What is a social enterprise? A social enterprise is a type of business that makes sure their actions have a significant environmental or social impact.
Why is this important? Social enterprises allow you to take on a mission-driven business where you can use most of the profit to benefit others by using various impact assessment methods. By doing so, you address economic, environmental concerns, social justice concerns and community benefits. The number of important themes this topic can relate to is endless. This is why the impact is so positive.
Did you know that social enterprises have made around $2 trillion annually while they have created their intended positive effects? This is quite significant.
Here, we will look into the numerous characteristics, operations and real-life examples of social enterprises and why they play such a significant role in our society.
What is a Social Enterprise and Its Relation to Other Business Types?
According to Investopedia, a social enterprise, which is also known as a social business, is a business where you can achieve specific social goals as your main purpose. To better understand this, you can make as much profit as you can while also making positive changes to the community, making it an ideal mission-driven organization. The types of people this kind of business fully benefits are people who have little advantage economically and marginalized groups because it improves their social and economic conditions.
My Perspective on How Social Enterprises Affect People with Disabilities
As someone who struggles with a disability and some mental health issues, I feel social enterprises are especially important to improve the lives of these people. Frustratingly, without various disability support programs, too many people with disabilities may end up jobless or even homeless for much of their lives, as many may not receive a large amount of income without the appropriate support.
How Social Enterprises Differ from For-Profits and Non-Profits
You may also wonder how these businesses differ from regular for-profit businesses and non-profit organizations. When it comes to their main purposes, non-profits do not distribute profits and instead focus on social or environmental causes. For-profits are about maximizing profits for shareholders or owners, while social enterprises have more of a “middle ground” type of goal. This is because they work on both the financial and social aspects of managing a business plus reinvest their profits for communities and environmental causes, as social enterprises are mission-driven models.
Social Enterprises Vs. Social Entrepreneurship
With social enterprises and social entrepreneurship, how do they differ? Social enterprises solve issues in society through selling goods and services. On the other hand, social entrepreneurs focus more on social innovation by using many business strategies that already exist. Therefore, the concept has become increasingly popular in various sectors such as the media and well-known social organizations.
The Appeal of Being a Social Entrepreneur
What primarily interests people to become social entrepreneurs are inspiring stories of where social entrepreneurs have made substantial changes to many issues in society. For example, a woman grows up in a community where many women struggle to find employment due to limited education and job skills. She created her a social venture named “Threads of Change” to teach disadvantaged women sewing and tailoring skills. As a result, this not only helps them with skills but also helps them become more financially independent through her entrepreneurship.
The Many Characteristics of Social Enterprises
As social enterprises prioritize social or environmental missions for their business model, they also ensure social impact is measurable. For example, a therapist who is part of an autism organization working with an autistic child may measure how well the child responds to certain play situations by giving them stickers each time their play is functional through their social mission of helping autistic children gain social skills.
AI Technology Social Impact Example
Regarding technology for measuring impacts, I’ve appreciated how AI has been helpful for people in organizations in analyzing data quicker because, before, it would take hours for people to complete relatively mundane tasks. Interestingly, with AI, people can measure how effective their impacts are in shorter periods of time and in great detail. For instance, a therapist can simply submit images of their detailed records of where the child is progressing, and the chatbot can give a detailed analysis. It makes helping these children that much more efficient.
On the other side of the coin, some organizations may struggle to keep up with balancing rapid technological advancement and continuing with their mission. For example, over-reliance on AI can be ineffective for service-oriented enterprises where personalized human care is important.
Social Impact Assessment
Also, the more detailed your social impact assessment is in various situations, the more effectively you can plan for initiatives in your organization. With the therapy example, if certain strategies like frequent calling an autistic child’s name helps them focus well, you can use these strategies as one of your goals in your organization.
Economic Viability
When enterprises reinvest their profits to make long-term impacts while they make sure they make no change to their missions, this allows economic viability to take place. This term means there is a net societal benefit when everyone involved ensures there are costs and community benefits for all social, economic and environmental factors. Let’s say a clothing company purchases cotton sweaters and donates them to children in need. Ultimately, this would be a net societal benefit because they are reinvesting money for this initiative instead of making the profits go to their shareholders. At the same time, though, this company balances profitability with its social and sustainability mission as it continues to sell clothing.
