Social enterprise


A social enterprise is an organization that applies commercial strategies to maximize improvements in financial, social and environmental well-being. This may include maximizing social impact alongside profits for co-owners.
Social enterprises have business, environmental and social goals. As a result, their social goals are embedded in their objective, which differentiates them from other organisations and companies. A social enterprise's main purpose is to promote, encourage, and make social change. Social enterprises are businesses created to further a social purpose in a financially sustainable way. Social enterprises can provide income generation opportunities that meet the basic needs of people who live in poverty. They are sustainable, and earned income from sales is reinvested in their mission. They do not depend on philanthropy and can sustain themselves over the long term. Attempting a comprehensive definition, social enterprises are market-oriented entities that aim to create social value while making a profit to sustain their activities. They uniquely combine financial goals with a mission for social impact. Their models can be expanded or replicated to other communities to generate more impact.
A social enterprise can be more sustainable than a nonprofit organisation that may solely rely on grant money, donations or government policies alone.

Types

A social enterprises can be structured as a business, a partnership for profit or non-profit, and may take the form of a co-operative, mutual organisation, a disregarded entity, a social business, a benefit corporation, a community interest company, a company limited by guarantee or a charity organisation. They can also take more conventional structures. Social enterprises are dynamic, requiring adaptation to ensure they meet the needs of communities and individuals in an ever-changing world. Their shared common thread is that they all operate to achieve a balanced financial, social and environmental set of objectives.

Trading enterprises

Worker- and employee-owned trading enterprises, co-operatives, and collectives. These vary from very large enterprises such as John Lewis Partnership in the UK and the Mondragon Corporation in Spain to medium-sized enterprises owned by their staff with traditional management hierarchies and pay differentials to quite small worker cooperatives with only a few directors and employees who work in less hierarchical ways and practice wage parity. Within the trading enterprises, there are employee-owned enterprises and membership-owned enterprises.

Financial institutions

Savings and loan organisations such as credit unions, microcredit organisations, cooperative banks, and revolving loan funds are membership-owned social enterprises. Credit unions were first established in the 1850s in Germany and spread internationally. Cooperative banks have likewise been around since the 1870s, owned as a subsidiary of a membership co-operative. In recent times, microcredit organisations have sprung up in many developing countries to great effect. Local currency exchanges and social value exchanges are also being established.

Community organisations

Many community organisations are registered social enterprises: community enterprises, housing co-operatives, community interest companies with asset locks, community centres, pubs and shops, associations, housing associations, and football clubs. These are membership organisations that usually exist for a specific purpose and trade commercially. All operate to reinvest profits in the community. They have large memberships that are customers or supporters of the organisation's key purpose. There are village cooperatives in India and Pakistan that were established as far back as 1904.

Non-governmental organisations (NGOs) and charities

There are many NGOs and charities that operate commercial consulting and training enterprises or subsidiary trading enterprises, such as Oxfam International. The profits are used to provide salaries for people who provide free services to specific groups of people or to further the social or environmental aims of the organisation.

History

Origins

In 1978, at Beechwood College in the UK, the term and concept of Social Enterprise were developed by Freer Spreckley as an alternative commercial organisational model to private businesses, co-operatives, and public enterprises. The concept, at that time, had five main principles divided into three values and two paradigm shifts. The two paradigm shifts were:
  • A common ownership legal structure where members/owners have one voting share and different forms of investment
  • Democratic governance, where each worker/community resident is a member with one vote
The three principles, now referred to as the triple bottom line were:
  • Trading and financially viable independence
  • Creating social wealth
  • Operating in environmentally responsible ways
Furthermore, it was intended as part of the original concept that social enterprises should plan, measure and report on financial performance, social-wealth creation, and environmental responsibility by the use of a social accounting and audit system.
The organisational and legal principles embedded in social enterprises are believed to have come from non-profit organisations. Originally, non-profit organisations relied on governmental and public support, but more recently they have started to rely on profits from their own social change operations. The Social Enterprise Alliance defines the following as reasons for this transition:
  • the increase in non-profit operating costs
  • the decline in government and public philanthropic support
  • increased competition due to growth in the charitable sector
  • the expansion in the demand for non-profit provided services
Social enterprises are viewed to have been created as a result of the evolution of non-profits. This formation process resulted in a type of hybrid organisation that does not have concrete organisational boundaries. Various scholars have argued that this may have come about due to the marketization of the non-profit sector, which resulted in many non-profit firms placing more focus on generating income. Other scholars have used institutional theory to conclude that non-profits have adopted social enterprise models, because such models have become legitimized and widely accepted. Some organizations have evolved into social enterprises, while some were established as social enterprises.
The first description of a social enterprise as a democratically owned and run trading organisation that is financially independent, has social objectives and operates in an environmentally responsible way, was put forward by Freer Spreckley in the UK in 1978 and later written as a publication in 1981. One of the first examples of a social enterprise, in the form of a social cooperative, can be traced back to the Victorian era. Like social cooperatives, social enterprises are believed to have emerged as a result of state and market failure. However, market failure is emphasized in the UK, while state failure is emphasized in the United States.

