What is a Social Enterprise?

There is a big difference between what is a socially responsible business,  a charity, and a Social Enterprise.

Sadly there are some misleading interpretations of the term “Social Enterprise” particularly new business startups or well-meaning charities who try to ride a wave of popular support for Social Enterprises in the community. Nevertheless, despite the founders best motives and goals to establish a business based on meeting social outcomes they can’t truly be called a Social Enterprise.

The textbooks call a Social Enterprise:
“a profit-making venture set-up to tackle a social need”

Many commercial businesses might consider themselves to have a social objective, but a Social Enterprise is unique because their social purpose is central to who they are. Rather than maximising shareholder value, their aim is to generate profit to further their social purpose.

Some commentators describe this as “not-for-profit” as their profits are not distributed to financial investors, this is misleading as it implies they are unbusinesslike.

It is better said that:
“the profits of the business are used to support its social aim, or that the business itself accomplishes the social aim through its operation.”

Social Enterprises have two main differences compared to a socially responsible business or charity:

  1. There are binding policies or legal structures in place to ensure profits support the social purpose long-term, and
  2. the majority of operating income is derived from trading and not charitable sources.