Social enterprises use entrepreneurship, innovation and market approaches to create social value and change; they usually share the following characteristics:
Social Purpose - created to generate social impact and change by solving a social problem or market failure;
Enterprise Approach – uses business vehicles, entrepreneurship, innovation, market approaches, strategic-orientation, discipline and determination of a for-profit business;
Social Ownership – with a focus on public good and stewardship, although not necessarily reflected in the legal structure. Social enterprises may be structured as a department within an organization or as a separate legal entity, either a subsidiary nonprofit or for-profit.
In its widespread usage, "social entrepreneur" is the individual and "social enterprise" is the organization. Therefore, social enterprise is an institutional expression of the term social entrepreneur.
Social Enterprise in the NP Sector
Multi Sector - Social enterprise transcends traditional nonprofit sectors and applies as equally to health, environment, education and social welfare as it does to economic development or job creation programs.
Economic and employment development organizations are a natural fit with social enterprise, and therefore frequently integrate social enterprise as a program strategy
Other social sectors tend to incorporate social enterprise as a financing mechanisms, though in both cases programmatic and financial benefits can be realized.
The Context of SE
Mainly targeted at poverty alleviation
In environment of competing models
Market based solutions to poverty
“ Many advocates of market based solutions to poverty view poor people as rational consumers who, if given more options, would make better choices…yet these advocates do not acknowledge that the poor lack the education, information, and other economic, cultural, and social capital tat would allow them to take advantage of and shield themselves against the vagaries of the free market” – excerpt from Romanticizing the Poor article
Hybrid Spectrum Purpose: Social Value Creation Purpose: Economic Value Creation Sustainability strategy: commercial methods support social programs Sustainability strategy: “Doing well by doing good” Traditional Nonprofit Nonprofit with Income Generating Activities Social Enterprise Socially Responsible Business Corporation Practicing Social Responsibility Traditional For Profit
Purely Philanthropic Hybrid Purely Market Motives Appeal to goodwill Mixed motives Appeal to self interest Methods Mission driven Balance of mission and market Market driven Goals Social value creation Social and economic value creation Economic value creation Destination of Income/Profit Directed toward mission activities of nonprofit org. Reinvested in mission activities or operational expenses and/or business growth Distributed to shareholders and owners
Social Enterprise Field
Community Development Corporations
Social Firms or Affirmative Businesses
Civil Society Organizations
Base of the Pyramid
Venture Philanthropy & Philanthropreneurs
Use business tools and approaches to achieve social objectives
Blend social and commercial capital and methods
Create social and economic value
Generate income from commercial activities to fund social programs
Market-driven and mission-led
Measure financial performance and social impact
Meet financial goals in way that contributes to the public good
Enjoy financial freedom from unrestricted income
Incorporate enterprise strategically to accomplish mission
Combining Social and Economic value
As a hybrid, the social enterprise is driven by two strong forces.
First, the nature of the desired social change often benefits from an innovative, entrepreneurial, or enterprise-based solution.
Second, the sustainability of the organization and its services requires diversification of its funding stream, often including the creation of earned income
When is Earned Income a Social Enterprise?
Though subtle, and subject to debate, the defining characteristic is that an income- generating activity becomes a social enterprise when it is operated as a business.
The following characteristics apply:
the activity was established strategically to create social and/or economic value for the organization.
It has a long-term vision and is managed as a going concern.
Growth and revenue targets are set for the activity in a business or operational plan.
Qualified staff with business or industry experience manage the activity or provide oversight, as opposed to nonprofit program staff.
More than half of all nonprofits are engaged in some form of income generation, though few have the tools, knowledge, expertise or desire to develop these activities into enterprises
Elephant Dung Example
The National Zoo in Washington DC sells Elephant dung to the public as exotic fertilizer. Although the humorous product is popular among local organic gardeners, the "Zoo Doo" venture is not treated as a business and the income it earns is insignificant. Instead Zoo Doo functions as an innovative public relations and marketing strategy used to attract visitors and patrons to the National Zoo. The small amount of money it generates is considered a plus.
Using the same raw material, Zookeepers in Bangkok, Thailand turned their Elephant dung into lucrative business. The Thais transform the animal excrement into high-quality handmade paper which are sold in stationary stores, nature shops, and used in premium paper products in domestic and export markets. The enterprise employs several people who process the organic pulp to produce handmade paper.
Varying Levels of Integration Social Programs + Enterprise Activities Social programs Social Programs Enterprise Activities Enterprise Activities
Organizational Support Model
Service Subsidization Model
Market Linkage Model
Fee for Service Model
Market Intermediary Model
Entrepreneur Support Model
What models are goodwill industries and ten thousand villages?
Principal Agent Complexities
Measuring Social Impact
Emerging trends to achieve scale
Franchising enhances nonprofit organizations that have viable, yet non-scaleable social enterprises, through replication. For example, a café that employs disabled people may be profitable only when it employs 12 or fewer disabled people. However, if franchised, the café social enterprise can create employment for hundreds of disabled people. Goodwill Industries’ used clothing and furniture retail stores are a good example of an employment model social enterprise achieving scale through the franchise model.