Stakeholders
In a typical social enterprise situation, there are various stakeholders. Stakeholders are simply all the people involved in an organization. Clients, customers, funders, beneficiaries and employees are all stakeholders. Furthermore, the better your stakeholder engagement is when you run a social enterprise, the better your finance situation will be.
One way you can improve engagement is to regularly create content such as newsletter, reports or social media posts that you can target towards certain groups and their needs for impact assessment. For example, in a social organization, investors might be most interested in financial reports, while the broader community might be most interested in surveys on various social trends such as how accessible healthcare services are. Networking, attending workshops or seminars, and collaboration are other examples of stakeholder interactions.
Partnerships
Finally, partnerships with the non-profit sector and the government are also common. For instance, I worked in a position two years ago where the environmental organization I was at collaborated with a social non-profit organization to integrate environmental statistics with relevant social issues like housing in marginalized communities.
Examples of Business Models in Social Enterprises
Social enterprises can operate in both for-profit and non-profit sectors. However, they must ensure a well-balanced economic viability. This is where operational models come into play. There are numerous types of models, including the ones below.
- Employment Model: The employment model ensures opportunities for employment and job training for people who have increased difficulty gaining employment, such as the disabled, homeless, at-risk youth and more. When social enterprises use this model, they integrate employment into their mission. For example, a bakery might hire people with various intellectual disabilities, which may then serve its products to cafes and restaurants. This will allow revenue to cover operating expenses while giving these people with disabilities skills and experience that are marketable.
- Fee-for-Service Model: The fee-for-service model allows you to manage your organization to make a profit before you sell services directly to the target population. In the case of a social enterprise, you can use this for helpful services such as counselling or teaching new skills. With this additional money, it will help you further run your business. For example, if your social enterprise offers tutoring, parents may pay fees for the service, which will help cover costs like tutors’ pay and books.
- Organizational Support Model: With the organizational model, you separate your business activities from your social initiatives, which will create revenue for the non-profit organization. To generate income, you use a for-profit subsidiary, where you can sell products to the general public or other businesses and then reinvest the money into the non-profit organization. This ensures economic viability. For example, say you’re in a non-profit organization that teaches people how to create pottery so you will be able to sell it at stores. By selling these products, you may have enough money to offer even more hands-on opportunities for the community.
Real-Life Examples of Social Enterprises
- Second Chance: As a non-profit based in Hendon, UK, 2econd Chance is a computer recycling mission-driven organization. Their mission is to use a sustainable business model of refurbishing and selling computers while also helping people with disabilities and mental health challenges learn IT skills and soft skills to gain meaningful employment.
- Aisle: As a B Corp located in Vancouver, Canada, Aisle specializes in world-class sustainable products for menstruation. Madeleine Shaw, co-founder, was having allergic reactions to regular types of pads and tampons. Eventually, this prompted her to not just to make reusable products for both sustainability and comfort but to allow women to create new solutions in a market they helped shape over the years.
Conclusion: Social Enterprises Shape Lives in Positive Ways
Running a social enterprise is a highly effective ways to support the community without always having to prioritize profits. It is a powerful model that greatly balances financial success with contributing to the environment and community in meaningful ways.
As you focus on mission-driven goals, you offer sustainable solutions to various challenges, such as social inequality or sustainability. Also, by using many ways of social innovation, you can have a huge measurable impact on society because of your business. At the same time, however, you also ensure economic viability and substantial stakeholder relationships while creating positive, long-term changes.
By putting people as your number one priority, you can allow numerous long-term benefits to numerous groups of people such as marginalized communities. As more people may use these models, there is optimism that a large amount of societal issues may not take place in future generations.
FAQs
Q: How do I start a social enterprise?
A: You should start one by considering what are common issues in society you are passionate about, who your target audience is and where they would like to see changes.
Q: How do social enterprises measure their impact?
A: Social enterprises use a variety of tools for impact assessments such as surveys and financial reports to measure outcomes.
Q: How can social enterprises adapt to rapid technological change while keeping their mission?
A: Even though many social enterprises are exploring the advancements, it’s important to maintain a balance to ensure technology doesn’t get in the way too much of your mission-driven work.
