What is a social enterprise
Social enterprises are businesses that trade to intentionally tackle social problems, improve communities, provide people access to employment and training, or help the environment.
In the Australian context, there is no legal structure called social enterprise but are typically defined as organisations that:
- Are driven by a public or community cause, be it social, environmental, cultural or economic
- Derive most of their income from trade, not donations or grants
- Use the majority (at least 50%) of their profits to work towards their social mission.
Why do social enterprises need to make a profit
If a social enterprise does not make a profit, it is dependant on philanthropic or government support to stay afloat. Some social enterprises exist knowing that they need to raise funds every year to continue operating. These social enterprises which are reliant on noncommercial sources of support believe their social returns merit the grants they seek and secure. Most social enterprises seek to generate a profit from trading activity because they are ineligible for grants or because they choose to operate this way. No matter how you look at it, income must exceed expenses over time.
Social enterprises can broadly be categorised into three principle motivations:
- Employment: Businesses that provide employment, training and support for disadvantaged groups.
- Community Need: Businesses that create or maintain products and/or services in response to social or economic needs in the community, not met by the market.
- Profit Redistribution: Businesses that exist to generate profits which are redistributed to social programs or charitable activities.