potential. All workers are paid a market-rate wage or salary that is appropriate to the work. All employees are intended to have the same employment opportunities, rights and obligations.”

 

What is a Social Enterprise?

The Good Trade says 

“A social enterprise is a cause-driven business whose primary reason for being is to improve social objectives and serve the common good.”

 

Social Enterprise Examples and Principles

The possibility of causes can be infinite, but one aspect common to all social enterprises is that they do not work exclusively for a profit maximization purpose.” said Concious Connection Magazine in a 2016 article identifying ideal practices of social enterprise 

Social Enterprise Business Ideas

(via thesedge.org)

….the difference between a social enterprise idea and a traditional business idea is the motivation of the entrepreneur…..a social entrepreneur is driven more by a passion to solve a social problem, and only chooses to use business as a mechanism to solve these problems.”

“…..simply put, these businesses have impact and financial success at their core…..

Considering the landscape as “charity vs. company” or “social enterprise vs. social business” obscures the wider movement that sees business and finance as a force for good.”

 

Social Enterprise Entrepreneurships

 

“….entrepreneurships merging the pursuit of profit with the passion for a cause. The movement is global and spans the gamut from tiny startups like ours to some of the biggest companies on the planet…..It’s where the heart of Gandhi meets the mind of Henry Ford….we’ll use the terms social innovation and social enterprise interchangeably with social entrepreneurship, as they are different expressions of the same concept.”

From Kyle Westaway’s Profit & Purpose

https://hls.harvard.edu/faculty/directory/11190/Westaway

 

Business Model examples of Social Entrepreneurship

 

“Although most social enterprises may fall naturally into one of W. Grassi’s nine categories…..there is always room for new and combined models to emerge. If your social enterprise cannot achieve its goals through one of these business models, you may choose to explore entirely new ones.”

How can people engage in Social Entrepreneurship? 

 

  1. Grassi describes how people can engage in social entrepreneurship based on nine categories.  We have found that some social enterprises do not fit into these specific categories, including ours.  

 

I am co-founder of a social enterprise called Investing In Communities® (IIC). Because I am so much more familiar with IIC than I am with any other social enterprise, I want to share with you how IIC works.

 

IIC is a web-based platform that provides a new way to utilize both residential and commercial real estate brokerage services. But IIC does not represent any individual or company as their broker. I make that disclosure because IIC is licensed in IL as a brokerage company, but only because of a regulatory technicality of the entire real estate brokerage industry.

 

The Social Good of IIC

IIC enables consumers to provide significant funding to a charity, or school, of their choice, at no expense to themselves. In that way, IIC provides a new “development” resource for an unlimited number of charities, NGOs, schools, hospitals, et al.

 

The Business Good of IIC and its “universal” utility 

IIC is free for consumers, both individuals and companies, to use with any upcoming transaction for which they want to use an agent to represent them. IIC does not limit your choice of agent. You are able to use IIC with any agent licensed in the state where you want to have your transaction, including an agent you already know. (In this discussion, agent = broker = licensee.)

 

IIC plays the role of the referring broker, to which a referral fee is paid by the receiving broker. Then IIC gives the lion’s share of that referral fee to the charity chosen by the referred consumer. 

And, to be blunt, IIC works without any need for agents to be generous.

 

That’s because IIC works by redirecting and then repurposing a common, and even hoped for, expense that is especially common in the residential sector of the industry. Usually, a Referral Fee is eagerly paid by the receiving broker to the referring broker, in exchange for getting a referral. 

 

Brokers pay no more for a referral from IIC than they would pay to any broker for the  referral.

 

Business Good of IIC, cont’d.

The selection of which brokers IIC will suggest to each consumer is based strictly on there being a good match between what a licensee specializes in and the specifics of that consumer’s desired transaction. Licensees can not pay to have IIC make referrals to them.

 

Nevertheless, brokers benefit significantly from IIC. First, an IIC referral is no more expensive for brokers than a referral from any broker. And once a licensee successfully completes an IIC-referred transaction, we will call that agent first, the next time we have a referral to place that’s appropriate for their realty practice. 

 

If the consumer already knows of an agent they want to work with, we will contact that agent to make arrangements that enable them to get the assignment. 

Social Good of IIC, cont’d.

The charities to which IIC makes distributions pay nothing for those distributions. In other words, there is no development expense associated with getting IIC funding.

Also, IIC distributions are unrestricted”, which magnifies their importance to the recipients.  

 

A common idea in fundraising circles is that if someone gives to a charity once, they will be more likely to give again.

 

So it may hold that, by enabling consumers to support charities, even at no expense, that consumer will be more likely to give again.

 

IIC works by adding an intermediary that directly benefits charities and consumers without hurting brokers. This is surprising in this day and age of internet-enabled removal of intermediaries!

 

Removal of the intermediary has already happened in the travel, hotel, and auto industries, and is transforming the real estate industry. 

 

Social enterprise and social entrepreneurship have a wide range of meanings and interpretations.  Being a social enterprise requires dedication to doing social good and to making a profit. Being a good company requires dedication to profit. The fundamental difference, for the good of the world, between social enterprise and charity is that a charity might run out of money if donations stop coming in. That charity will go “out of business” and its social mission will also go out of business. In contrast, a social enterprise, specifically because it has a profit-face and a mission-face, can in theory go on forever. That means both its profit and its social mission will continue.

I don’t know who first said these words, but think about it: “No margin, no mission”. 

If there is not enough profit, the ability to promote the social mission of the social enterprise also runs out of money.

 

So, profit is not a “four letter word”, as everybody already knows. 

And that’s not only because it has six letters!

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