There are millions of nonprofits addressing issues like poverty, hunger, gender inequality, racial discrimination and much more, but they aren’t the only organizations concerned with social and environmental objectives. Since the 1970s, a unique type of organization – the social enterprise – has been blending aspects of nonprofits and for-profits into businesses that prioritize social good over profits. In this article, we’ll explore what social enterprises look like, the different types, five examples and where you can learn more.
Social enterprises are organizations prioritizing social and environmental goals. Taking the form of for-profits or nonprofits, they include entrepreneurial nonprofits, cooperatives, worker-owned businesses, B corporations, fair trade organizations and credit unions.
What is a social enterprise?
Social enterprises are businesses with social and environmental goals. While they’re not charities, they tend to be committed to similar concerns regarding poverty, hunger, environmental protection, gender equality and so on. Social enterprises generate profit, but a lot of it goes back into the business to help it achieve its goals. Social enterprises also often hire people from disenfranchised communities while prioritizing programs like profit-sharing, member ownership, training and development, inclusive hiring practices and more.
What are the types of social enterprises?
Social enterprises are united by common features, but there are different types. Here are six:
Nonprofits are a type of organization exempt from taxes. Because “nonprofit” is a tax status, organizations working on a variety of social issues can be nonprofits. Churches, private foundations, political organizations or charitable organizations are four general types, while Feeding America, Greenpeace and Human Rights Campaign are three specific examples. To qualify as a nonprofit, organizations must receive government approval. Countries vary in their requirements, but in general, nonprofits do not generate profit. What’s an entrepreneurial nonprofit? Nicole Motter says these organizations use a revenue-generating program or an entrepreneurial business model. Unlike a traditional nonprofit, which depends on donations and grants for funding, the programs and activities of an entrepreneurial nonprofit keep the organization sustainable.
According to the Corporate Finance Institute, cooperatives are member-owned organizations. Their goal is to “satisfy their members’ social, economic, and cultural needs.” Even if a member owns fewer shares than others, everyone has equal voting rights. While cooperatives are for-profit, they have some key differences from traditional businesses, like open membership, democratic member control, independence and concern for the community. Specific structures vary by region because of legalities, but in general, all cooperatives are designed to serve the members.
Like cooperatives, worker-owned organizations have goals different from traditional for-profits, but they have a narrower membership. To qualify as a worker-owned cooperative, workers must own 100% of a company’s shares. They’re directly involved in business operations, have an equal vote and benefit financially based on factors like how long they’ve worked there and how many hours they work. Unlike traditional for-profits where those who work for the company may not even be able to afford stocks, employee-owned organizations are more democratic and equal.
Cooperatives and worker-owned businesses are not the only for-profit social enterprise. If a company wants to demonstrate its commitment to social and environmental issues, it can choose to become a “B corporation.” Founded in 2006, the nonprofit B Lab has been offering certifications and support to for-profits that want to become B Corporations. According to the B Corp website, companies earn a certification by meeting three requirements. The first is showing “high social and environmental performance.” During assessment, they must score a B Impact Assessment score of 80 or higher and pass the risk review. Secondly, the company must make a legal commitment to change its corporate governance structure, so it’s accountable to all stakeholders and not only shareholders. They must receive a benefit corporation status if available. Lastly, a B corp must commit to transparency. Information about its performance must be publicly available on the B Lab’s website.
Fair trade organizations
“Fair trade” is a social movement committed to achieving better standards for wages, product origins, supply chains, environmental impacts and much more. There are a handful of fair trade certifications, such as Fairtrade, which calls itself “the most recognized and trusted sustainability label in the world,” and Fair Trade Certified, which sets standards for things like safe working conditions, sustainable livelihoods and environmental protection. Entities classified as fair trade tend to be for-profit, but they’ve demonstrated values that empower workers and consumers, which makes them different from traditional for-profits. Nonprofits can also participate in fair trade practices by setting higher standards for products they sell, promoting fair trade principles, collaborating with fair trade organizations and establishing their own fair trade values.
