Social enterprise: confused about what it is?

Some days I’m feeling totally confused about what is a social enterprise and what isn’t.

It seems to me that we’ve got at least three types of ventures in play when the term “social enterprise” gets bandied about that may need more clarification:

  • Social Enterprise
  • Socially responsible business
  • Cause-marketing

To me, these are not describing the same thing. Here’s how I understand them:

Social Enterprise:

According to the Social Enterprise Alliance, the definition of social enterprise is:

“businesses … that use the methods and disciplines of business and the power of the marketplace to advance their social, environmental and human justice agendas.” The word business here doesn’t only apply to a for-profit enterprise, but could include nonprofits as well.

The Alliance definition lists three characteristics that are essential to a social enterprise:

  1. It directly addresses an intractable social need and serves the common good, either through its products and services or through the number of disadvantaged people it employs.
  2. Commercial activity is a strong revenue driver, whether a significant earned income stream within a nonprofit’s mixed revenue portfolio, or a for profit enterprise.
  3. Common good is its primary purpose, literally “baked into” the organization’s DNA, and trumping all others.

A social enterprise could be an over 100-year old organization like Goodwill Industries or a newbie like Solar Sister.

Socially Responsible Business

A business (and I’d say any nonprofit as well) could adopt socially responsible business practices without being a social enterprise. Modular carpet manufacturer Interface Global has often been held up as a shining example of a company wedded to environmentally responsible practices. But I think you would be hard pressed to say that modular carpet is solving an intractable social need.

Socially responsible businesses seek to minimize their negative impact on the world as they pursue profit by reducing their environmental impact, not using child labor, ensuring worker rights and living wages, creating diverse or healthy and safe workplaces, or not using animal testing, among others.

Cause Marketing

You know this one: “We’ll donate 5 Cents to the XYZ cause for every item you purchase.” From the perspective of a for-profit business, cause marketing seeks to improve profitability and brand reputation by establishing a strong connection with a social cause or issue, whether directly through partnership with an individual nonprofit or with an entire sector. From the nonprofit side of the equation, an organization would seeks out a cause marketing relationship in order to improve its revenues or build public awareness for itself or its issue by linking with a for-profit business in some type of marketing venture.

So what?

It seems to me for the concept of social enterprise to have integrity, it would be helpful to apply more discipline in the application of the term.

I’d be hard pressed to consider a T-shirt company a social enterprise just because it donates a t-shirt to a foster kid every time someone buys one of its products.

While these three categories I discussed aren’t mutually exclusive, they also aren’t a direct overlay. A business could employ cause-marketing and still have shameful labor practices. A nonprofit which is officially established to deliver a public benefit – whether a social enterprise or not – could also have terrible environmental practices or pay a poverty wage to its regular employees.

What do you think? Are you also finding confusion in the growing popular application of the term social enterprise?

Related readings:

Cause-related marketing: 10 Cautionary Principles for Nonprofits

Remembering what we know: two landmark social enterprises

Leave a reply

Basic HTML is allowed. Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.