Social Enterprise

OVERVIEW

Social enterprise refers to non-profits that operate businesses both to raise revenue and to further the social missions of their organizations. These businesses build locally controlled wealth, which helps stabilize community economies, and represents a shift in non-profit operation toward a model of collaborating with ‘client’ populations in community-building efforts. Social enterprise is particularly common in non-profits with an employment training focus, since the businesses themselves can be integrated with the programs. However, many different kinds of non-profits are employing business strategies in innovative ways.

Social enterprise most often refers to a non-profit organization that goes into business to provide services to the general public, thereby both raising revenue while advancing specific mission-related benefits. There are myriad ways that non-profits can set up these businesses, which often take the form of either for-profit or non-profit subsidiaries of the parent non-profit organization. This division is often used for legal reasons, but also facilitates effective oversight and management by keeping the business unit(s) organizationally distinct from the non-profit’s direct service functions. The resultant social enterprises — sometimes referred to as “social purpose businesses” – employ market mechanisms to meet key organizational goals, such as providing job opportunities to “clients” in the businesses they operate.

As well as their direct employment benefits, the income social purpose businesses generate can often enable non-profits to be more innovative in their service approach. For instance, San Francisco-based REDF (formerly the Roberts Enterprise Development Fund) found that the income earned by social purpose business ventures freed the non-profit organizations from government time constraints. This led to much more favorable results, as these enterprising non-profits were able to “employ individuals for longer periods of time and … provide transitional and permanent employment to individuals outside the economic mainstream.” Basic statistics regarding social enterprises appear below: