A social enterprise is an organisation that applies commercial strategies to maximise improvements in financial, social and environmental well-being. Profit made through fundraising or the sale of products is reinvested in the organisation's mission, making them more sustainable than a non-profit organisation that may solely rely on grant money, donations or government policies. A social enterprise's main purpose is to promote, encourage, and make social change in a financially sustainable way. Unlike conventional businesses, social enterprises embed social or environmental goals into their core objectives while maintaining financial sustainability. They aim to create social value while generating income, reinvesting profits into their mission rather than relying solely on philanthropy. Social enterprises can provide income-generating opportunities to address basic needs, particularly for people living in poverty. They combine financial viability with a social purpose and can expand or replicate their models to increase impact. They are often considered more sustainable than non-profit organisations, which may rely heavily on donations or government support.
Overview
Origins and definitions
One of the first examples of a social enterprise, in the form of a social cooperative, can be traced back to the Victorian era. Like social cooperatives, social enterprises are believed to have emerged as a result of state and market failure. However, market failure is emphasised in the UK, while state failure is emphasised in the United States. Contemporary social enterprises are viewed to have been created as a result of the evolution of non-profits. The first description of a social enterprise as a democratically owned and run trading organisation that is financially independent, has social objectives and operates in an environmentally responsible way, was put forward by Freer Spreckley in the UK in 1978 and later written as a publication in 1981. It was developed as an alternative commercial organisational model to private businesses, co-operatives, and public enterprises. The concept, at that time, had five main principles divided into three values and two paradigm shifts. The three values, now referred to as the triple bottom line were:
Trading and financially viable independence Creating social wealth Operating in environmentally responsible ways The two paradigm shifts were:
A common ownership legal structure where members/owners have one voting share and different forms of investment Democratic governance, where each worker/community resident is a member with one vote It was intended as part of the original concept that social enterprises should plan, measure and report on financial performance, social-wealth creation, and environmental responsibility by the use of a social accounting and audit system. Social enterprise has philanthropic roots in the United States and cooperative roots in Europe and Asia. In the US, the term is associated with 'doing charity by doing trade', rather than 'doing charity while doing trade'. In other countries, there is a much stronger emphasis on community organising, democratic control of capital, and mutual principles than on philanthropy.
Types and differences
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