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These days, consumers have a growing list of expectations when shopping for goods and services. Where does the product come from? How much environmental devastation has been caused by which multinational? For each of these considerations, there seems to be a different type of organization that believes it has the answer.
Traditional businesses think the free market will solve social injustice through competition. B Corps are sure that stricter regulations are required to ensure businesses do their part. There are also charities, who consider social responsibility through donations as the best option. In this article, we’re going to look at social enterprises. While we all know about corporations and charities, and you can find out more about B Corps here, social enterprises aren’t so well-known.
So what exactly does Yunus mean when he describes social enterprises as “a new kind of capitalism?” To put it simply, a social enterprise is a sort of hybrid between the traditional business and a non-profit charity. While social enterprises do make money, the primary purpose is “to create social, cultural, and/or environmental value,” say Common Good Solutions.
The whole idea is that the whole community should benefit from the businesses that operate in that area. There are two main ways social enterprises accomplish this goal.
So how does a social enterprise create this ‘value?” The first differentiator between a standard company and a social enterprise is recruitment. Typically, a traditional business employs whoever is considered the best fit for that role. Skills and experience are usually the main considerations when staff are appointed. A social enterprise works a little differently. There is a tendency for the workforce to be from disadvantaged backgrounds or from at-risk sections of their community.
One amazing benefit of social enterprises is the way they can help uplift these disadvantaged people, not only with jobs but with vital skills and experiences.
More emphasis is placed on employee well-being than what might be found at a big company, with long-term relationships with employees placed on an equal, if not higher, footing with profit and expansion.
Let’s look at Babban Gona as an example of how a social enterprise can do exceptional things for its employees. Nigeria has a 50% youth unemployment rate, so this social enterprise offers agricultural training to these young people seeking work. Through this training program, the yield of these small-hold farms is 2.3 times the national average.
Speaking of profit, another key difference between a social enterprise and a regular business is how it considers profit.
As we mentioned earlier, social enterprises are for-profit organizations. However, unlike traditional businesses, this profit isn’t spent on shareholder dividends. The majority of the profit gained from social enterprises is reinvested either back into the community or a global issue; typically by trying to reduce poverty or limit the impact of climate change.
What this means is the whole initiative is focused on the community. The workers are those who live in the area, the organization serves consumers in that district, and the money raised through this goes back into these communities. In a nutshell, “the more profitable a social enterprise is, the more it can invest in activities and resources that create social benefit.”
There is a rising trend of consumers buying local, from a source that cares for the environment and the workers who helped create the produce.
Not only that, but laissez-faire capitalism creates the paradox of companies seeking endless profit in a world with finite resources. These factors have created a void that needs to be filled: innovative and forward-thinking companies that still put the environment and people first. As Vince Cable writes, “there is a growing sense that the old-fashioned model of large companies which are focused on profit-maximization is not sustainable, and it is not socially acceptable either.”
With what we have learned thus far, that is, social enterprises being community-based organizations with impact rather than profit being the bottom line, it is easy to be under the false impression that these organizations will always be little acorns compared to the mighty oaks of multinationals. But actually, some of the biggest social enterprises are established household names and offer genuine competition to corporate hegemony.
Ever heard of Goodwill? We thought so. Goodwill has transformed the lives of almost a quarter of a million people by providing everything they need to be successful. Not only does Goodwill help its workers, but has 164 stores all over the United States. The scale of Goodwill really is mindblowing when you consider its primary goal isn’t to make a profit. The size of the organization proves how successful a social enterprise can be.
Of course, this doesn’t mean a social enterprise has to serve 25 million customers every year in order to be considered a success.
One of our favorite enterprises is Swipe Out Hunger. Student hunger is a frightening reality on college campuses in the US today with one in three students facing food insecurity.This social enterprise decided to do something about it. Swipe Out Hunger has provided 2.5 million nutritious meals to students through donation-based advocacies. It’s even helped pushed legislation through, not bad going for a few college students!
There is no simple solution in eradicating the crises of today. Climate change, poverty, and social injustice are problems that not one body alone can absolve. Governments, businesses, and individuals all have to collaborate in order to help those affected as well as tackling the root causes of these injustices.
In conjunction with this, we can’t underestimate the power the traditional business has in creating and manufacturing consumer goods at reasonable prices that may prove to be impossible to replicate with alternative business models.
A more pertinent question may be: can social enterprises play a bigger role in society? The answer to this question is a resounding: yes. We hope this article has shown the possibilities social enterprises can play in our communities. We implore consumers to really think about the source of the products and services they are purchasing.
There’s also merit in governments increasing the quantity and capital of the grants given to these community-based businesses. The greater the strength of these enterprises, not only can produce remarkable achievements, but also places greater pressure on traditional businesses to act in ways that are more responsible to the areas they work in, and the environment their business depends on.