What is a social enterprise? Social enterprises can be defined as enterprises that have a social purpose, but are run on business principles, and reinvest any profit or surplus into the social purpose of the entity.
The characteristics of a social enterprise
Social enterprise is often described as a ‘movement’ or a way of doing. Social enterprises are characterised by the following:
- They have a core social or environmental aim
- They trade as a means to a social or environmental end
- They mainly reinvest their profits into their social or enviromental aim
- Ethical values guide their activities
- They can take a number of different legal forms.
1. Social enterprises have a social or environmental aim at the heart
This is the core reason for being a social enterprise. Of course, it must generate enough revenue to sustain itself but the reason it is doing business is to achieve a core social or environmental purpose.
2. Social enterprises trade as a means to a social or environmental end
While many non-profit organisations trade in some way, a social enterprise sets out to undertake trading as its means to an end. For many (but not all) community organisations and non-profits, ‘enterprise’ is just an add-on to spending grants and donations. Social enterprises have trading as the means to achieve their social or environmental objectives.
3. Social enterprises mainly reinvest their profits into their social or environmental aim
While there are many privately owned companies who operate to environmentally or socially beneficial codes or who use their profits for philanthropic purposes, these organisations primarily exist to create wealth for their shareholders and owners. They are therefore not deemed to be social enterprises. Social enterprises do aim to make profit but this profit is mainly used to further the social/environmental aims or is reinvested back into the enterprise for scale and growth.
4. Ethical values guide a social enterprise’s activities
Many social enterprises are guided by “triple bottom line” thinking, that is they consider the impact their decisions have on people, profit and planet, actively attempting to increase their positive impact. Many social enterprises are values-led, explicitly stating the values they ascribe to and aligning themselves accordingly.
5. Social enterprises can take a number of legal forms
Social enterprises can take a non-profit or a for-profit legal form, or indeed a hybrid of the two. It is not the legal form that defines a social enterprise, rather its core characteristics and reason for being.
Read next: The social enterprise continuum
