Welcome to the Breakdown, a new series where we’ll explain terms and concepts in the emerging impact space.
November 7, 2016
What’s a social enterprise?
A social enterprise is a firm that combines the market-driven approach of a business with a mission to improve society or the environment. It may be a private firm or not-for-profit organization.
An organization is a social enterprise if it:
• Intentionally creates positive social or environmental change through its operations. It does not stumble upon positive impact or see it as marketing approach for products it already sells. Creating impact is the central reason it exists.
• Survives by earning revenue. Whether it sells vegetables grown by formerly incarcerated people, or donates shoes for every pair sold, it provides a good or service in exchange for money. And this revenue fuels its mission. A traditional homeless shelter or food pantry, in comparison, receives donations and provides services for free.
There is no consensus on the definition and a lot of misinformation about social enterprises. Some think social enterprises are only non-profit organizations that sell products or charge for their services, while others believe that any business that has a positive impact is a social enterprise.
Instead, it may be helpful to consider social enterprises on a spectrum. On one end are non-profits that earn revenue because doing so allows them to fulfill their mission more effectively than raising donations. On the other end are for-profit companies that create positive social or environmental change while maximizing profits.
Social enterprises have been around for decades…
What ties together Butch Cassidy, salad dressing, and social enterprise? Paul Newman, of course. In 1982, Paul Newman founded Newman’s Own promising to donate 100% of the company’s profits to charity. To date, it has donated more than $460 million.
Where did you put your old clothes after cleaning out your closet? If you’re like most Americans, you probably donated them to Goodwill. In 2015, Goodwill earned more than $3.3 billion in revenue from their second-hand stores, making them one of the largest social enterprises in the world.
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