What is a social enterprise? Defining social enterprise and social business

Over the past few years, as ClearlySo has grown and changed, the most common questions we have been asked are: "What is a social enterprise?" and "What is a social business?".

By Clare Jones · September 19, 2015

Over the past few years, as ClearlySo has grown and changed, the most common questions we have been asked are: “What is a social enterprise?” and “What is a social business?”.

We used to have a definition for each of these different phrases. We knew underneath both simply meant an organisation that seeks to be financially successful while creating social and/or environmental impact. It has commercial goals and it has impact goals – it is really not that complicated.

With famous examples of these kinds of businesses –  Green and Blacks, Divine Chocolate or Ben and Jerry’s – people can understand what it means to consider social impact alongside financial return.

But sometimes it has felt pretty complicated. We’ve all made diagrams – like this one:

We argued in 2010 that “The Time for Social Enterprise is Now”:

Many people who approach us ask how social enterprises make their money, or how a social enterprise is different from a business (or indeed how it is different from a charity). Because there is such a range of high-impact organisations operating in such a myriad of ways, these questions are impossible to answer precisely – except that, simply put, these businesses have impact and financial success at their core.

Sometimes it is useful to consider some organisations as “impact first”, like charities, and some as “purely for profit”.  This spectrum of organisation types shows the range of organisations working to create change – and there are many. It’s also very limiting. Considering the landscape as “charity vs. company” or “social enterprise vs. social business” obscures the wider movement that sees business and finance as a force for good.

It means considering the majority of businesses (that do not exist with positive social impact as a core metric for business success) against then a small niche for charities, social enterprises, social businesses, co-operatives, mutuals, BCorps, community interest companies… (that list just keeps getting longer). It means disregarding the idea that all businesses have an impact. Some have overwhelmingly positive impacts, some have overwhelmingly negative impacts, and many fall somewhere between the two.

Although these labels can be extremely useful (think about the Cabinet Office using “legally defined social enterprise” to determine who is eligible for social investment tax relief), and many of our clients are examples of those who define themselves as social businesses or social enterprises, we work with all kinds of high-impact businesses.

Charities like the London Early Years Foundation are run as businesses; they run sustainable models that support their growth and their impact aims. Yes, they may reinvest their profits: this does not mean that they themselves are ‘non-profit’ while traditional companies are ‘for-profit’. Profit, as June Sullivan, their CEO, explains, is not a dirty word.

Justgiving is an online donation platform that has revolutionised how we give to charity – and it is a business.

Businesses can be early-stage ventures or they can be long-established companies that consider every aspect of their social and environmental impact, like HCT. It doesn’t matter to us whether a company is structured as a charity, a company limited by shares, or a community interest company: what matters to us is what they do, how they plan to grow their business, and how they create social or environmental change. You can see a full list of the wide range of organisations that we work with here.

For these businesses, the financial bottom line matters, and so does the social or environmental impact. We have over 5,000 of these businesses in our network, many of which are growing rapidly. We believe that these businesses can be both high-return and high-impact; we do not see an “impact see-saw” where investors and businesses trade off financial returns in order to achieve social impact.

In any industry, different types of businesses have different risk and return profiles. We are simply adding impact to the equation. All businesses have an impact, we just believe they should be accountable for it – and we want to help those businesses that create positive impacts to thrive. We envision a future where if you don’t care about your social impact, you won’t have a sustainable business.

Professor of Social Entrepreneurship at the Said Business School, University of Oxford, Alex Nicholls (MBA), told ClearlySo that:

“All businesses are social. All businesses create – and sometimes destroy – social and environmental value. However, social enterprises measure and manage their social and/or environmental impact performance as a function of good governance of equal strategic importance to their financial management. Despite some excitable talk of new models of ‘corporate purpose’ or ‘stakeholder capitalism’, the same in not true of all businesses.”

Where great business is founded upon great principles, it is possible to do good while doing well – where enterprise and investment are powerful forces for good.

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Image: Aduna, whose superfruits create sustainable livelihoods in sub-Saharan Africa.

(Please note: This blog article was updated on April 2021 to include an updated definition of ‘social enterprise’ by Professor Alex Nicholls (MBA), from Said Business School, University of Oxford)

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