Before we begin to think about what the value of social enterprise might be, we need to be clear about what social enterprise actually is. While there is no specific legal definition of a social enterprise as an entity, and there are many different potential definitions of social enterprise circulating, enterprising non-profits (enp) has identified some common definitional themes. These are: social enterprises are businesses, they have community impact and social value, and they limit or do not distribute profits and assets to individual shareholders.
But….what is a social enterprise?
In Canada, social enterprises are very often businesses that are attached to a non-profit, where the business helps to support the sustainable generation of funds in support of the mission of the non-profit.This is perhaps best illustrated through an example. In Calgary, the Fireworks Cooperative operates as a social enterprise providing catering services both on and off site. If it were just providing these services, it could be considered a small business like any other. However, the Fireworks Cooperative is operated by Servant’s Anonymous Society, a non-profit agency facilitating the exit of women from the sex trade.
The Fireworks Cooperative helps sustain funding for Servants Anonymous Society (SAS) by channeling the profits from its catering business into the non-profit entity. Further, the business is used as a work experience opportunity for women in the SAS program to develop valuable mainstream work and life skills. For the women in recovery, it is infinitely valuable to be able to have a meaningful work experience and develop skills in an environment that is supportive and understanding of their journey.
Fireworks Cooperative is a social enterprise that creates financial value for SAS and the beneficiaries of its programs, rather than shareholders. Social value is created by extending assistance to vulnerable women in the community.
Social and financial impact
In the SAS and Fireworks Cooperative example, both financial and social value are generated through social enterprise. The key point about social enterprise is that not only do these entities create financial value by operating as a business, but they also create social value by contributing to non-profits or engaging in an inclusive, socially/environmentally conscious business model.
Social value created through community impact comes in many different forms, ranging from employing marginalized individuals, to providing services to underserved populations, to creating connections between different members of a community. The operation of social enterprises leads to a different set of economic interactions in the community, where financial gain and social benefit are sought in balance.
Where there are established systems to measure the financial value that business generates, the challenge is in how social enterprises seeking to create social value can establish credible ways of quantifying this value. This process starts with measuring the social impact that is achieved through the activities of a social enterprise and then moves from just counting outputs (in the Fireworks Cooperative example: number of clients, number of events, amount of food prepared) to determining and measuring outcomes.
In the SAS example, outcomes could include, for example, things like the increase in job-readiness of participants, the experience for Fireworks Cooperative customers of ‘doing good’ through their purchases, and the work made possible for SAS through funding generated by the Fireworks Cooperative.
Now, to measure it
When social outcomes are established and measured, the Social Return on Investment (SROI) methodology, like accounting, offers a set of standard principles for the valuation of outcomes, assigning a financial value to the social impact created. SROI takes into account both the value of the outcomes achieved, as well as the value of avoiding alternative outcomes. By consistently ensuring value creation is represented from each stakeholder’s perspective, overall value is better captured and represented in the analysis. And social value is, thus, fully understood.
A recent example of using SROI to understand the value of a social enterprise in Canada is the CanDo! Employment Now program in Newfoundland. CanDo! employs people who are otherwise considered unemployable due to mental illness, physical limitations, or addiction. Through an SROI, the organization demonstrated that for every dollar invested in the program, a minimum of $1.77 is created in social value. This value includes direct cost savings, value from avoiding homelessness, value from avoidance of accessing healthcare services, social services, and justice services, and value of increased income.
By moving from measuring outcomes to valuing these outcomes, CanDo! has been able to demonstrate the overall social value of its social enterprise, which goes beyond the business-related financial value generated. This can be extremely advantageous in communicating the value add of social enterprise, as well as in improving processes and practices, creating a business case, and demonstrating benefit to the community.
Social enterprise combines social impact and business practice by contributing a blend of financial and social value. By measuring and valuing the impact created by social enterprise, organizations can demonstrate the impact and importance of shifting business practices. This will become increasingly important as more investors contemplate impact investing and look for investment opportunities that offer a social return.
Anne Miller is the SROI Team Lead at SiMPACT Strategy Group. She is Canada’s second SROI practitioner to be accredited by the SROI Network. Anne may be contacted at: email@example.com