The social enterprise – a further explanation

This post is for AS Level students only and based on some questions I received from a CL student. Please read through this in conjunction with the section on social enterprises (page 12 of your textbook).

Let’s get started: what you should try and associate with social enterprises is the ‘triple bottom line‘ – this will probably make it easier for you to remember what they are all about.

First, the triple bottom line deals with the objectives of a social enterprise:

1. Economic – yes, a social enterprise is a business and thus it must make some profit to invest in the business and reward the owners to some extent (the extent will vary depending on the particular social enterprise in question). A social enterprise is not a charity. Thus at least some profit will always be necessary and an objective.

2. Social objective – remember stakeholders? The community is an important stakeholder of businesses, and even more so for social enterprises.  Social enterprises place a high value on helping the community by providing employment  often in disadvantaged areas, e.g. townships or rural areas in SA. In short: the social enterprise should benefit those around it.

There’s also 3. the environmental objectives of the social enterprise. The environment is a part of the community (a stakeholder) and thus a social enterprise should not harm the environment. In fact, social enterprises might even have a strong focus on helping the environment, e.g. planting trees for every ‘x’ amount of products sold. You could then also describe a social enterprise as a sort of community initiative, but be careful to remember that they are indeed businesses…they must make a profit.

So what is the difference between a business doing there part for humanity and PR and a social enterprise?

PR (Public Relations) is field of study and practice on its own. Businesses often have their own PR/Corporate Communication departments, or else they outsource this function to a PR agency. The PR professional essentially deals with all the communication of the business, for example, it would deal with press releases, product launches, communication with employees etc. It is quite a broad field, but it works to promote a good image of the business/brand.

A business doing its part for humanity might make good use of PR and always be conscious of its activities and how it affects other stakeholders around it, but this does not make it an actual social enterprise. For example: Investec is a financial institution – a business. However, it does quite a bit for stakeholders. For instance, it provides bursaries to university students and sponsors sports teams. However, its day-to-day operation are very much business-oriented, i.e. profit-oriented. In making decisions, Investec considers stakeholders, but this is not the primary focus.

Social enterprises, on the other hand, go that extra mile beyond just being responsible and considering other stakeholders. They have social goals on the same level (same priority, if not more so) as their economic goals…that takes us back to the triple bottom line. The social side must be funded – that is why the economic side (profit) is necessary. In other words, you need profit, as a social enterprise, to support your social objectives. Your textbook sums it up quite well: “Social enterprises use business principles to achieve social objectives” (Stimpson & Farquharson 2010:12).

Those who start social enterprises wouldn’t be motivated by profit and say, “Wow, look at this lucrative venture I should start…I could make so much money!”. Rather, they would say, “This community could be uplifted through this business idea. We need to make some profit though to keep it running, and this is how we could do it…”

Question: Using the Internet, can you identify a social enterprise? Find one, then comment about it on this post. What makes it a social enterprise? If you can browse the website of the enterprise, mention what features indicate that it is a social enterprise.

Source:  Farquharson, A & Stimpson, P. 2010. Cambridge International AS and A Level Business Studies.  2nd edition. Cambridge: Cambridge University Press.