social delta

Consulting and support for social enterprise in Canada

Tag: definition

Is what I’m doing actually a social enterprise?

In the last decade, many more people working to create social change in Canada have been calling themselves social entrepreneurs. The phrase is no longer a mystery for most, as programs in social enterprise spring up at universities and colleges, social innovation incubation spaces proliferate across the country, and young leaders are increasingly looking to create meaningful work for themselves.

However, not all efforts to improve the human condition are social enterprises. Literally, an enterprise can be defined as any “project or undertaking, typically one that is difficult or requires effort” (as in the enterprise of training for a marathon). A social enterprise, under this definition, could be construed as involving any effort that has a social purpose. But, in fact, a social enterprise is not simply any social movement or activity.

There are a multitude of definitions of the term “social enterprise” in countries and markets across the world. All of them include the principle that an enterprise is a business that, at the very least, includes a transaction of value in which a customer pays cash for a good or service in a marketplace.

And then there’s the matter of social value. Here’s the thing: if you are creating social value but not selling anything, you are effectively operating a charity.

If you are creating limited social value (or social value as a happy by-product) through the sale of your product or service, you are a business – a regular, traditional business.

But, if you are in business primarily to create social value through the sale of a good or service, then—and only then—are you a social enterprise.

To be clear, there is nothing wrong with being a charity or a business. However, it is the direct, concerted effort to use a financial transaction to maximize social improvement that characterizes and differentiates a social enterprise.

Improving livelihoods, communities, culture and well-being is not only the responsibility of one type of actor. Governments, non-profits and charities, co-operatives, businesses and the informal sector (families, clubs, collectives, collaboratives, etc.) can all contribute to making our world a better place. One actor is not implicitly better or worse than another at making that contribution; how they operate dictates how much of a contribution they make.

However, social enterprise is a way of conducting business in which creating social value is a primary goal. It is a tool for social change that can pay for itself through earned revenues. This sustaining revenue offers an alternative to charity, voluntarism or tax-funded activities. It is a unique mechanism for which it is expected that the revenue-generating operations will always be seeking to improve the world around us.

To be clear, in Canada today there is very little benefit to calling yourself a social enterprise. There is no tax relief, no designated employment programs and limited start-up capital. Even grant opportunities are far more related to the form of incorporation and the prescribed outcomes than to the label “social enterprise.”  In fact, there is no way to legally define an entity as a social enterprise in Canada.

Nonetheless – and perhaps as a result— many people are calling their project, program, or idea a social enterprise, which is actually making the term increasingly meaningless for policy makers, funders, employees, or even the purchasing public.

So, if you still want to call your work a social enterprise (in spite of lack of clear benefits currently) ask yourself the following four questions:

  1. Are you selling something?
  2. Is the sale of that good or service directly helping you to address a social problem or gap in our society?
  3. Do you have a systematic tool in place to quantify how your sales are directly reducing that social problem?
  4. Do you have a strategy to grow your business, and thus increase your (positive) social impact over time?

If you answered yes to all these questions, then you are a social enterprise. If you didn’t, then you may be doing fantastic work or providing a service that can prove both important and beneficial, but you are not a social enterprise.

This article was co-written by Jonathan Wade and Elisa Birnbaum.

Jonathan Wade is the principal at Social Delta and Elisa Birnbaum is writer and publisher who has recorded the advancement and achievements of social entrepreneurs in Canada both online (at SEE Change Magazine) and in print (her first book, In the Business of Change, will be published in May)

A case against defining social enterprise.

What’s in a name? That which we call a rose, by any other name would smell as sweet. William Shakespeare

As if to refute Shakespeare’s famous line, we all like to define things that are new to us.  Scientists will define new stars, species or diseases. Social workers and teachers will define new approaches to learning and social improvement. Business people will define their brand, or a new trend in consumer behavior. Academics spend their entire careers reading about previously defined concepts and trying to invent new ideas and label them.

It comes as no surprise that many people who first hear the term social enterprise want a definition. This is why you’ll see a “definition” of social enterprise in the margin to the right of this post. For most, to understand the meaning  of a term is the first step to embracing the idea. The words are familiar but are not fully understood as a pair. Is social enterprise a chatty workplace? Is it a new media term? Is it a collection of similar businesses?  Amalgamating the known definitions of the two terms leads to many interpretations.

Social Enterprise, in essence, basically refers to a commercial activity with a primary goal of creating some sort of social benefit.  However, this is not the only definition. There are many nuances and variations, including legal structures, ownership, profitability goals, success measurements, hiring practices, asset locks, target beneficiaries and a host of subjective qualifications depending on the personal perspective of the entrepreneur.

It is significant to note that even people who work as social entrepreneurs or as supports to social enterprise can’t agree on a definition. This is confusing for the newly initiated and leads to a great many people dismissing social enterprise as a fad, a new label on an old idea, or even an insidious effort to undermine the market economy, or the charitable sector. Without a definition, social enterprise runs the risk of being marginalized–possibly even shunned–by the establishment.

