Social Enterprises 101: Understanding Their Role in Solving Global Challenges

Everywhere, in every country and sector, we come across terms such as sustainability and social change today. It has become a necessity to promote these changes and address various social challenges head-on. The success of these changes are a result of social enterprises.   

Let’s talk about social enterprise today. This blog serves an introductory piece that coincides with various concepts, including entrepreneurship, business sustainability, addressing social problems and fixing them, much more.  

Meaning of Social Enterprise

A social enterprise is a business that looks into offering societal and environmental well-being by obtaining profits and providing funds for social programmes or helping entrepreneurs and small businesses. 

As the mission is to drive social change positively, the methods used can be entrepreneurial in nature. But, a fixed organisational structure is required to self-sustain and operate. 

There are many definitions of social enterprises as well. One is from the OECD (Organisation for Economic Co-operation and Development). 

This organisation defined it in the late 90s as - “any private activity conducted in the public interest, organised with an entrepreneurial strategy, whose main purpose is not the maximisation of profit but the attainment of certain economic and social goals, and which has the capacity for bringing innovative solutions to the problems of social exclusion and unemployment.”

Global Landscape of Social Enterprise Sectors 

According to a report from the British Council, here is a division of sectors that have social enterprises worldwide. 

Agriculture, Fisheries, and Dairy

In countries, including Ghana and Vietnam, the focus is on sustainable agriculture practices. You can find social enterprises offering local farmers and community support. 

Arts, Culture, and Heritage

This sector collectively invites more social enterprises in Malaysia, Singapore, and Hong Kong. The purpose of these enterprises is to preserve cultural heritage, promote local artists, and creativity at a community level. 

Business Consultancy, Development, and Entrepreneurship Support

Nigeria has among the largest number of social enterprises that support business consultancy, development, entrepreneurship.

Creative Industries

Indonesia has a significant number of creative industries that focus on innovation, design, as well as cultural expression.  The same goes for Morocco. 

Education 

Quality education and skill development opportunities had been a challenge in Nigeria, Pakistan, and Singapore. The social enterprises here address those issues. 

Financial Services and Energy/Clean Technology

Among many, India is fast adopting social enterprises that aid in providing financial services and clean technology.

Environmental Sustainability

Nigeria, Morocco, and Malaysia are also focusing on the environmental sustainability. The social enterprises demonstrate a proactive approach to overcome the challenges. 

Food

India has many social enterprises operating in the food sector. The same is with Ghana and  Greece. The challenges these social enterprises are focusing on are improving food security, making agriculture sustainable, and promoting healthy food eating habits. 

Healthcare

Healthcare access for the underserved populations have been an alarming issue in Pakistan. Social enterprises are focusing on this sector more in the country today.

Hospitality 

Vietnam is a fairly cheap country to travel to. However, in the past there was little focus on responsible tourism. Today, social enterprises focus on supporting local communities and making tourism eco-conscious in the country. 

Manufacturing

The manufacturing sector has a seen a rise of social enterprises that are helping with the local production, creation of jobs, and developing the economy as a whole. 

Business Model of a Social Enterprise: Structure and Types 

Social enterprises are usually self-sustaining with a market-driven approach. But there are different ways to sustain such as an enterprise.

The business model of such endeavours broadly comprises two strategies. 

One is the strategy to operate. There is a defined organisational structure with a clear understanding of roles, autonomy, and decision-making. 

Secondly, you will find that a social enterprise has a separate strategy for acquiring resources. That is mainly financial because acquiring bank funding can be challenging unless a company has sufficient resources. Another resourcing requirement is the employees. 

There are quite a few categories of social enterprise business models. These models describe how the social enterprises operate. Some of the popular ones that you can find in India are mentioned in below. 

Types of Social Enterprise Business Models 

Entrepreneur Support Model

In this type of operational business model, the social enterprise helps entrepreneurs to build their business. The support can come through training and technical assistance. 

Typically, organisations that use this model are microfinance and business consultancy services. Some examples of microfinance organisations are Equitas Small Finance and Hindusthan Microfinance Pvt. Ltd.  

Market Intermediary Model

Here the social enterprise provides services to entrepreneurs, small firms and/or cooperatives so they can access markets. 

Fairtrade International is one of the most popular examples using this model. By working with small-scale farmers, this organisation connects them to the global market stage. It also focuses on promoting fair and sustainable practices. 

Service Subsidisation Model

This model is used by social enterprises that sell services or products and with the income earned, they help fun social programmes. There can be any type of business adopting this model. 

Patagonia is one big example of this. It donates for various programmes from the profits it earns. 

Features of a Social Enterprise

International membership bodies, such as the SEUK (Social Enterprise UK), have explained the characteristics and features necessary to be a social enterprise. 

Have a look at the features of social enterprise, as highlighted by it. 

• Have a clear social or environmental mission set out in its governing documents and be controlled in the interest of that mission. 
• Be independent of state or government control, and earn more than half of its income through trading.
• Re-invest or donate at least half of its profits or surpluses towards their mission.
• Be transparent in the way they operate and the impact they have.

Scope of Social Enterprises

OECD provides a broad overview of the scope of social enterprises in the following way. 

• Social enterprises are a mix of public and private sectors.

• Even though they work differently, they all try to help disadvantaged groups find jobs and provide goods and services.
• They use what's around them to do better socially and economically.

Now, an expanded view of the scope can be understood better with Prof Jo Barraket, from the Swinburne University of Technology. He describes the scope of a social enterprise in relationship with economic development at one level. In the second level, he talks about its relationship with the local government. 

Extending Collaborative Efforts in Community Development 

Social enterprises are actively involved in fixing issues in rural and regional communities. This indicates a collaborative effort with local governments to address economic and social challenges at the grassroots level.

Recognising and Utilising Local Resources 

Social enterprises recognise and utilise latent value in people, physical assets, and community capital. This suggests a partnership with local authorities to harness local resources for community development projects.

Supporting Niche Market Development

Social enterprises are engaged in niche market development and modelling emerging industries, particularly in green and creative sectors. 

Local governments may provide support or collaborate with social enterprises to promote sustainable economic growth and innovation in these areas.

Deep Scaling 

They focus on creating meaningful impact within local communities rather than expanding their operations on a large scale. 

Local governments may support this approach by providing tailored assistance and resources to help social enterprises thrive locally.

Addressing Capacity Challenges in Procurement Processes 

There is evidence of uneven capacity among social enterprises to engage in procurement processes, similar to small and medium-sized enterprises (SMEs). 

Local governments can play a role in addressing these capacity challenges by providing training and technical assistance. They also simplify procurement procedures to enable social enterprises to participate more effectively in public procurement opportunities.

Where Can You Go From Here?

The goal for explaining social enterprise was to help you learn concepts surrounding entrepreneurship and startups. 

Secondly, since the blog offers a fine vantage point of an overview, you can use this understanding and explore courses below. 

• Coursera’s Unleashing the Impact of your Social Enterprise - Highly recommended if you are just planning to work and learn more on the concept of social entrepreneurship. 
• FutureLearn’s Social Enterprise: Business Doing Good – Do it if you want to get a foundational level training on launching your own. 
• PlusAcumen’s Human Capital Strategy - An intermediate level one, it covers the strategical elements that improve your business financial acumen.