What is social enterprise?

A social enterprise is a business which aims to help people, communities or the planet. The Big Issue, Divine Chocolate and Jamie Oliver’s Fifteen restaurant are all examples. According to government statistics in 2010 there are 68,000 social enterprises in the UK.

 

How is a social enterprise different to any other business?

The classic business model is usually about creating products and services to sell in order to make money. The aims of a social enterprise are two-fold. Firstly, they want to address a social or environmental issue. Secondly, just like your average business, they want to make a profit. Much of the profit is then reinvested in the venture. They base their success on measurable changes to an issue in society together with generating a profit to sustain the business.

 

What makes a social enterprise a social enterprise?

The term ‘social enterprise’ came about from the recognition that in the UK and across the world, there were organisations using the power of business to bring about social and environmental change.

 

The characteristics of a social enterprise

Social enterprises should:

Have a clear social and/or environmental mission set out in their governing documents

Generate the majority of their income through trade

Reinvest the majority of their profits

 

Be accountable and transparent

The social enterprise community agrees that the primary aim of all social enterprises must be a social or environmental one.

Social enterprises should be able to explain and justify the value of the social change they aim to bring about.

 

Trade

Social enterprises are businesses. So they must generate the majority of their income through trade. It is recognised however, that many start-up businesses of any form need funding to get off the ground and turn to readily available sources. With this in mind it is usually expected that within two years of operating, genuine social enterprises generate more than 50% of their income through their own trading activities.

 

Profits

What a social enterprise does with its profits is a critical way in which social enterprise is distinct from standard businesses. We believe the majority (more than 50%) of an organisation’s profits should be reinvested to further its social or environmental mission.

We recognise that reinvesting profits alone does not necessarily equate to the creation of social value, and we acknowledge there are other ways an organisation can extract finance should it choose to.

However, we believe that alongside other factors, the reinvestment of profits is a clear indicator that an organisation is not set up primarily for owner or shareholder value.

 

Further information

You may be interested in reading Start your Social Enterprise. you can download this guide and get other free information are free from the SEUK website.

Post by Action Hampshire