The Social Economy Series will focus on research, findings and case studies by the Social Economy Centre of the University of Toronto. We launch the series with definitions, as established by the Centre through their work in the field.
As those who’ve spent time in this broad field we call social enterprise can attest, definitions can often prove confusing, aggravating—even distracting. For the many who just want to move the discourse and their enterprise forward, the focus on labels can sometimes feel like a hindrance to the ultimate mission: getting the job done.
That said, definitions can still play a significant role in laying the foundations for that discourse – and for a movement currently experiencing huge shifts and growth spurts. Conceptualization seems a worthy exercise to ensure we’re all working from a common reference point and vantage point. And so, for the purpose of kicking off this Social Economy Series, setting a contextual framework would probably be good practice, with definitions central to its execution.
The Series will profile a diverse number of organization within this broad spectrum of social enterprise, referring to them as “social purpose enterprises”. The question is why. Why is that term used over another? To effectively explain the reasoning behind the chosen term, let’s take a step back.
Over the past decade, we’ve witnessed a growing movement away from conventional business toward a new model, one that not only attempts to earn revenues from sales but also carries a social mission at its core. This form of business goes by different labels, including CSR, social business, social enterprise and social purpose business. To understand each term, let’s examine the respective models along the broad spectrum of organizations balancing economic, social and environmental priorities.
Corporate Social Responsibility
On the far end of that spectrum you have business corporations that engage in corporate social responsibility, otherwise known as CSR. Over the years, a wide-ranging number of corporations have adopted socially responsible corporate practices, in a variety of incarnations. Various offshoots from traditional CSR have emerged too, including new methods of accounting – social accounting— and socially responsible investments, whereby social and environmental criteria are explicitly included in the assessment of investment impacts.
Similarly, we’ve even seen the emergence of “socially conscious” mutual funds that attract investors looking to channel their money into corporations, thereby setting a higher standard and establishing incentives for corporations to improve their behaviour.
To be sure, the world of CSR and its various derivatives have received much public and media attention as well as a host of champions. The question is how impactful the practices have been in terms of changing corporate behaviour or impacting the marginalized. So far, the jury’s out.
Next up we have “social businesses”. Though they’ve been around for ages, the model was popularized by Muhammad Yunus, the founder of the Grameen Bank. It refers to a specific type of corporation that adopts corporate policies and practices that prioritize helping those in need over traditional business goals, such as investor value and maximizing rate of return.
Typically self-sustaining, a social business uses the revenues from selling goods and services to repay its owners for money invested. Bottom line: investments in a social business are for a social benefit, with the expectation that investors will receive a return of their investment but not dividends and capital appreciation, like they would with a pure capitalist investment.
Social businesses come in various shapes and sizes. Take Newman’s Own—a salad dressing business started by actor Paul Newman and A. E. Hotchner—that donated all their after-tax profits to charitable causes in the US and across the globe.
Just like CSR, there’s been a number of offshoots from the social business rubric, an emergence of new classes of businesses endowed with similar characteristics but different designations. The Benefit Corporation, for example, is an organization that follows certain social and environmental standards as determined by the legislative requirements of their location.
Social enterprises (that earn income for a nonprofit organization)
Next up along this scale of corporate entities dedicated to social and environmental priorities is what’s referred to as a social enterprise. There are almost as many definitions of social enterprise as there are organizations who self-identify as one. But if we were to find some common ground, we’d say they are businesses with balanced economic, social and environmental priorities— or what we call a triple bottom line.
Enp Canada defines them as: “Social enterprises are businesses operated by non-profits with the dual purpose of generating income by selling a product or service in the marketplace and creating a social, environmental or cultural value.” Some refer to this combination as a double or triple bottom line; others label it as creating blended value.
Take Habitat for Humanity’s ReStores, established with the goal of generating income to support the nonprofit’s homebuilding services. The thrift shops run by Salvation Army follow the same model. One could also use businesses run by Aboriginal communities as examples of social enterprises. They’re owned by band councils, tribal councils or land claim or development corporations with the goal of generating profits to help their respective communities.
For some time now, nonprofit organizations have been turning to income-earning business to generate revenue that will help it meet its social mission. This popular approach has led to a new corporate form in the U.S. – the limited liability company (L3C) – and a similar designation in the U.K. called the community interest company (CIC). Primarily used by grant-giving foundations to increase their revenue, the goal is to subsidize a nonprofit’s services toward attaining its social objectives.
Social purpose enterprises (relying upon a nonprofit organization for ongoing support)
Which brings us to social purposes enterprises, a term that stems from the broader heading of social enterprise. The distinction here is one of emphasis. In Canada, where the term social enterprise hasn’t yet received any legal standing, it has been used very broadly to define a vast range of organizations engaging in a variety of activities. That reality poses some very real challenges when attempting to research, quantify and qualify the field.
Enter this new designation of social purpose enterprise. The term “enterprise” denotes an entity that sells goods or services but on a smaller scale than what would be implied if it were a business. The term “social purpose” implies that, contrary to the goal of a conventional business of providing owners with a return on investment, this organization’s social objective is its ultimate mandate. Sure, sales revenues are important but the social goals are equally important.
Moreover, when people use the term “social purpose enterprise”, they’re generally referring to the betterment of a marginalized social group, more often than not the employees. The focus is either on providing jobs or offering training or workforce integration. The betterment—the social purpose—varies but could include such goals as helping employees develop their skills and enhancing their earning capacity or other facets of their well-being.
Creating employment opportunities for people with disabilities, recent immigrants, unemployed youth or homeless people can all fit within the objectives of a social purpose business. As such, while social purpose enterprises share some elements of a conventional business, they differentiate themselves by virtue of their primary purpose – they may sell goods and services but they do so for the goal of supporting their employees and communities.
And, while some social enterprises exist without the need of external support, most have a parenting, founding organization that helps them function –whether offering them a place to operate, management assistance or other supports. They also receive external supports from such entities as government programs, foundations, and individual donors.
And so, with its delicate and unique balancing of the social and economic, the social purpose enterprise emerges as the label of choice for businesses with these common features. It will thus serve as the lens through which the upcoming Series will focus.
The enterprises that will be explored differ one from the other in various ways. But they all share some common features. For one thing, they’re not self-sufficient. For another, they rely extensively on extraordinary supports from a parenting organization, supports that go beyond the conventional. Examining how each uniquely attempts to balance its social purpose while running a successful enterprise will not only prove instructive but will speak volumes about a movement that has carved a firm footing in our discourse on the social economy.
Elisa Birnbaum is the co-founder, publisher and editor-in-chief of SEE Change Magazine, and works as a freelance journalist, producer and communications consultant. She is also the president of Elle Communications.