What is a social enterprise?

One of the questions I get most often is:

 
So, what is a social enterprise?
— everybody
 

Usually followed by: 

"How do you know what one is?"

"Is my organization a social enterprise?!" 

So let's talk a little about what a social enterprise is - and what it is not.

A SOCIAL ENTERPRISE IS

As defined in partnership with the Social Enterprise Alliance - Twin Cities board of directors: 

A social enterprise is an organization that sells products or services in order to achieve its social purpose.

Break it down!  Ok, let's take a couple of those terms in the definition and make sure we understand and agree on what they mean. 

Sells products or services = sells a tangible good or delivers a service for a fee. 

Social purpose = nonprofit with tax-exempt status for social purpose OR business with social purpose declared in Articles of Incorporation, in directors decision-making, and included in regular reporting.

Whoa, what? How do you know if an organization has a social purpose? 

A social enterprise can be social by:

Sharing: Organizations that exist to share some or all of their profits with charitable organizations or causes.

Selling: Organizations that make their impact through what they sell or to whom they sell it.

Sourcing: Organizations that develop their programs by how they make their products or services, typically using environmentally sustainable methods and employing the underserved.

So, what do we call these social enterprises?

In the nonprofit sector, we call it a COMMERCIAL NONPROFIT.

In the business sector, we call it a SOCIAL BUSINESS.

Confused? It's ok. Don't worry. We'll get through this. 

Ok, now that we know what a social enterprise IS, let's talk about what a social enterprise is not. 

A SOCIAL ENTERPRISE IS NOT

A social enterprise is not a CONTRIBUTION NONPROFIT (a nonprofit organization that exclusively relies on philanthropic contributions; a charity in the traditional sense). These organizations are not a social enterprise because they don't sell a product or service. Remember that part of the definition? Oh yeah. 

A social enterprise is not a TRADITIONAL BUSINESS (a business that exists for the sole purpose of making profit). These companies are not a social enterprise because they don't have a social purpose. There are lots of businesses that have nice things they do for the community, but they are not social enterprises because the social purpose is not part of the structure, goals, reporting and decision-making.

Make sense? Agree? Disagree? Let's discuss in the comments section below! 

 


ABOUT THE AUTHOR:

BETH PALM, MBA

Hi there! I'm Beth. I'm here to equip social entrepreneurs and change makers like you with the tools to change the world. As a jack-of-all-trades nonprofiteer and recognized social enterprise expert, I've walked the talk in this emerging industry. With over a decade of experience launching and managing social enterprises, I want to share my best tools, resources and knowledge with you.

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