Social enterprises are in. Banks in Australia, such as the NAB, are increasingly willing to fund social enterprise start-ups. But what is a social enterprise and what are its strengths?
Getting a group of people together to sell fair-trade coffee on a bicycle may be a great way to start, but the social enterprise can go much further. It is a powerful organisational structure, best placed to solve some of our community’s most pressing issues, with impact.
Our community faces a number of social challenges, including homelessness, environmental problems and social isolation, but there are ways in which these issues are being addressed. One can occur from within an organisation – the organisation adapts its existing business systems to create shared value, and another is through the creation of an external, arms-length organisation called the social enterprise.
As such, social enterprises are organisations that:
- Are led by an economic, social, cultural, or environmental mission consistent with a public or community benefit.
- Trade to fulfil their mission.
- Derive a substantial portion of their income from trade.
- Reinvest the majority of their profit/surplus in ways which will help them to fulfill their mission.
In summary, social enterprises are led by purpose as opposed to any profit objective. Under this structure resources, funding and expertise are all directed toward the enterprise’s mission -addressing a prevalent issue within society. Profit may flow, however, the focus of the organisation and its board is on fulfilling its mission and purpose.
And the power of the social enterprise lies in its governance and structure.
The power of the social enterprise.
The structure on the left of the diagram shows an example of where the social enterprise comprises a number of organisations. These organisations may come from a variety of industries and thus include a variety of structures such as private company or not-for-profit. The structure on the right of the diagram below, shows an example of when a social enterprise sits within an organisation.
The Social Enterprise’s structure
As an arms-length organisation, a wide variety of organisations can partner to create a social enterprise. The ability of the social enterprise to deliver impact and fulfill a mission is strengthened by the range of resources, knowledge and expertise of the organisations involved.
Also, a varied and diverse range of expertise can be brought to the social enterprise’s board.
Under a social enterprise structure, the board has a wider decision making framework within which to work. It’s decisions are not constrained by profit considerations and decisions can be made purely to fulfill and advance the organisation’s mission and purpose.
Ellis Jones is guiding social enterprise start-ups as well as establishing it’s own.