What is social enterprise?

In short, they are businesses that earn money that have a social purpose built-in.

What is social enterprise?

In short, a business that profits from doing good.

An international definition

Social Enterprise International has worked to develop and promote social enterprise for nearly two decades in 25 different countries. In order to continue our work with partners around the world we need a working definition that is modern and relevant.

The following definition was complied at the end of 2011 following a documented debate with our members and supporters in 14 different countries.  It was updated at the end of March 2014 to align with the FairShares Model.

Social enterprise describes (informal and formal) organisations that rely on trading for their income and consider themselves engaged in business activities.  This can include enterprises that have public sector clients where the income is predominantly derived from contracts awarded via open tendering.

Social enterprises are radically different from private sector businesses. They aim to generate sustainable sources of income, but measure their success through:

  • Specifying their purpose(s) and evaluating the impact(s) of their trading activities;
  • Conducting ethical reviews of their product/service choices and production/consumption practices;
  • Promoting socialised and democratic ownership, governance and management.

Different social enterprises may focus on one or two of these principles but we expect all ventures that claim to be a social enterprise to be able to state and justify their policies on each of the above.

Social enterprises should set their own criteria for measuring success and establish processes for each of the above.  In doing so, they will seek the active participation of their primary stakeholders. Further external assessments should be through the democratic involvement of other social enterprises and partner organisations using social auditing and accounting techniques.

“Not for Profit” is a misleading criterion. It is good practice for social enterprises to provide incentives to workers and social/community investors by sharing the wealth that is created with them (so long as the distribution of profits or payments to individuals is consistent with an enterprise’s value statement and/or social objectives).

Sole traders and social activists may engage in social enterprise.  We believe their business activities are best described as “social entrepreneurial ventures” until such a time as they represent an instituted set of activities involving a stable group of people.  We acknowledge that there is a also a wider definition of social entrepreneurship that includes individuals working to reform the private and public sectors.

We can therefore summarise our international definition of social enterprise as:

Business ventures that prioritise their social purpose(s), operate ethically and promote democratic ownership and governance by primary stakeholders.

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