What is a Social Enterprise?

What is a Social Enterprise?

A social enterprise is a business whose success is measured as much on the positive social impact it sets out to achieve, as on its profitability.

Social enterprises tend to share the following characteristics:

  • They are set up to positively address a social or environmental problem.
  • They operate in a way that strives to be profitable and sustainable, so that they can viably continue to provide positive social and/or environmental benefits into the future.
  • They often operate in market niches i.e. in ways or places where a need exists that is not being addressed by government agencies, non-governmental organisations (NGOs), charities or other commercial businesses. They may however operate alongside or in partnership with these organisations through, for example, corporate social responsibility (CSR) programmes.
  • Dividends are used to fund a positive impact or, the dividends actually are the positive impact. e.g. the provision of a vital service (and the satisfaction that brings) to a community that no other organisation or body is providing.

Social enterprises must compete

Social enterprises, like every other business, must be competitive. They supply products and services and compete for customers and market share. They must also compete on quality and market rate prices since social credentials or intangible assets on their own are rarely sufficient to maintain a stable customer base. They must also compete for resources such as talent, investor funds, grant aid, advertising space and public attention.

To be competitive social enterprises must therefore be entrepreneurial. They must be flexible and provide creative and innovative solutions to running their businesses, fulfilling their mission and achieving their goals.

Leading and managing a social enterprise

Social enterprises require strong leadership and management that:

  • can develop clear strategy and business plans in conjunction with their board and stakeholders
  • have, or have access to, financial and business acumen
  • can deal effectively with the regularly conflicting demands of achieving the social mission and growing a commercially viable business
  • are open to learning, adapting and responding  
  • manage risk and taking good counsel when considering risk
  • grow relationships with multiple stakeholders that include beneficiaries, volunteers, employees, investors and customers
  • are accountable to and mindful of the expectations of a wide array of stakeholders.

Often referred to as ‘impact first’ enterprises, social enterprises are businesses by any other name. They have the same challenges and operate in a competitive environment but, in supporting more than just shareholders, they have a wider positive impact.