Muhammad Yunus

used the term "social enterprise" in his 2009 book Banker to the Poor, and in other essays. Muhammad Yunus used the term referring to microfinance. His work in the area of extending micro-credit especially to women in societies where they are economically repressed, led him to receive the Nobel Peace Prize in 2006.

Adoption of social enterprise across institutions

In the US, Harvard, Stanford and Princeton universities built on the work of Ashoka, and each made contributions to the development of the social entrepreneurship field through project initiatives and publications.
the field of social enterprise studies has not yet developed firm philosophical foundations, but its advocates and its academic community are much more engaged with critical pedagogies and critical traditions in research in comparison to private-sector business education.
Teaching related to the social economy draws explicitly from the works of Robert Owen, Proudhon, and Karl Marx, with works by Bourdieu and Putnam informing the debate over social capital and its relationship to the competitive advantage of mutuals. This intellectual foundation, however, does not extend as strongly into the field of social entrepreneurship, where there is more influence from writings on liberalism and entrepreneurship by Joseph Schumpeter in conjunction with the emerging fields of social innovation, actor-network theory, and complexity theory to explain its processes.
Social enterprise is not taught exclusively in a business school context, as it is increasingly connected to the health sector and to public service delivery. However, Oxford University's Said Business School does host the Skoll World Forum, a global event focused on social entrepreneurs.

Publications

The first international social enterprise journal was established in 2005 by Social Enterprise London. The Social Enterprise Journal has been followed by the Journal of Social Entrepreneurship, and coverage of issues pertaining to the social economy and social enterprise is also covered by the Journal of Co-operative Studies and the Annals of Co-operative and Public Economics. The European Social Enterprise Research Network and the Co-operative Research Unit at the Open University have also published research into social enterprise. The Skoll World Forum, organised jointly by Oxford and Duke universities, brings together researchers and practitioners from across the globe.

Terminology

The term 'social enterprise' has a mixed and contested heritage due to its philanthropic roots in the United States and cooperative roots in the United Kingdom, European Union, and Asia. In the US, the term is associated with 'doing charity by doing trade', rather than 'doing charity while doing trade'. In other countries, there is a much stronger emphasis on community organising, democratic control of capital, and mutual principles than on philanthropy.
In recent years, there has been a rise in the concept of social purpose businesses, which pursue social responsibility directly or raise funds for charitable purposes.
Muhammad Yunus, founder of the Grameen Bank, believes that a social enterprise should be modelled exclusively to achieve a social goal. Another view is that social enterprises should not be motivated by profit motives, but rather that profit motives should be secondary to the primary social goal. A second definition provided by The Social Enterprise Alliance defines a social enterprise as an organisation that uses business methods to execute its social or environmental mission. According to this definition, the social enterprise's social mission is to help the disadvantaged, which is executed by directly providing goods or services. Additionally, earned revenue must be the main source of income for the organisation or venture. A third definition is purely based on how the organisation is legally structured or formed as a legal entity. In this context, a social enterprise is a legal entity that, through its entity choice, chooses to forgo a profit motive. A fourth definition asserts that a social enterprise consists of a community of dedicated individuals that are continuously thinking about social impact and, as a result, employ business and management techniques to approach social causes.