Social enterprise is an emerging field with many varying definitions. Simply put, this type of enterprise is about solving old problems in new ways. We define social enterprises as “entities that use sound business practices and the power of market demand to create social and/or environmental benefits for a community or region.” They can be for-profit businesses, non-profit programs, and everything in between. While legal structure can vary widely, social enterprises generate revenue through the sale of a product or service that impacts a social or environmental problem.
A social enterprise is distinguished from traditional for-profit businesses in two key areas:
- Purpose: A social enterprise must have a social and/or environmental mission as part of its core purpose and motivation, whether or not it also seeks profits. A values-driven purpose is what distinguishes a social enterprise or socially responsible business from one that pursues profit as its only bottom line.
- Impacts: A social enterprise should intentionally generate significant social and environmental benefits for communities and people, in addition to revenue. Businesses that only produce financial results, or produce shallow or unintentional social outcomes, are not social enterprises.
A social enterprise is also different from traditional non-profits in the following elements:
Market Focus: A social enterprise must have a market where there is both demand and some ability for consumers to pay for the goods or services offered. If there is a market for goods and services, but no ability to pay for them, the provider is meeting a need rather than a demand. These providers are important, but are not considered social enterprises.- Revenue Model: A social enterprise should generate some portion of its income through the sale of some good or service, though the proportion depends on its market focus. If there is established demand and consumers have the full ability to pay for goods and services, then a social enterprise should be able to operate on revenue alone. If demand is emerging or a market is still developing, a social enterprise may need to subsidize its revenue with grants or other income.
Why does social enterprise matter?
Social enterprises are an emerging trend in social change work worldwide, and are catching on in Appalachia and the rural Southeast. While it is a small segment of the region’s overall economy, we see the acceleration of the social enterprise sector as a crucial driver of economic transition. These enterprises capitalize on growing consumer demand for values-oriented goods and services. They offer an opportunity for the region’s many non-profits with revenue-generating activities to sustain and expand their services and products. For Appalachian entrepreneurs and small businesses with social missions, a social enterprise model makes it possible to make ends meet and begin to fill the gaps in rural social and environmental services. In persistently distressed communities, these enterprises can explore and grow market opportunities that wouldn’t exist otherwise. And by pursuing double or triple bottom line results, social enterprises and social entrepreneurs act as change agents, gradually shifting the region’s economy toward one that promotes sustainability and broadly shared benefits.
To read our full publication on the topic, download the PDF here.