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What is a social enterprise - and how can my organization benefit from being more like them?

April 20, 2022

What is a social enterprise - and how can my organization benefit from being more like them?

Synopsis
8 Minute Read

The rise of the social enterprise is inspiring organizations to look at the way they operate and to determine how adopting aspects of the social enterprise model into their operations can benefit them, their employees and their community.

Contents

 


While social enterprises continue to evolve and redefine themselves, they share common features. A social enterprise is a revenue-generating organization that could encompass either a non-profit organization or a for-profit company. It has two goals: to achieve social, cultural, community economic and / or environmental outcomes and to earn revenue.

Operating as a business, a social enterprise manages its operations and leverages the power of the marketplace to redirect surplus funds towards these goals.

Some organizations are pure social enterprises, existing entirely to pursue social goals through their core activities. Here are some examples of notable social enterprises:

  • ACCFutures is a not-for-profit social enterprise offering a wide range of funding, financing and capacity-building services to local business communities in the Cornwall, Ont., area. Among its programs is an Indigenous-focused partnerships program that brings Indigenous and non-Indigenous partners together to build a more robust economy.
  • Vancity Community Investment Bank exists to provide financial solutions for Canadian projects designed to drive social, economic, and environmental change while remaining profitable and rewarding its depositors. Based in Vancouver, B.C., Vancity projects include anything from building projects that promote sustainable and affordable communities to financing for clean energy technology projects.
  • Hackney Community Transport is a successful bus transportation company based in London, England. Formed initially by community groups pooling their vehicle resources, the company faced the challenges of operating under a grant funding model. Instead, it reimagined itself and began to compete for commercial transport contracts. That allowed the organization to reinvest profits into transport services offering social impact while training people from disadvantaged groups as drivers, mechanics and passenger assistants.
  • TAS is a Canadian development company that exists to develop real estate projects that respond to social, cultural, economic and environmental drivers that impact neighbourhoods and communities. TAS projects include the development of affordable housing or business spaces designed to build social capital and promote the growth of sustainable neighbourhoods. It continues to own and manage these projects to ensure social benchmarks are honoured.
  • Kiva is a not-for-profit social enterprise based in San Francisco, California, that distributes funds received through grants, loans and donations to microfinance institutions, social impact businesses, schools and non-profit organizations around the world. Those donations are then loaned to entrepreneurs in communities underserved by financial services with the goal of helping them thrive.

Hybrid social enterprises are also plentiful

Becoming a more social enterprise is not an all-or-nothing premise. Some organizations redefine what they do to ensure their core activities reflect a greater purpose and are reinterpreted in light of social goals. Others redirect part of their focus to these issues and challenges in a fundamental way to drive mutually beneficial outcomes for their communities. The following are examples of hybrid social enterprises.

  • Calgary Housing Company transformed its operations away from traditional municipal affordable housing models to serve the wider purpose of promoting thriving, resilient mixed-income communities. By combining both private and social enterprise practices, the Alberta-based organization embarked on the even more powerful mission of building self-sustaining communities while making the organization itself more economically sustainable.
  • Highline Mushrooms, the largest independently owned and operated mushroom grower in Canada, took the initiative in 2010 to rethink its vision to fundamentally incorporate sustainability into its operations. The Crossfield, Alberta-based company has radically reduced its use of water, diverted more than 80 percent of its waste from landfills, redesigned its packaging to reduce environmental impact and developed new ways to grow mushrooms more efficiently. Those efforts go beyond the practical by working to raise awareness of environmental priorities among the broader community.
  • Danone relies on dairy products as its key ingredient. A decade ago, the Paris, France-based company began to look at the wellness of its suppliers, focusing on health, education, community development and support of low-income farmers. This has resulted in a more resilient, reliable, socially stable and secure supply chain for dairy products and growth for farmers and their communities.
Group of business people planning by placing sticking notes on a whiteboard

Many organizations already have the business resources, skills, and ability to generate revenue to help address and solve societal problems, which are often problems related to the organization’s core activities.

And organization leaders are finding many of the decisions they make every day are compelling them to examine the far-reaching consequences of those decisions on customers, the organization, their neighbours, their industry and their community. In essence, they’re finding the problems faced by their organizations are mirroring the complexity of the problems society is facing as a whole.

Realizing society’s challenges are also the challenges of the organization often creates the impetus to become a more social enterprise. By addressing society’s needs and helping to improve the environment in which their organization operates, they acknowledge their organization is a part of society, not an entity distinct from it.

This is not simply about transforming for-profit businesses into social enterprises, or about helping not-for-profits to identify revenue streams to fund their operations. Private enterprises and social enterprises, such as municipal administrations and non-profits, can learn from one another and develop in convergent and meaningful ways. Benefiting from each other’s experience allows organizations to innovate and help solve big problems.

Most organizations seek to do good, promote the well-being of stakeholders or work to support charitable causes. But not all these positive activities define those organizations as social enterprises.

