Social Enterprise

DEFINITION of 'Social Enterprise'

A social enterprise is an organization that is directly involved in the sale of goods and services to a market, but that also has specific social objectives that serve as its primary purpose. Social enterprises are not volunteer organizations in that they operate as an enterprise by selling in a market, and can be registered as for-profit or non-profit. Profits are principally used to fund social programs.

BREAKING DOWN 'Social Enterprise'

Social enterprises exist at the intersection of the private and volunteer sectors. They seek to balance activities that provide financial benefit with social goals, such as providing housing to low income families or job training. Funding is provided primarily through selling goods and services, though they may also receive money from grants. A social enterprise operates differently than a typical company because profit-maximization is not the primary reason for existing.

Social enterprises have been founded by activists seeking to support a particular cause, as well as entrepreneurs who want to use a portion of the organization’s earnings to give back to the community. The Organization for Economic Cooperation and Development (OECD) identifies social organizations as being highly participatory in nature, with stakeholders actively involved and a minimum number of paid employees.

Employees of social enterprises can come from many backgrounds, but may be prioritized if they are from more at risk sections of the community. These include long-term unemployed workers, those who have historically worked in jobs where they were informally paid, and marginalized groups. The social enterprise may seek to provide a living wage, which in most cities would be above the minimum wage. Drawing employees from at-risk groups may in itself be the stated goal of the social enterprise.

Social enterprises are not to be confused with social entrepreneurship, which tends to focus on individuals who develop solutions to social problems using techniques typically used in other sectors.

Some examples of social enterprises include: Warby Parker, which requires that for every pair of eyeglasses sold, another pair is donated; Tom's similarly has pledged to donate a pair of shoes or sunglasses for every one that is sold; climatesmart trains businesses and gives them software tools that let them track and cut their greenhouse gas emissions; and the Social Good Network uses software to measure how well digital cause marketing campaigns have worked for various brands.