You can hear the term social enterprise everywhere online but what does it mean exactly?
There are a lot of different definitions but it’s important to have a simple one that we can refer to in order to evaluate whether a company really is a social enterprise.
Our definition of a social enterprise:
“A social enterprise is a business built around a specific cause that exists mainly to deliver societal objectives and which acts in the interests of everybody.”
What Drives A Social Enterprise?
A social enterprise’s big driver is the societal objective or objectives that it wants to bring about.
This might be anything from “better youth services in XYZ place” to “providing adequate sanitation to everyone in the world”.
There is no specific scope of activity, but it ought to be clear that the objective is beneficial to people.
Social enterprises are sometimes lumped in with “non-profit organizations” but while many social enterprises are not concerned with making a profit, some are.
In fact, there is growing realization in the sector in recent years that profits can help sustain a social enterprise in leaner years.
What Differentiates A Social Enterprise From A Charity?
A charity seeks donations or grant funds to sustain its activities. A social enterprise is a business that has societal benefits.
But unlike most businesses its mission is to fulfil its societal objective rather than to profit its shareholders.
Social enterprises succeed when they deliver on their social mission whilst remaining sufficiently economic to stay sustainable.
Is A Social Enterprise An Ethical Business?
An ethical business, typically, is a standard profit driven business which has pledged to pay attention to its impact on the environment, etc.
A social enterprise is markedly different – trade is the tool by which it delivers a societal benefit rather than the main objective.
Types Of Social Enterprise
There are three main categories of social enterprise.
Innovation Led
An innovation led social enterprise is one that aims to meet a social need by delivering innovative products into a market.
An example of this in practice would be the $10 laptop a social enterprise which was developed in India to provide all the world’s children with affordable access to computers.
Sadly, it never managed to live up to its aims.
Employment And Education
This is a social enterprise which delivers benefits by creating employment in under privileged communities and often combines this with an education benefit.
So, a company like WaterSHED which employs Khmer people to educate others on the benefits of effective sanitation would be a great example of this.
They also fall into the innovation category as their systems are innovative.
The Giving Back Model
Warby Parker, the glasses people, are a great example of this model.
They sell a product (glasses) and every time you buy through them; they donate a product (also glasses) to someone in desperate need in the third world.
It’s one of the most common and successful social enterprise models now because it’s very easy for consumers to get involved with.
For more details on social enterprises within the fashion industry check out our guide to sustainable fashion.