However, it is my belief that the fluidity of the definition, the nuances, and the many interpretations is actually what makes social enterprise so powerful as a tool for social change. In our modern world the silos of social structures—non profits, coops, government, business, clubs—have led us to myopic perspectives on how to provide value to society. In order to really start to address the social problems that are a result of the current structures, we need to look for more malleable, more dynamic, more intangible, and less defined tools. Social innovation requires new thinking to old problems and new hybrid approaches to put that new thinking into action.

It is no longer sufficient to simply “partner” with another sector actor to seek effective change. Partnership and collaboration are strong tools to bring different perspectives to a problem, but they are just the beginning. Social enterprise, in all of its many forms and definitions, is a structure that allows for many approaches and many perspectives to be used simultaneously. Social entrepreneurs can glean from the best practices of a diverse group: non profits, private businesses, public sector institutions, co-ops, voluntary associations, charities, community associations, etc.

As if to punctuate the value of a vague definition of social enterprise, the Harvard Business School’s Social Enterprise Initiative’s mission, “applies innovative business practices and managerial disciplines to drive sustained, high-impact social change…[while we] engage with the nonprofit, for-profit, and public sectors to generate and share resources, tools, and knowledge.”

The challenge of no clear definition is that our laws, our financial services and our social support networks remain somewhat confused by social enterprise. Interpretation of the term’s meaning leaves us wondering: does a social enterprise run on grants or through investment?  Does it require volunteers or paid staff? Are they taxed or not? Must they incorporate or be informal? Are they out to make financial gains or generate social value? The answer is that social enterprise can do all of these things…sometimes all at the same time.

Confusing? At first yes, perhaps. However, if we embrace the concept of social enterprise rather than a strict definition, then we may indeed see innovative solutions that will improve our society for generations to come.

When is a medical innovation a social enterprise?

  • An effective device to decrease hearing loss in musicians or audiences.
  • A low-cost prosthetic limb to make mobility possible for millions unable to afford traditional technology.
  • A medical equipment business that makes it affordable to get a used wheelchair, bathroom lift or other medical aid.

These are all innovations that have led to improved health, especially for individuals in our community or around the world with a low income. But which among them is a social enterprise?

  • They all generate revenue through the sale of a product or service. As such, they are enterprises.
  • They all seek to improve health of individuals in our community. As such, they have a social mission.
  • They all require investment of time, resources and assets in order to bring their social benefit to market. As such, they have had to get grants, donations, loans or other forms of start-up capital.

If they walk like a duck, and sound like a duck, then surely they are a duck?

The first case is that of Ear Peace, a company that produces various simple earplugs that reduce decibel levels. It is a product that looks like a thousand others in the marketplace, but its salesman tells me that this private company exists to ensure that people’s hearing is protected. Their slogan sounds altruistic: “Hear Today. Hear Tomorrow.” They are available for about $12-20 a set online. Their website features logos of a variety of non-profit hearing loss agencies and associations. (inferring-but not expressly stating-some form of endorsement)

The second case is Legworks, a Toronto based company that calls itself a for-profit social enterprise. They have developed a low cost prosthetic limb to “help people walk again.” Mobility, they highlight, empowers amputees to more fully participate in society, work, and family life. They offer this technology to those in need “regardless of where they live or their ability to pay.” This social mission is to be achieved by creating a margin on sales in more wealthy markets in order to cover losses in other markets. They note that some 85-95% of the 10 million amputees worldwide do not have access to an affordable prosthetic device, and they recently won the Para PanAm accessibility tech pitch award.

The last case is now a historical case.  STRIDE was a medical aid facility operating in Ottawa, but it closed down because the free rent they enjoyed was lost, and in spite of the value they brought to their customers who paid on a “pay what you can” model, they were not able to generate sufficient revenue to pay for the rent increase. The inventory of medical aids were distributed to agencies across the city upon their closure. The business ran on largely volunteer labour, and dozens of agencies would refer clients to STRIDE to access medical aids needed after suffering an injury or contracting an illness.

All of these businesses could be considered a social enterprise based upon their stated mission. But are they social enterprises? One way to determine whether these are businesses with “a primary goal of achieving a social mission”  is to question where the money goes. Ear Peace appears to create profits for its owners.  Legworks might be profitable, it might not—only time will tell—but it has received financial support from publicly funded bodies and it is unclear where any future profits might go. STRIDE was certainly in the business of social benefit, but it was unable to remain in business without jeopardizing its social mission; this tragedy was precipitated because of a lack of a profit motive.

These businesses are but a few in a large array of those marketing medical improvements, breakthroughs and innovations.  As consumers and social enterprise supporters, we are challenged to determine which of those businesses are motivated by social mission and which simply create better health outcomes for a profit. This is the challenge of trying to define social enterprise. 

What we do know is that if each of these companies were to flourish and grow, then we would have a healthier society, and that is a good outcome regardless of the labels we might apply.

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