In the last decade, many more people working to create social change have been calling themselves social entrepreneurs. The phrase is no longer a mystery for most, as programs in social enterprise spring up at universities and colleges, social innovation incubation spaces proliferate across the country, and young leaders are increasingly looking to create meaningful work for themselves.
However, not all efforts to improve the human condition are social enterprises. Literally, an enterprise can be defined as any “project or undertaking, typically one that is difficult or requires effort” (as in the enterprise of training for a marathon). A social enterprise, under this definition, could be construed as involving any effort that has a social purpose. But, in fact, a social enterprise is not simply any social movement or activity.
There are a multitude of definitions of the term “social enterprise” in countries and markets across the world. All of them include the principle that an enterprise is a business that, at the very least, includes a transaction of value in which a customer pays cash for a good or service in a marketplace.
And then there’s the matter of social value. Here’s the thing: if you are creating social value but not selling anything, you are effectively operating a charity.
If you are creating limited social value (or social value as a happy by-product) through the sale of your product or service, you are a business – a regular, traditional business.
But, if you are in business primarily to create social value through the sale of a good or service, then—and only then—are you a social enterprise.
To be clear, there is nothing wrong with being a charity or a business. However, it is the direct, concerted effort to use a financial transaction to maximize social improvement that characterizes and differentiates a social enterprise.
Improving livelihoods, communities, culture and well-being is not only the responsibility of one type of actor. Governments, non-profits and charities, co-operatives, businesses and the informal sector (families, clubs, collectives, collaboratives, etc.) can all contribute to making our world a better place. One actor is not implicitly better or worse than another at making that contribution; how they operate dictates how much of a contribution they make.
However, social enterprise is a way of conducting business in which creating social value is a primary goal. It is a tool for social change that can pay for itself through earned revenues. This sustaining revenue offers an alternative to charity, voluntarism or tax-funded activities. It is a unique mechanism for which it is expected that the revenue-generating operations will always be seeking to improve the world around us.
To be clear, in Canada today there is very little benefit to calling yourself a social enterprise. There is no tax relief, no designated employment programs and limited start-up capital. Even grant opportunities are far more related to the form of incorporation and the prescribed outcomes than to the label “social enterprise.” In fact, there is no way to legally define an entity as a social enterprise in Canada.
Nonetheless – and perhaps as a result— many people are calling their project, program, or idea a social enterprise, which is actually making the term increasingly meaningless for policy makers, funders, employees, or even the purchasing public.
So, if you still want to call your work a social enterprise (in spite of lack of clear benefits currently) ask yourself the following four questions:
- Are you selling something?
- Is the sale of that good or service directly helping you to address a social problem or gap in our society?
- Do you have a systematic tool in place to quantify how your sales are directly reducing that social problem?
- Do you have a strategy to grow your business, and thus increase your (positive) social impact over time?
If you answered yes to all these questions, then you are a social enterprise. If you didn’t, then you may be doing fantastic work or providing a service that can prove both important and beneficial, but you are not a social enterprise.
Jonathan Wade is the principal at Social Delta, a Canadian social enterprise consulting firm based in Ottawa. www.socialdelta.ca
Elisa Birnbaum is writer and publisher of SEE Change Magazine who has recorded the advancement and achievements of social entrepreneurs in Canada both online and in print (her first book, In the Business of Change, will be published in May)