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

by Clare Jones

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:

3socialbusinessdiagram

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.

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.

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.

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

 

This blog has been prepared for informational purposes only by ClearlySo Ltd which is an appointed representative (592808) of Catalyst Fund Management & Research Ltd which is authorised and regulated by the Financial Conduct Authority (No.185678). The document is not intended for or to be relied on by retail investors. If you are uncertain with regards to your eligibility or any other matter contained within the document or associated links you should seek professional advice. Nothing in this document constitutes an offer or solicitation to invest. It is intended to help people understand the definition of social enterprise and social business, social enterprise vs social business and see examples of social enterprises and social enterprise companies. It does not provide specific advice on how to invest in social enterprises and should not be taken as such, even by social angel investors. Past performance is not a guide to future performance; investments go up as well as down. Whilst all reasonable care has been taken in preparing this document, the information contained herein has been obtained from several sources that we consider reliable but we do not represent that it is complete or accurate and it should not be relied upon as such. The opportunities listed may not be suitable or appropriate for your personal circumstances. The levels and basis of taxation may change and depends on your individual circumstances. The marketability of this type of investment is often restricted and you may have difficulty selling at any price. It is the responsibility of all Users to be informed and to observe all applicable laws and regulations of any relevant jurisdiction, and to satisfy themselves that their use of this information is permissible under the applicable laws, rules and regulations of any applicable government, governmental agency, or regulatory organisation where they reside. Unless otherwise stated, the source of all information contained herein is ClearlySo.