What is a 'Social Enterprise'

A social enterprise is a commercial organization that has specific social objectives that serve its primary purpose. Social enterprises seek to maximize profits while maximizing benefits to society and the environment. Their profits are principally used to fund social programs.

BREAKING DOWN 'Social Enterprise'

The concept of a social enterprise was developed in the UK in the late 1970s to counter the traditional commercial enterprise.  Social enterprises exist at the intersection of the private and volunteer sectors. They seek to balance activities that provide financial benefits with social goals, such as providing housing to low-income families or job training. Funding is obtained primarily by selling goods and services to consumers, although some funding is obtained through grants.  Because profit-maximization is not the primary goal, a social enterprise operates differently than a standard company.

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.

Social Enterprise Employees

Employees of social enterprises come from many backgrounds, but priority is given to those who are from 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 members of marginalized groups. The social enterprise may seek to provide a living wage, which in most cities is above the minimum wage. Sometimes, drawing employees from at-risk groups may be the stated social goal of the enterprise.

Social Enterprise Examples

A social enterprise is not to be confused with social entrepreneurship, which tends to focus on individuals who develop solutions to social and environmental problems using existing business techniques and strategies.  There are many social enterprises who successfully maximize improvements in social well-being.  For example, Warby Parker is an American eyeglass retailer that donates a pair of glasses to someone in need for every pair sold; Tom's, a California-based retailer, similarly has pledged to donate a pair of shoes or sunglasses for every pair sold.  Also, Climate Smart trains businesses and gives them software tools that let them track and cut their greenhouse gas emissions.  

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