Compare and Contrast - Social Enterprise, Entrepreneur, and Business
The topic of social enterprise comes up often in discussions and meetings that I have with nonprofits, businesspeople interested in nonprofits, and foundations. I keep tripping over the lexicon, though, because I don’t think that the commonly used terms are certain, universal, or completely clear. It seems that the “field” encompasses a number of different types of organizations with different definitions and identifiers. Because I dance around these phrases so often, I looked around the other day to compile definitions for these terms in regular use.
Social enterprise is defined by Social Enterprise Alliance as “an organization or venture (within an organization) that advances a social mission through entrepreneurial, earned income strategies.” This often reflects a market-based effort to receive earned income in direct exchange for a product or service. Examples of social enterprise from SEA include:
- A substance abuse treatment facility operating a moving company
- An organization promoting college enrollment that provides workshops to educators
- A youth services organization opening a pretzel shop or ice cream shop franchise
- Goodwill thrift stores
Social entrepreneurs are defined by Ashoka as those who “act as the change agents for society, seizing opportunities others miss and improving systems, inventing new approaches, and creating solutions to change society for the better. While a business entrepreneur might create entirely new industries, a social entrepreneur comes up with new solutions to social problems and then implements them on a large scale.” Examples include:
- Jim McCorkell, founder of Admission Possible (an Ashoka Fellow)
- Muhammad Yunus, founder of Grameen Bank
A socially responsible business is defined as a venture (generally for-profit) that seeks to “leverage business for a more just and sustainable world” (Social Venture Network) or “help create a better world by building healthy communities, promoting economic equity, and fostering a clean environment” (Social Investment Forum). In addition to generating a profit for shareholders, these businesses have goals in the areas of economic development, employment, environmental practices, or ethical business practices.
For me, the key distinctions between these terms are the following:
- Social enterprises are defined by revenue source
- Social entrepreneurs are defined by innovative vision and strategy
- Socially responsible businesses are defined by the intention and goals of a for-profit business
It may seem to some people that the definitions are just semantics, but I think they’re important if we want to create resources, find capital, and develop a knowledge base. The needs and demands are probably different if your focus is on revenue sources rather than a game changing strategy.What do you think - do these definitions matter? Are the three listed here on the right track, or would you offer some others?
I respond with more questions. Does a so-called social entrepreneur cease being a social entrepreneur once their solution is no longer new (e.g. Muhammad Yunus)? Can something be called a solution before the problem is actually solved? Does paying such enormous attention to “new” ideas discourage people from furthering “old”, evidence-based approaches?
Comment by Kristi Rendahl — September 7, 2008 @ 6:38 pm
Kate -
I’m fine with the definitions, although “social enterprise” is just new terminology for “earned income.”
Of course, earned income for nonprofits is nothing new. Organizations like the Red Cross (first-aid, CPR training), Goodwill(thrift stores), and YWCA (health clubs) have been selling their products and services for years. Some, like Goodwill and the YWCA even generate the majority of their income from selling products/services, greatly reducing their need for fund-raising — and thus increasing their financial stability.
The bottom line, I’d argue, is that ALL non-profits should seek ways to generate earned income. The key is to align the product or service with the organization’s mission, and to ask whether there’s a substantial market and enough organizational capacity (talent, skill) to compete in that market.
- Soren
Comment by Soren Jensen — September 8, 2008 @ 10:46 am
Thanks for the comments. I think that both Kristi and Soren address different facets of how these terms can be an obstacle to both (a) creating resources or funding in this area, and (b) getting on with the work. Maybe one question that I should have asked is this: does it matter what words we use?
Comment by Kate Barr — September 8, 2008 @ 3:26 pm