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what is a social enterprise?

Are you interested in making a difference in the world? Are you interested in social entrepreneurship as a way to unify your passion and your livelihood, but are you still unsure about what Social Entrepreneurship is?

Let’s try to make it a bit complicated, before we make it simple!

Sounds complicated? Doesn’t have to be!

In practice, Social Enterprise is any business that:

  • Aims for a positive social impact as its primary objective;
  • Generates a social return through innovative services or goods;
  • Employs innovative method of production;
  • Is managed in an open and transparent way by involving workers, customers and/or stakeholders.

Thus, what makes Social enterprise social is its dedication to a cause. A lot of businesses these days mark themselves as being inclusive, transparent and with good practices of business accountability. This, however, is not sufficient to make your business “social”. The social aspect has to be a goal on its own and even the outputs or the procedures should have a definite and reachable social character.

Often social businesses begin because people see a gap where the state or the local government are not able to provide solutions and they decide to do something about it. By the way, even if the final goal is always social-oriented, there are some differences on how the business approach the issue.

According to Schwab Foundation for Social Entrepreneurship, social business have different organizational models:

  1.  Non-profit Social Enterprise – A non-profit organization to drive the adoption of an innovation that addresses a market or government failure. The entrepreneur engages a cross section of society, including private and public organizations. There is a dependency on outside philanthropic funding, but their longer term sustainability is often enhanced given that the partners have a vested interest in the continuation of the venture.
  2. For-profit Social Enterprise– A for-profit organization created with the explicit intent to solve a social problem. While profits are ideally generated, the main aim is not to maximize financial returns for shareholders but to grow the social venture and reach more people in need. The entrepreneur seeks investors who are interested in combining financial and social returns on their investment.
  3. Hybrid Social Enterprise– A non-profit organization that includes some degree of cost-recovery through the sale of goods and services. Often requires setting up several legal entities to accommodate earning income and charitable expenditures in an optimal structure.”

However, what is really relevant is that social goals are reached in an accountable and transparent way and life in community is changed for the best by filling a gap.

So, at the very beginning of your business journey, the questions you need to answer when you are starting to identify your product/service are:

  • Does your product/service solve a pressing problem faced by the community you want to serve?
  • Does your business idea encourage employment and skill training at the local level?
  • Does your business model allow for revenue to be reinvested into the local economy?

So first of all try to choose the social issue you want to address with your social business, thinking of your desires, inspiration, what kind of problem you’d like to solve with your contribution, and then try to identify and choose your product/service.

As a general overview, the phenomenon of Social Entrepreneurship has grown since 2009 and become more and more widespread and visible all over Europe. It has grown so popular that multiple countries even have their own specific legal regulations for it!

You can find more information with some maps and statistics in the European Commission synthesis report: “A map of social enterprises and their eco-systems in Europe”.

Now listen up the TedxYouth speech by Greg Overholt on Social Entrepreneurship, that is really inspiring!

Play & Learn!

Do you know what a Social Enterprise is? Test yourself and find out how much you know about it!