5 Common Misconceptions about Social Enterprise
We are in a golden age of entrepreneurship. From Silicon Valley to New York City, an explosion of innovation and excitement means there is more opportunity than ever for new ideas to grow from a spark into a full inferno. And while many of these entrepreneurs have their minds set on big paychecks and leaving their mark on the world, another kind of business is steadily growing in popularity and practicality: the social enterprise.
Most businesses focus on making a profit — on the sacred bottom line. Social entrepreneurs focus on developing sustainable business practices that proactively and significantly advance social issues, splitting their focus between two bottom lines.
What is a social enterprise, why does it matter, and why should you be excited about it?
Defining Social Enterprise
Even among entrepreneurs who practice social enterprise and academics who study it, the definition of social enterprise is widely discussed, sometimes controversial, and often misunderstood.
Marc J. Lane is a lawyer and the Vice Chairperson of the Cook County Commission on Social Innovation. In his book. Social Enterprise: Empower Mission-Driven Entrepreneurs, Lane defines social enterprise as “any business model that, to a significant degree, has a mission-driven motive.”
Social enterprise is the incorporation of social values into a business’s mission statement and core operational procedures. These business can be for-profit or non-profit companies, and exist in a wide variety of sectors such as energy, food, healthcare, recruiting, technology, community development, education, and more. For just about every industry, there is a social enterprise turning the focus from internal monetary profit to external, social profit.
Like any business, a social enterprise must be sustainable. What makes a social enterprise unique, however, is the understanding that the focus is not on financial profits or large dividends for investors, but rather, a performance goal is set based on social welfare, like helping the unemployed find jobs or helping the homeless find shelter.
Common Misconceptions about Social Enterprise.
With social enterprises emerging in almost every industry, there’s a bit of confusion about exactly what social enterprise is — and what it is not. Here are 5 common misconceptions you may have about social enterprise:
1. Social Enterprises Focuses Equally on Profit and Mission
“Social entrepreneurs reject the notion that profit and social impact are equally important,” says Lane. While social enterprise uses business and revenue to drive social change, these organizations emphasize societal betterment over personal profitability.
The difference between the traditional business and a social enterprise is the mission. At the heart of every social enterprise is an organization-wide mission typically focused on improving the world and the lives of those in it. So, while many businesses may invest or encourage social improvement, social enterprises exist to create it.
To state it simply, the end goal of a traditional business is to make a profit; that is their indicator of success. In a social enterprise, the indicator of success is whether a specific goal is achieved. For example, poverty in a community is lowered by 50%, or high school graduation rates rise 10%.
2. Social Enterprises are Exclusively Not-for-Profit
As charitable giving decreases and operating costs climb, many non-profits are pursuing innovative sources to sustain and grow their organizations while remaining true to their missions. But not all social enterprises are not-for-profit. There are many for-profit businesses that remain steadfastly dedicated to their core mission of social and/or environmental improvement.
The most famous example might be Grameen Bank, a microfinance and microcredit bank established in Bangladesh with the mission of community development. Its founder, Muhammed Yunus, and the Bank won the Nobel Peace Prize in 2006 “for their efforts to create economic and social development from below.”
*You can find examples of Chicago social enterprises below.
3. Every Non-Profit Business is a Social Enterprise.
What separates social enterprise from the traditional business arm of a non-profit is the idea that a social enterprise is sustained and grown through earned revenue as opposed to fundraising or donations. The business mechanism of any non-profit must in itself be creating means to accomplish the mission of driving positive social change, as opposed to just keeping the doors of the non-profit open.
4. Social Enterprise is the same as Corporate Social Responsibility
Corporate Social Responsibility is an organization’s obligation to consider the social and environmental consequences of their business activities. For a corporation, these objectives are secondary to turning a profit. In social enterprise, these same objectives are the heart and purpose of its very existence.
5. Social Enterprise is a Nice Thought, but is Unsustainable in Practice.
“If it were possible to succeed with a double bottom-line, somebody would have done it already, right?”
“Social enterprise is small-scale, can’t be grown and is ultimately inconsequential — isn’t it?”
Organizations across the countries are shattering these notions. The Social Enterprise Alliance, a national organization with 16 chapters, is over 1,000 members strong. In Chicago, countless social enterprises are popping up and thriving by using sustainable business practices to drive social improvement.
Who’s Doing Good in Chicago?
Open Books — Open Books is a non-profit social venture based on the creative capitalization of books. Part bookstore, part e-commerce site, this enterprise combines book donations and volunteerism with retail to to provide literacy experiences for tens of thousands of readers.
A Safe Haven — A Safe Haven provides job training and placement to individuals in social and financial crisis to help them achieve sustainable self sufficiency while providing businesses with reliable labor.
ThinkCERCA — ThinkCERCA uses modern technology and data collection to impact student outcomes, improve teacher effectiveness and boost test scores. They are committed to closing the achievement gap.
LuminAID — Through their Give Light, Get Light program, this seller of inflatable lights partners with organizations all worldwide to distribute LuminAID lights to those in need of a safe, rechargeable light source.
UrbanArray — Urban Array adds a new element to volunteering and community development through an incentive system. Just like you earn cash back on your credit card purchases, Urban Array uses a unique digital currency called Array Coin to encourage community development, collective ownership, and a sharing economy.
There are also a number of organizations dedicated to providing capital and support to social entrepreneurs. Organizations like Goodcity, Seed613, Upstart Chicago and Social Venture Partners Chicago provide financial sponsorship and support, incubation and management and consulting support to social entrepreneurs to under-resourced communities in Chicago.
These organizations and thousands more like them are changing the social landscape by developing sustainable business models centered around doing good. While social enterprise is not a new concept, advances in technology allow for more innovation than ever. These days, anybody can see a problem and commit to fixing it. It’s not always easy, but social enterprise is leading the way in what the double bottom-line can do for those in need.
