Throughout the twenty-first century, social enterprise has emerged as a global phenomenon aimed at meeting individual and community needs that have arisen amid evolving environmental, economic, and social developments. Driven by a new cadre of innovative, pragmatic, and visionary social activists and their networks, an unprecedented wave of social entrepreneurship has been growing internationally over the last decade. A survey of social entrepreneurship activity in the UK conducted as part of the Global Entrepreneurship Monitor suggested that new social start-ups are emerging at a faster rate than more conventional, commercial ventures. More remarkably, the impact that social enterprises are achieving today is much more ambitious than ever before. By influencing social behaviour for the good, social entrepreneurs are also initiating systemic changes around the world.
What is social enterprise?
The term “social enterprise” was first used in 1975 to distinguish the types of marketing activities used by governmental and cooperative enterprises from those used by the private sector. Since then, both academics and global practitioners have made a handful of attempts to describe social enterprise but have not agreed yet on a singular definition.
For the purposes of this article, we will define social enterprise as a business venture created for a social purpose, one that intends to mitigate a social problem or a market failure and to generate social value while operating with the financial discipline, innovation, and determination displayed by a private sector business.
The social purpose is created to generate change by making a positive impact on a social problem or market failure. The enterprise approach uses business tools including entrepreneurship, innovation, market-driven approaches, strategic orientation, discipline, and determination that drive for-profit businesses.
To put it simply, consider the motto of Greyston Bakery in Yonkers, New York: “We don't hire people to bake brownies; we bake brownies to hire people.”
Social enterprise in Scotland
In the United Kingdom, the concept of social enterprise debuted within the community regeneration sector and cooperative movement. Due to multilevel complexities, the UK does not have a consistent national social enterprise policy, and neither is there a legal definition of social enterprise, even within Scotland.
Scotland has a separate political culture and social heritage compared to other parts of the UK, including distinct legal and educational systems, as well as its own church. Re-established in 1999, the devolved Scottish Parliament took responsibility for the third sector in their country and have been committed to its growth and expansion.
In 2013, Senscot (Social Entrepreneurs Network for Scotland) provided ‘The Voluntary Code Of Practice For Social Enterprise In Scotland’ (see Appendix), which lists the criteria, values and behaviours of a social enterprise.
Although some people would still like to describe social enterprise as “not-for-profit” organisations, Scotland-based academics Declan Jones and William Keogh believe this description is misleading because, in reality, social enterprises operate to make a profit in order to stay in business and to advance their social mission. The key difference is how their profits are used. Therefore, Jones and Keogh suggest perceiving this sector as “more than profit,” leaving the not-for-profit label for traditional charities and those dependent on public funding rather than trading in the market.
You have to understand the rules of cricket in order to understand the game and to enjoy the excitement of the game. In addition to observation, you also need interpretation. The flip side of this, however, is that if you focus too much on something, if you are too keen on a certain interpretation, then you might miss something else. Or, in the words of American journalist Walter Lippman, “For the most part we do not first see and then define, we define first and then we see.”
The absence of a unified definition is in fact an opportunity to liberate ourselves to see more. As for myself, I always “find pleasure in intelligent dissent, rather than in passive agreement, for the former implies a deeper agreement than the latter” (David Grahame-Smith).
Challenges facing social enterprises
Despite any disaccord on definitions, the third sector agrees that social enterprises are facing a dilemma: on one hand, customers or service users expect products or services to meet or exceed the standards of other organisations. On the other hand, social enterprises require financial sustainability. Maintaining a balance between these potentially conflicting aims could be problematic, a challenge unique to social enterprises. Therefore, it is not surprising that the Scottish social enterprise sector has yet to achieve a definitive agreement regarding how best to reconcile these tensions.
The reasons the social enterprise sector has difficulty achieving win-win scenarios comes down to the dynamics involving its various actors: funders, investors, employees, and customers. Funders and donors may not want to give money to profit-seeking organisations. Investors may not want to invest in organisations that are not designed solely to maximize profits. Employees may be confused about what the organisation’s top priority actually is. And customers may be at loss about whether they are the actual beneficiaries and expect to get what they want and what they paid for.
Social enterprise may not be a panacea for all of the world’s domestic and international problems; however, “Nobody expects this to happen overnight, but decisions made today matter much longer than often appreciated” (Dr. Joeri Rogelj).
To know more about social enterprise, read my new book 'Invisible Hand with Visible Heart'.