Social enterprise
Social enterprises are innovative organizations that blend commercial strategies with social missions to address pressing social, environmental, and human justice issues. They operate with the primary goal of benefiting society rather than solely maximizing profit, making them distinct from traditional businesses, nonprofits, and government entities. Many social enterprises focus on entrenched problems such as poverty, education, health, and housing, often functioning alongside nonprofits to provide complementary services. They can take various forms, including arts organizations, food services, and retail operations like thrift shops, where revenue from sales supports charitable work while providing employment and training opportunities to disadvantaged individuals.
These enterprises often create a sense of community among their customers, who may feel an emotional connection to the mission and values behind the services or products offered. Despite their growth, social enterprises face regulatory challenges, as many countries work to define their legal status and address the complexities of combining for-profit and nonprofit activities. The rise of social stock exchanges reflects increasing public interest in investing in such ventures, providing platforms for individuals to support organizations aligned with their values. Overall, social enterprises represent a dynamic approach to solving societal challenges, fostering both economic sustainability and social impact.
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Subject Terms
Social enterprise
Social enterprises are businesses that use strategies from the commercial sector to try to build a better world. They focus on addressing social, environmental, and human justice issues. Such organizations often take an entrepreneurial approach to solving problems and frequently operate alongside nonprofits as complementary ventures.
Overview
Social enterprises address social concerns that traditional businesses, governments, and nonprofits cannot. Businesses, governments, and charities must focus on other vital interests. Businesses are under pressure to generate profits, while governments struggle with dwindling resources. The nonprofit sector relies on funding from outside sources, which may fluctuate wildly as the economy changes. Social enterprises are structured to be self-sustaining ventures that efficiently address needs.
Several characteristics define social enterprises. The main purpose of these ventures is to benefit humankind. Many specifically focus on entrenched social needs, such as poverty. Social enterprises are also concerned with revenue, either as for-profit ventures or through nonprofit strategies, because funds are necessary to achieve their goals. These organizations do not need to generate enough revenue to cover all operating expenses. The money these organizations do earn supplements the amount of donations or grants they may be relying on from other sources, while also generating a social return on these investments.
Social enterprises may include arts organizations, consulting and research services, human and social service providers, food service operations, and manufacturing and retail businesses. For example, many charitable organizations operate thrift shops or resale shops. Generally, the organizations accept donated items that are sorted and displayed in their stores. Revenue generated from the sale of donated items goes toward funding charitable work.
Social enterprises address many social needs, which range from economic and workforce development to education, health, and housing issues. Thrift shops and similar ventures often serve other purposes beyond generating funds. For instance, they may provide employment and work training to disadvantaged persons living in impoverished communities. Such benefits help individuals and also relieve some of the burden on charities and government programs. Many social enterprise restaurants provide work experience for homeless individuals. Social Bite, which has sandwich shops in Scotland, employs recovering drug addicts and former prisoners, teaching them work skills such as cooking and customer service. The owners of Social Bite have stated that at least a quarter of their staff will be made up of individuals who have dealt with homelessness.
One aspect of social enterprises that sets them apart from private businesses is customer experience. People often feel an affinity for a social enterprise, and they support its products and services. Some customers consider themselves members of a community because they feel they are part of a movement or mission. When the products or services of a social enterprise are of equal value to those of a private business, customers will often choose to support the social enterprise.
Obstacles
The rapid development of international social enterprises at the beginning of the twenty-first century surprised governments and business communities. Many countries were faced with entities that did not fit into a specific category. For example, Canadian brothers Marc and Craig Kielburger founded a charity called Kids Can Free the Children in 1995, when Craig was just thirteen years old. The brothers wanted to free children from poverty and slavery. In 2000, the brothers founded Leaders Today, which organized trips for people who wanted a volunteer experience. In 2008, the Kielburgers replaced this organization with the for-profit company Me to We.
Me to We arranges overseas trips for young people, organizes leadership camps, provides speakers, and sells products, all as a way to finance global change. The profits from the trips and socially conscious goods help fund the work of Free the Children.
At the time Me to We was founded, it was illegal under Canadian law for charities to engage in for-profit work. Charities could sell promotional items but could not compete with for-profit companies. US law was similarly strict until 2009, when some states introduced Low Profit Limited Liability Companies (L3Cs). Additionally, the United Kingdom created Community Interest Companies in 2005 to address the increasing number of social enterprises.
Yet to comply with regulations, many organizations had to create multiple legal entities. In addition to the Free the Children charity and Me to We, the Kielburgers had to create a holding company to handle the revenue generated from their books and speaking engagements—funding they invested in their charitable ventures. Lawmakers around the world continue to grapple with legal issues concerning social enterprises.
Social Stock Exchanges
The increase in social enterprises has inspired people to invest in them. This led to the formation of social stock exchanges.
Some social stock exchanges cater to private individuals, while others limit membership to accredited investors. Many of these social stock exchanges emphasize helping potential investors find organizations involved in the causes that interest them. Most are not true stock exchanges. They simply evaluate organizations and provide information and links to social enterprise websites, where individuals can pursue opportunities for investment if they wish.
The most well-known social stock exchanges are the United Kingdom's Social Stock Exchange (SSE), Singapore's Impact Exchange (IX), Canada's Social Venture Connexion (SVX), and the United States' Mission Markets (MM).
Bibliography
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Forrest, Adam. "The Homeless Workers Taking On Greggs, Eat and Pret a Manger." Guardian. Guardian News and Media, 25 Mar. 2015, www.theguardian.com/sustainable-business/2015/mar/25/homeless-edinburgh-work-jobs-poverty-employment-greggs-pret. Accessed 27 Oct. 2024.
Motter, Nicole. "Stock Exchanges for Social Enterprises? Here's Where You Can Find Them." Forbes. Forbes.com, 27 Mar. 2014, www.forbes.com/sites/ashoka/2014/03/27/stock-exchanges-for-social-enterprises-heres-where-you-can-find-them. Accessed 27 Oct. 2024.
Shackleford, Heath. "Social Enterprises Must Move Beyond Purpose." Fast Company. Mansueto Ventures, 23 Apr. 2013, www.fastcoexist.com/1681898/social-enterprises-must-move-beyond-purpose. Accessed 27 Oct. 2024.
Wingrove, Josh. "Marc and Craig Kielburger's Do-Gooding Social Enterprise." Globe and Mail. Globe and Mail, 23 Aug. 2012, www.theglobeandmail.com/news/national/marc-and-craig-kielburgers-do-gooding-social-enterprise/article4389008/?page=all. Accessed 27 Oct. 2024.