Social enterprises or social businesses have emerged as important institutions of change over the last decade. Large corporations, governments, international government organizations, entrepreneurs, universities have all recognized the utility of social entrepreneurship to solve some of the world’s most pressing problems.
This article highlights some important features of a social enterprise and how it is different from other forms of organizations.
Not Just an Enterprise
A typical enterprise has profit as the main priority. Lately, there is increasing talk of consumer-centric, human-centric, and planet-centric models of profit-making organizations. Still, the businesses are set up in a way to maximize profit. Needless to say, such organizations have achieved a tremendous feat since their existence by creating employment, wealth, and innovations for society. Although operating as a business, a social enterprise has a key difference. It puts impact as the priority rather than profit.
A social enterprise devises ways to create a sustainable business model which is not geared to maximize profit but to maximze impact. Therefore, a social enterprise is able to achieve twin objectives – the philanthropic objective of creating a social impact and the business objective of financial sustainability.
Social Enterprise vs Charity Organization
One key difference between a social enterprise and a non-profit charity is that in most cases, the beneficiary of a social enterprise is also the funder for the organization. On the other hand, in a typical non-profit organization, funds are raised through donations and used for another set of beneficiaries. This makes a social enterprise directly accountable to the people it serves.
Legal Structure of Social Enterprise
A social enterprise can be set up as a for-profit as well as a non-profit company. It can generate profits for its shareholders or decide not to provide any returns to the investors. More than the legal framework, it is the financial operations of the entity which make it a social enterprise.