Small Business Tips
Whether you run a for-profit or non-profit business, your company may be considered a social enterprise if your commercial strategies contribute to advancing a social cause. The social enterprise sector is growing fast. In recent years, the provincial governments of Ontario and British Columbia have responded with initiatives to help social enterprise organizations grow and scale their objectives.
Among other things, the government is making an effort to provide social enterprises with better access to business fundamentals. It's also working to promote the value of social enterprises among investors, government bodies, and communities by drawing attention to their business potential.
What is a social enterprise organization?
Until recently, the term social enterprise had no official definition in Canada. In fact, social enterprises are notoriously difficult to identify due to the vague nature of "contributing to a social cause." That being said, great strides have been made to regulate this industry in recent years.
Not too long ago, the progressive politics, ideas and culture magazine this.org defined a social enterprise as:
"An enterprise that seeks to achieve social, cultural, or environmental aims through the sale of goods and services. The social enterprise can be for-profit or not-for-profit but the majority of net profits must be directed to a social objective with limited distribution to shareholders and owners."
More specifically, a social enterprise can generate profits, but most of these profits must serve to fulfill the company's social mission. For example, a company like Amazon wouldn't be considered a social enterprise just because it sells eco-friendly products. Similarly, global fashion retailer H&M can't call itself a social enterprise just because it makes an effort to recycle clothes. When defining a social enterprise, we need to look at the company as a whole.
What's the difference between an enterprise and a company or business?
An enterprise is a project or undertaking that requires effort, such as a business, company, or entrepreneurial economic activity. Enterprises can be for-profit or not-for-profit, whereas companies must necessarily be for-profit.
If you have a venture with a social mission - also known as having a double or triple bottom line - or if you own a business that aims to address one or more of the many challenges that plague society today, you may very well be a social entrepreneur.
Social enterprises have come a long way in recent years. We even have events like Social Capital Markets (SOCAP) in San Francisco that help social enterprises resolve some of the world's most pressing problems. Among other things, social enterprises can fight for access to things like clean water, education, and food. Many social enterprises are also dedicated to fighting climate change.
Why start a social enterprise?
There are a number of impact investors, social entrepreneurs, corporations, foundations, and global non-profits that want to get involved with eco-friendly and economically sustainable solutions to global issues. For some, it's a matter of core values and the desire to make a difference in the world. But not all social entrepreneurs are social reformers. In fact, many companies, investors, and entrepreneurs become interested in social enterprises for financial reasons rather than ethical ones.
Recently, certain companies have turned to the social enterprise model in an effort to appeal to millennials - who usually prefer to support businesses that match up with their values. Canadahelps.org reports that 87 percent of Millennials purchase products with a social or environmental benefit, 67 percent would rather work for socially responsible companies, and 45 percent want to use their financial resources to help others. In other words, a business that provides a product or service that will "do good in the world" may be more likely to appeal to younger consumers, who are not always easy to market to.
The challenges of social enterprise models
But in Canada, there's a problem with adopting a social enterprise model in hopes of appealing to a more conscientious demographic. According to Elisa Birnbaum, author of In the Business of Change: How Social Entrepreneurs are Disrupting Business as Usual, Canada has implemented very little policy to regulate social enterprises compared to the U.S. and the U.K. In her words, "Where any specific policies do exist there's a lack of consistency among jurisdictions. What's more, there's no distinct incorporation (and thus no distinct legal entity) for social enterprise, which makes it difficult to develop policies."
Without a governing body to regulate the social enterprise industry, there is no way to differentiate genuine social enterprises from false ones. As a result, the Canadian social enterprise sector is vulnerable to corruption. For example, misleading social enterprises might adopt practices akin to a form of greenwashing (i.e., the use of marketing to portray an organization's products, activities or policies as environmentally friendly when they are not). Consumers need protection from companies that make false claims to attract customers, with no intention of following through on their mission.
Government policies, on the other hand, would contribute to regulating and defining the industry. They would help prevent greenwashing by ensuring that social enterprises are acting with honesty and integrity. Policies and action plans can also encourage entrepreneurs to embrace an alternative business model that falls under the social enterprise umbrella, thus increasing the number of companies that impact the world in a positive way.
The growth of social enterprise
Although social enterprise governance is a relatively new thing in Canada, it has come a long way in the past ten years. According to a recent survey, Canada now has more than 7,000 social enterprises. These companies employ more than 254,000 people and serve another 5.5 million. Increased government support means that more social enterprises are likely to see the light of day.
