Social Enterprise

Everyone seems to be talking about social enterprise, but what exactly is it?  Although the clues are in the phrase, there is no clear, universal definition and it means different things to different people. 

Firstly, it's important to recognise that "a social enterprise" can be defined fairly specifically.  The Social Enterprise Coalition has a simple statement:  "Social enterprises are businesses set up to tackle a social or environmental need". This differentiates them from businesses which are set up with the prime objective of making profits for directors or shareholders. The Department for Trade and Industry's definition of 2002, still often quoted, is "A social enterprise is a business with primarily social objectives whose surpluses are principally reinvested for that purpose in the business or in the community, rather than being driven by the need to maximise profit for shareholders and owners." What makes an enterprise social, then, is its purpose:  social enterprises are in the business of improving the lives of other people either in the local community or the wider community.  The word "enterprise" is just as important, though, and implies innovation, boldness and risk.  A business that is set up, from the start, as a social enterprise, is likely to need strong leadership, a clear vision, a sound business model and a good funding base if it is to be sustainable.

When it comes to "social enterprise", however, this can refer to an approach, rather than a specific type of business.  Many charities rely on local fundraising, donations and grants to fund the work that they deliver.  Increasingly, however, voluntary organisations are recognising that they need to diversify their income sources in order to sustain their services.  This may involve trading, either by delivering contracts for local authorities or private businesses or by selling goods or services.  This can be seen as adopting a social enterprise approach.  A charity which trades could, in theory, make all of its resources through trading income, provided what's being traded is compatible with the charity's objects.  Where a charity plans to diversify its activities in order to increase its earned income, it may reach a point where it has to establish a trading subsidiary.  This company would not be constrained by the charity's objects, so it could, for instance, run a shop or sell training to the private sector, with the aim of maximising profits which ultimately benefit the parent charity.

There is no single legal structure which marks out a social enterprise, which means that what comprises social enterprise is open to interpretation.  If you're involved with a charity or other local organisation, do you think it's a social enterprise or that it adopts a social enterprise approach?

There are many sources of information and advice for people wanting to find out more about social enterprise.  See our page More on Social Enterprise for further information.