You are asking yourself ”What is a social enterprise?” a question that most of practitioners (and scholars) are asking. In this post the Social entrepreneur and Founder of the Impact Breakfast Club, Oscar Ohlström, will help you get a grip of this:
The only thing we all agree on is that a social enterprise is combining a social mission (social value chain) and a commercial activity (economic value chain).
Here are the 3 main schools of thought when it comes to defining the social enterprise:
1. The idealist research network and its exclusive definitions
Deriving from the early days of social entrepreneurship research, within the field of nonprofit organizations. This type of definition was first coined by the EMES research network. It defines the social enterprise as an ideal type of enterprise with key characteristics such as following. Democratic governance, primary focus on the social mission and limitations on profit distribution. In other words, a social enterprise is a nonprofit organization with business-like operations and noble characteristics defined by the EMES network.
WHAT??? WHY CAN’T I BECOME RICH AND SAVE THE WORLD?
2. The spectrum approach and it’s way too inclusive definitions
You can also take the broadest approach ever on what a social enterprise is. In the spectrum approach, all enterprises that have any social value creation and economic value chain is defined as a social enterprise. It simply includes grant-funded nonprofit organizations (at one end) and profit-maximizing corporate businesses, that donate a small sum to an external charity as part of their CSR-efforts (at the other end). This approach makes it incredibly hard to define how much (and what kind) of a social purpose and economic value an enterprise needs to generate in order to classify as a social enterprise. In other words, the social enterprise is an amazing thing, but we don’t know where the boundaries between traditional forms of enterprises and social enterprises are. We simply can’t tell you exactly what it is (but it is a thing trust us, please)
EEH, SO WHAT IS A SOCIAL ENTERPRISE THEN?
3. The Schumpeterian view and its stupid love-story with innovation
Let’s change focus here. Why are we talking about the enterprise? It’s the social entrepreneurs that make the change. Hence, it’s the entrepreneurial drive to disrupt markets and create innovative solutions to social issues that we need to focus on. The social enterprise is simply the legal entity in which a social entrepreneur generates innovative solutions to make this world a better place. This type of definition gives the social enterprise clear boundaries and differentiates the social enterprise from traditional enterprises. But, what if significant social good is generated through a traditional business model?
YES! YES! BUT NO… WHY DOES SOCIAL GOOD HAVE TO BE GENERATED THROUGH INNOVATIVE SOLUTIONS?
What is your definition of a social enterprise?
All these types of definitions have pros and cons. We need to be understanding when we meet other practitioners carrying other views of social entrepreneurship. The important thing is that you know what YOU bring into the definition of what a social enterprise is. Your arguments behind make that definition. My preferred definition is seen below. It clearly states how much of the enterprise objectives that have to be connected to a social mission. And how much of the income that has to derive from market-based activities.
“A social enterprise is an enterprise with a social mission as one of its primary objectives, and where the primary revenue source derives from commercial activity.” – (Ebrahim et al., 2014)
Thank you Oscar! Follow his Linkedin if you enjoyed the read.