Social enterprise is a business model that balances making a profit with a social purpose. It is a more ethical and sustainable way of doing business. The core mission of a social enterprise business plan is to create positive impact and improve society.
Unlike charities or not-for profits, these socially responsible businesses still make profit and aim to grow independently to increase their impact.
There is no legal definition of social enterprise. They trade in different sectors and industries around the world with the intention of using business as a force for good to have a positive impact on community problems.
In simple terms, a social enterprise can be defined as a business that reinvests profits into its social or environmental mission, rather than stakeholder gain.
This handy infographic explains the different types of social purpose businesses:
Private businesses are owned by shareholders and exist to make a profit for those who own shares in the company. They may engage in “Corporate Social Responsibility” activities, such as supporting chosen charities or implementing sustainability policies to reduce waste. Many businesses and corporations take CSR very seriously, but their primary mission in this traditional business model is to make profit.
The difference between private corporations and social enterprises is that social enterprise businesses reinvest their profits with their primary focus on social or environmental impact.
Alternatively, traditional charity and not-for-profit business models focus purely on addressing social need. Charities traditionally raise money to fund their social mission through grants and donations and are eligible for some tax reliefs, whereas social enterprises raise money through trade – by selling products or services, and pay the same taxes as for-profit corporations (depending on their legal structure).
The truth is, there’s a sliding scale of socially responsible businesses. The marketplace for ethical business is growing, with the value of ethical consumer spending growing to £38 billion in the UK in 2015 – an average growth of 8.5%. According to Social Enterprise UK, there are around 70,000 social enterprises in the UK alone.