The philosophy of social enterprises
A social enterprise is an organization or venture that achieves its primary social or environmental mission applying market-based strategies and using business methods. Social enterprises build a more just, sustainable world by applying market-based strategies to today’s social problems. Rather than maximizing shareholder value, the primary aim of social enterprises is to generate profit to further their social or environmental goals. Profit is viewed as a means and not a primary goal.
With social enterprises, business is viewed as the vehicle for social change. Whether structured as non-profits or for-profits, social enterprises are simply launched by social entrepreneurs who want to improve the common good and solve a social problem in a new, more lasting and effective way than traditional approaches. Social enterprises operate in every sector of the economy: retail, service, manufacturing, consulting and even technology enterprises…
Differences between traditional businesses and social enterprises
Two distinct characteristics differentiate social enterprises from other types of businesses, nonprofits and government agencies:
- Social enterprises directly address social needs through their products and services or the numbers of disadvantaged people they employ. This distinguishes them from “socially responsible businesses”, which create positive social change indirectly through the practice of corporate social responsibility;
- Social enterprises use earned revenue strategies to pursue a double or triple bottom line. This distinguishes them from traditional nonprofits, which rely primarily on philanthropic and government support.
A traditional business
- Aims at maximizing its shareholder value
- Operates in a profitable market to make money
- Operates in a competitive world
- Serves two main stakeholders: shareholders and clients
- Measures success according to the profit realized
A social enterprise
- Aims at creating social change in solving a social problem
- Answers uncovered social needs with a sustainable manner
- Develops partnerships with a complementary logic
- Serves several different stakeholders, including its beneficiaries and employees
- Measures success according to the social utility created and the economic viability of the enterprise
In video – What is a social enterprise ?
Characteristics of social enterprises
The common characteristics of social enterprises, summarized from different sources (Social Enterprise London, EMES), are:
- An enterprise orientation
· An activity of production and/or sale of goods and services
· A high level of autonomy: social enterprises are created voluntarily by groups of citizens and managed by them, and not directly or indirectly by public authorities or private companies, even if they may benefit from grants and donations
· A significant economic risk: its members have the responsibility of ensuring adequate financial resources, unlike most public institutions
· A minimum number of paid workers, although, like traditional non-profit organizations social enterprises may combine financial and non-financial resources, voluntary and paid work
- Social aims
· An explicit aim of community benefit: the primary aim of social enterprises is to serve the community or a specific group of people. Their objectives tend to fall into three categories :
- Integration of disadvantaged people through work
- Provision of social, community and environmental services
- Ethical trading, such as Fair Trade
· A citizen initiative: social enterprises are the result of collective dynamics involving people belonging to a community or to a group that shares a certain need or aim
- A social ownership
· A decision making not based on capital ownership: the voting power is not based on capital shares. Although capital owners in social enterprises pay an important role, decision-making rights are shared with other stakeholders.
· A participatory character: the users of social enterprises’ services and those affected by the activity are represented and participate in their structure.
· A limited distribution of profit: social enterprises may distribute their profit only to a limited degree, thus avoiding profit maximising behaviour. Some social enterprises totally prohibit profit distribution.
An example of social enterprise: Big Issue, in the UK
The Big Issue is a street newspaper written by professional journalists and sold by homeless individuals. The Big Issue, founded in 1991, is one of the UK’s leading social businesses and aims at offering homeless people the opportunity to earn a legitimate income, thereby helping them to reintegrate into mainstream society. It has been described as one of the most successful street newspapers worldwide, selling over 300,000 copies a week and listed as the third-favourite newspaper of young British people (age 15 to 24).
To become a vendor, one must be homeless or vulnerably housed or marginalised in some way. Vendors buy The Big Issue for £1.00 and sell it for £2.00. The magazine is also produced and sold in Australia, the Republic of Ireland, South Korea, South Africa, Japan, Namibia, Kenya, Malawi and Taiwan.
During the last twenty years the organisation has worked with and on behalf of some of society’s most marginalised individuals, helping thousands of homeless and vulnerably housed people to take control of their lives.
“I became homeless following the painful break down of my marriage and after sleeping rough in several cities I ended up in London in 2004. I turned to The Big Issue as a last resort. The Big Issue helped me to get off the streets and into a hostel and after a few months I was given the opportunity to be a Vendor Coordinator. The Big Issue has helped me sort my life out so it is great to be able to help other Vendors out.” (A Big Issue vendor)
Sources : Social Enterprise Alliance, Social Enterprise London, EMES, Big Issue, ESSEC, Wikipedia
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