Social Enterprise: What Is It And Why Do We Love It?
Long ago, there was a time when being in business meant stamping on the heads of everyone around you, to scramble to the top. Undercutting? It’s called an open market, dahlink. Contracts? Only if you can add in some dirty clauses. Bound by honour? HA! Good one! Well… that is until the social enterprise quickly grew in popularity. Anyone would think that business now has a heart. So, let’s take a look at exactly what a social enterprise is – and why it’s proving to benefit the many, as well as business owners, themselves.
What is the meaning of social enterprise?
If you’re after the definition of social enterprise, you’d be surprised it can vary greatly. That being said, it’s generally agreed that to be considered a social enterprise, business owners use commercial tactics and apply them to social and environmental causes. They’re also different from a charity, however, since more than half of the income needs to come from trading. While “trading” doesn’t necessarily mean the sale of goods or services, it does mean that a social enterprise can’t rely on charitable donations, grants and similar funding.
How is a social enterprise different from a business?
The main differences lie in the mission statement when it comes to social enterprise. After all, like a commercial business, they aim to make a profit. However, the major difference is what happens to the profit itself. thus, in the case of social enterprise organisations, this profit is put back into the business via reinvestment.
The part in between the plan and the profit is also important, though. Because, during this stage, the work done is often, by design, to help others who are vulnerable or who face underrepresentation. Most of which focuses on training the individual to become skilled in that area. Of course, that isn’t always the case. There are plenty of examples of everyday shops and food providers, that focus more on the profit side, than the training.
What are the different types of social enterprise?
In terms of examples of social enterprise, UK-side, we have six core types.
Focused on local issues, and often run by local people (I’ll spare you that old joke), a community enterprise use activities to bring in income. Think of the local toddler group, for example. The income that these activities create pay for local development. The ultimate goal of which is to create self-sustaining jobs.
Credit unions are the best place to go if you’re struggling with debt, since they help people to save and borrow money. Rather than getting loans from larger corporations, with massive repayment rates, a credit union offers only what you can afford. Not to mention their profits help the union itself, and pay for community finance initiatives.
This kind of social enterprise is exactly what it says on the tin. Usually, for larger businesses, this means shares and stock options in the business (or parent business). This is different to having a “benefit” from your employer that offers stock and share options, as the major stakeholders are often still corporate business managers. Meanwhile, social enterprises under this banner offer employees a ‘significant and meaningful’ stake in a business.
Similar to employee-owned business, a cooperative is an “association of people united to meet common economic and social needs through jointly owned enterprises.” They work on behalf of a larger member base, and provide a shared service in return. The most common example of this in the UK is, unsurprisingly, the Co-op brand.
If you live in a housing association, then the profit off the rent you pay will be directed back into the company. This money is then used to significantly improve housing, build more affordable housing or to help the community that lives under that housing association’s banner. As such, while the company still employs and runs from people’s rent, it thrives under reinvestment.
This final, larger type of social enterprise focuses on employment and upskilling a marginal workforce. Most often, the biggest examples come from companies that employ people with disabilities. That being said, one of the biggest companies to hit headlines was Jamie Oliver’s Fifteen. This company employs those who are disadvantaged, ultimately training them to become chefs.
Why do we need social enterprises?
Quite frankly, if we didn’t have social enterprises, then all business will run for the sole purpose of profit over people. Since we already know that this disadvantages many – particularly in vulnerable communities or those who are already marginalised – it leaves us with a rather heartless, corporate, capitalist world. It’s important for there to be balance in all things, but especially when it comes to levelling out the playing field of work.
As an example, this website – The Live Life – is in consideration for being a social enterprise. This is because, as we grow, we’re hiring people from marginalised communities. Personally, I am a care leaver – belonging to a group of people who are traditionally underrepresented and often left with little support. Indeed, in 2017, 40% of young care leavers were NEET (not in education, employment or training).
Similarly, people of colour are also massively underrepresented in the journalism industry. A report by the NCTJ notes that 94% of journalists are white, with many often being older too. With journalism often being a graduate-only entry-point, this website works to give writers genuine training in standards and ethics. All while paying for this, in the long run, with money from advertising, affiliate schemes and sponsors. Every penny of which goes back into the website. Of course, for us, it’s still early days and we’re still hoping to secure funding. Until now, every penny for this website comes out of my pocket – and I don’t get paid, myself.
So, we’re not a social enterprise… yet. But we will be!
Can a social enterprise be for-profit?
Since a social enterprise holds a similar structure to a corporate business, then it can absolutely be run in the same way as a for-profit organisation. Of course, one of the key factors is that over half the profit needs to be reinvestment or donation. So, there’s a limit on how much can stay in the owner’s pocket, and how much needs to stay in the business.
How to start a social enterprise
Starting a social enterprise may be the best thing you ever do. But, like any job, it takes a lot of hard work. Most notably, because you’ll have to manage self-employment. But there are also a few hoops to jump through, first. Depending on what you want to do with your new venture, there are many routes to take. As such, we can’t give you direct advise here – but we can signpost you to the Gov website, which has more details.