This blog was originally published on KPN Blog site, “David LePage puts his cards on the table about the definition of social enterprise, why it’s a verb and not a noun, and how it’s marketplace value.”
The definition of social enterprise continues on as a fascinating issue. In fact it seems like the definition quandary just continues to go in every direction possible, and in the last couple weeks it may have gone to completely unsurpassed extremes. Some groups seem to be recognizing any manner of company or entrepreneur that just happens to “do good” through some of its products or social responsibility activities as a social enterprise, even if their profits are the key objective and purely for the shareholders. On the other side, in a recent blog it was stated, “A social enterprise is any entity that exists with the sole purpose of benefiting humanity.” The author argues that doing business is not a requirement of social enterprise, just being a non-profit organization makes an entity a social enterprise. (Indianewengland.com, August 15, 2015)
Will we ever get past the debate of social enterprise definition? Personally I sure hope so, but I don’t think quite yet for two reasons.
One: because the more the sector grows in size and influence and impact the more we need to capture social enterprise as the valuable tool for social impact it can be, before the term becomes a diluted form of social washing or disregards the social and economic change we really wish to create.
Two: because we have to understand social enterprise is a verb, not a noun. I use the term ‘tool’ above, because social enterprise is not the “entity” it is the manner in which we do business. Social enterprise is about the social and economic value we create through marketplace activity.
Does this mean other businesses don’t achieve social value? Not at all, lots of businesses do good and contribute to the community, through products, customer targets, social giving, profit sharing, co-operative structure, and more, but that doesn’t make them a social enterprise – many of us call those them ‘social purpose businesses’. They do lots of good but ultimately operate and evaluate success in the traditional shareholder, revenue driven economy.
Yes, there is a growing new energy emerging in the business world, such as B Corp Certification and the Harvard-based Shared Values movement. Social enterprise includes these values, but also includes another goal that goes beyond just doing and being good citizens, or adding a social value to your products, or being really green – social enterprises want to change the marketplace value system.
For me the best way to understand social enterprise is as a verb. Social enterprise is a way to do business, rather than merely a noun, or a thing. It is not the entity; it is the values it brings to the exchange of goods and services.
So social enterprise isn’t a single model or simple definition, it is the business activity that integrates and prioritizes social impact over private values. Social enterprise is ultimately about shifting the very tenets of the capitalist based economy. We need a social enterprise marketplace, where we trade goods and services, based on social and community values that drive the economy.
I think we can best define social enterprise by understanding the values that social enterprise operates within, and how it operates, rather than the thing that it is. For me social enterprise operates with a set of values:
- Why it does business – primarily it has a social, environmental or cultural purpose
- Who it benefits in the market– its products and services contribute to building a healthy and inclusive community economy
- How the profits are distributed – primarily to further its social purpose
Social enterprises’ primary purpose, their mission, is to create a social, cultural or environmental impact; they are a business, selling goods and services generates the majority of their income; and they reinvest all or the majority of their profits into the social mission.
Yes, they use a business model. Social enterprise definitely trades in the market place. It sells something; it is a supplier of goods or services to a buyer. And income is primarily derived from sales.
But, the Social enterprise prioritizes the social over the financial return on investment. It operates a financially sound business, however the social impact dominates or displaces personal or shareholder profits.
And it is incorporated in a way to insure this profit distribution happens in perpetuity. The value created is not just a charitable set-aside, temporary sales or marketing plan, a promotional gimmick or a share valuation scheme.
But ultimately, whether we argue the definition, and where we land in 5-10 years is not the real discussion. The real discussion is about the social value we create through the market place activities. We are building a long-term change in how the economy serves a community; so in the interim, the social enterprise story of its impact becomes tantamount to describe itself.
The Social enterprise quandary is not the definition of what it is, it is understanding social enterprise as part of the process of changing from a short term, shareholder, financial value driven market place, to the trading of goods and services as a means to create social value and a community economy.
While we are in this process of transition, the stories we share about our progress are critical to the defining social enterprise. We have to describe how social enterprise is impacting peoples’ lives and creating new opportunities. We have to continue to find the channels to share stories, to build the evidence, to encourage others.