Credit unions are similar to banks, but they’re member-owned. They also operate as nonprofits. According to CNBC, credit unions provide the same services as banks, like checking and savings accounts, loans and credit cards, but members have more control. They get to elect a board. Credit unions also reinvest profits into their own products, while traditional banks give profits to their shareholders. To use the credit union’s services, members have to meet eligibility requirements, which vary depending on the union. Factors could include where you work, where you live, or whether you’re part of another group, like a school or labor union.
What are five examples of social enterprises?
There are millions of social enterprises around the world. Here are five with a variety of structures and goals:
Girl Scouts of the USA is a youth organization based in the United States. Its goal is to empower girls through skill development, community engagement, leadership, friendship and mentorship. Placement of transgender youth is handled on a case-by-case basis. Girl Scouts is a nonprofit organization. Its cookie program, which usually extends from January through April, provides revenue, which is put back into the organization.
Patagonia is a for-profit business, but because of its social and environmental values, many consider it a type of social enterprise. It prioritizes environmentalism, justice and integrity. It also engages in corporate activism, runs environmental campaigns and is fairly transparent about its products.
The food company Bob’s Red Mill, which was founded in 1978, is an employee-owned business. In 2010, founder Bob Moore created an Employee Stock Ownership Plan. With this plan, the company contributes its stock, which is held in trust for the employees. When the vested employees leave or retire, they get cash. In 2020, Bob’s Red Mill became 100% employee-owned.
Since 1997, Township has been committed to building sustainable economic opportunities for women in South African township communities. The organization’s fashion brand provides work to independent, township-based sewing cooperatives. Using fair trade practices, the business designs, markets and sells a variety of handmade, ethically-sourced bags and accessories. According to its website, Township was the first South African fashion brand welcomed into the World Fair Trade Organization.
With its main shop in London, UK, Haven Coffee is a social enterprise with a commitment to refugees. Founder/director Usman Khalid founded Haven in 2019. The shop sells specialty coffee to support local refugee communities, provides barista training and helps refugee artists organize events. Their coffees, one of which is sourced from Honduras, the other from Indonesia, is Fairtrade certified.
Where can you find more learning opportunities about social enterprise?
If you want to learn more about social enterprises, there are a variety of classes and books that can help. Here’s where to start:
Commitment: 17 hours (3 weeks with 5 hours per week)
Instructor: Michael Gordon
In this beginner class, you’ll learn what a social entrepreneur is and hear from 11 social entrepreneurs based around the world. They’ll offer important lessons and mistakes they’ve made when working on issues like clean water, improving education, providing affordable food and much more. Through the course’s five modules, you’ll learn whether your idea is a good one, if starting a social enterprise is the right choice and so on.
Commitment: 6 hours
Instructors: James D. Tompson and Ian MacMillan
This course will help you develop a strategy and framework for a social enterprise. Taught by instructors with years of experience and expertise, you’ll learn how to identify a social problem, understand context, create a solution and plan for success. By the course’s end, you’ll understand what it takes to create and launch a social enterprise. The 4-module course is part of the Business Strategies for a Better World specialization.
Commitment: 1 month (10 hours per week)
Instructor: Kai Hockerts
Broken into three courses, this specialization teaches you everything you need to know about creating impact through social entrepreneurship. You’ll examine examples, explore the process of solving a social or environmental problem, form a team, and study an issue to identify its root problem. By the end of the specialization, you’ll have developed an idea, worked on a business model and finished a business plan.
The Solution Revolution: How Businesses, Government and Social Enterprises Are Teaming Up To Solve the World’s Toughest Problems (2013)
By: William D. Eggers and Paul MacMillan
This book describes the new economy built on a collaboration between business, government, philanthropy, social enterprise and others.
By: Johanna Mair and Christian Seelos
This book examines what derails organizations trying to work for the common good. Using four case studies, the authors help readers avoid mistakes, innovate and scale more effectively.
By: Madeleine Shaw
Madeleine Shaw, a menstrual health innovator with decades of experience, offers readers unique ways to start and lead social enterprises. She discusses her own journey, as well as the stories of other successful social entrepreneurs, to show that you don’t have to be a business expert to make a difference.