6 Types of Social Enterprise to Know & Model
Social enterprises exist as businesses that also make social differences.
“If we want to see change, we have to be the change we want to see.”
That’s a great quote from Gandhi. And, today, more and more businesses have taken it to heart. Social enterprises everywhere are combining business and cause to positively impact the world.
This doesn’t sound different from any other business. After all, don’t all businesses want to make a positive impact?
While this is true, social enterprises are in the market for more profound reasons. They want to see social change while also earning a profit. Instead of existing as a charity, they exist as real businesses that also make a social impact. They align products and services with impact.
You can probably see why this concept would confuse people accustomed to traditional non-profits, foundations, and government entities.. The truth is that social enterprise’s umbrella a lot of different business models.
Today we’re giving you six of those models that you can apply to your business.
If this interests you, keep reading.
Understanding Social Enterprise
Social enterprise is an existing business with a social-driven cause as the foundation of its purpose. It could also mean using business tools to address a social need. However you want to look at it, it’s a business that’s sole mission is for social change.
An example of this is a real estate company providing housing for low-income residents.
Because of their desire for social change, many social enterprises hire employees from at-risk backgrounds similar to their target market. Not all social enterprises do this, but many do.
What attracts people to social enterprises is the combination of social cause and financial benefit. Critics of social enterprise question the ethics of creating profit around a social cause. The impact of a social enterprise is challenging to calculate.
There’s also an overlap of terms that create confusion around social enterprises. The most common is the difference between a social enterprise and a non-profit. Let’s remove some of this confusion and look at some differences.
A social enterprise earns profit like a regular business by selling a product or service.
The Difference Between Social Enterprise And Non-Profit
The primary difference between a social enterprise and a non-profit is revenue.
A non-profit organization relies heavily on grants and fundraising for revenue. Income is usually secondary for a non-profit. These entities still earn a profit, but in a different way. They are subjected to specific rules that a regular business may not adhere to.
With social enterprises, income meets social causes. A social enterprise earns profit like a regular business by selling a product or service. Raising money for a social venture through investors is another option.
Businesses everywhere are looking for purpose. People want to buy from mission-driven companies. Likewise, non-profits are looking for creative ways to earn income for their cause instead of writing grants.
6 Types of Social Enterprises to Know & Model
Now that we understand social enterprises, it’s time to jump into the good stuff. Get ready to grow your income and your impact. Here are six types of social enterprises (with examples) that you can apply to your business.
1. Mission-centric Businesses
Mission-centric businesses are the textbook definition of a social enterprise. They are a for-profit business with a hard drive toward a social cause. The reason they exist is to fulfill the mission. But they can earn a profit without the restrictions of being labeled as a non-profit.
Usually, how they earn a profit coincides with their mission.
Example: Everytable is a food subscription service that seeks to eliminate food deserts through fresh, affordable meals.
2. Nonprofit Founders
An entrepreneurial nonprofit is a tax-exempt entity that builds revenue from different sources. Entrepreneurial nonprofits seek funding from government grants and donations from the public (the primary source of funding). Bank loans and foundation loans are also possible. However, additional revenue is earned through selling a product or service.
Example: Kiva.org offers microloans to new business owners without the need for capital. People can donate money and choose their investments. Investors can pull their money or re-invest once the entrepreneur pays back the loan.
3. Donate Back
Donate-back companies donate a portion of their profits to a specific cause. They earn money through traditional business investments, loans, and product sales. Activities centered around their mission are usually separate from their profit-earning endeavors.
Example: TOMS is a classic example of a donate-back business model and is considered a pioneer of the one-for-one. TOMS shoes donate one pair of shoes for every pair sold.
4. Social Awareness Brands
Awareness brands are similar to mission-centric businesses. The main difference is that awareness brands don’t actively address the root cause of their concerns in their activities. Rather, they bring together a group of people around a social cause through the products they sell.
Example: E.L.F. Cosmetics is a vegan makeup line sold in drugstores. Typically, this kind of product is sold for more than drugstore prices. E.L.F. brings together the vegan community at a fraction of the cost.
5. Socially Responsible Companies
A socially responsible business has practices that benefit the environment, community, or anyone employed. Socially responsible companies are centered around the idea of doing business differently, like being more environmentally friendly and not centering their entire business model around their cause.
Example: Sierra Nevada, a famous brewery, strives to become a zero-waste business through recycling and composting scraps. Nothing about their product or services changes. They are still the same business.
6. All other businesses
Any other business that seeks change through what they do can be considered a social enterprise. The definition isn’t so black and white. There will always be new ideas, new concepts, and new businesses. Why not create your own? You are a social enterprise if you’re a business using financial and technological tools to make a difference.
You are a social enterprise if you’re a business using financial and technological tools to make a difference.
Final Thoughts
If you are looking for new ideas to help a cause, consider applying these models to your business. You don’t need to seek labels to justify using your company for social change. When in doubt, remember the word “different.”
What makes being different so unique? What kind of difference do you want to make? What would you do differently?
Keep these questions in mind, and you’ll do something great.