One way to determine whether your organization is a social enterprise is to answer a simple question: Is your social enterprise goal and approach fundamental to your organization or simply helpful to it? If it’s just helpful, it represents a nice thing to do. If it’s fundamental, it can be nurtured to open an even more powerful set of benefits and abundance for the organization.

It’s not a selfish question to ask, because the social enterprise model is designed to benefit all stakeholders. For example, adopting social enterprise strategies can inspire employees and improve their job satisfaction / retention rates as they address significant social issues.

Many employees are looking beyond a paycheque to seek a purpose. They want the mission of the business for which they work to give their employment meaning. A Prudential survey of American workers indicates that 34 percent of millennials are planning to look for a new job, and many cite dissatisfaction with corporate culture as their reason for looking elsewhere. Similar rates in Canada might be a reasonable assumption.

Social enterprise strategies also can increase the creativity and autonomy of organization members. As they pursue solutions to social challenges, employees feel empowered to use their creativity to innovate. Organizations that transition in whole or in part to embracing a greater purpose or aspects of social enterprise often find themselves surprised by the level of creativity, energy and innovation their people bring to the table.

More benefits to organizations that adopt social enterprise strategies include:

  • Making a real impact on societal challenges
  • Creating a sense of community with other members of the organization, as they pursue a social purpose.
  • Creating synergies and partnerships with outside organizations that are pursuing the same social goals or solving different aspects of the same social challenge.
  • Creating new streams of revenue by exporting a social enterprise service to other organizations.
  • Helping a business run more efficiently, for example by identifying material or energy waste in pursuit of environmental goals.
  • Creating a closer connection between the organization and the customers or clients it serves.
  • Generating corporate goodwill, improving competitive advantage and building brand loyalty or brand advocacy.
  • Demonstrating a commitment to environmental, social and governance (ESG) standards.
  • Developing mutually beneficial relationships with stakeholders in their ecosystem—both inside and outside the organization. 
  • If you’re already a charitable organization or one that relies on donations or grants in the pursuit of public good, converting to a not-for-profit, revenue-generating model for something you’re already good at can make the organization less dependent on outside funding and more resilient.

Solving societal problems can represent a more complex challenge than a business problem. While a business problem can often be solved in a final and meaningful way, addressing societal problems may last a lifetime or are never entirely solved. That’s okay. The benefits to the organization are generated as much by the process of addressing those challenges on an ongoing basis as they are by solving them — and the purpose itself may evolve as the organization learns more, solves more and more clearly defines why it exists and how it can serve the community.

Adopting successful strategies employed by social enterprises

Different from a mission or a vision, a social enterprise seeks a purpose — a solution to a problem — and works toward a better world or community where that problem is solved. An organization can decide on how to do that in many ways, and often a third party can assist them in getting there.

Here are just some of the ways an organization can work toward becoming more of a social enterprise.

1. Become more purpose-driven:

Organizations cannot exist without a clear sense of purpose, at least not for the long run. Consultants can assist organization leaders in helping to identify or sharpen the organization’s true purpose, determining why the organization exists, explaining how business is carried out, and what the organization wants to be in the future. Through this process, leaders can identify social enterprise goals that are compatible with the organization’s purpose.

2. Develop an ESG strategy:

Developing a compatible environmental, social and governance (ESG) strategy can have a material impact on operating and financial performance, and help to better identify the organization’s priorities, including social purpose, and build the skills and a roadmap to meet those challenges.

3. Transform organizational culture the right way:

Ensuring you are developing the right organizational culture is critical to organizational success. Using leading-edge assessment surveys and design tools, advisors can help assess and shape the unique culture that sets your organization apart from others and identify a social purpose.

4. Consider your strategy & business planning:

If you’re a non-profit or charity that has already defined a purpose, an analysis of your operating model may identify potential revenue streams compatible with a social purpose that will make the organization more resilient and enhance its ability to deliver on that purpose. If you’re a for-profit company, perhaps you want to acquire a compatible existing social enterprise that will allow both organizations to do more or to create a subsidiary of your business devoted 100 percent to social enterprise. Becoming a more social enterprise requires sound business planning.

Leaders of an already successful enterprise commonly ask: “How do we ensure we continue to be the social enterprise we were founded as, instead of allowing success to make us more like our competitors?”

A third party can help ensure a social enterprise stays the course. For example, consider a music distribution company that built its existence on ensuring artists receive more fair compensation for their music. Building on that model, the organization grew substantially and achieved considerable financial success.

Yet, when they got to the size of about 100 employees, they were challenged with scaling-up structure and management practices that helped them keep their internal culture and experience closer to their leading and managing styles, without becoming too “corporate.” There are creative ways to address those concerns through innovative forms of business leadership, organization, strategy and culture, many of which can be learned from other social enterprises.

A social enterprise requires a purpose that emerges from within the organization. Outside expertise can help identify, sharpen and maintain that purpose so the organization’s resources can be deployed effectively to meet that challenge.

Len Nanjad is a partner on MNP’s Consulting Services team in Calgary focused on organizational renewal. Len delivers leading-edge, innovative solutions to redesign public and private sector organizations for rapid growth. He is a Certified Management Consultant (CMC) and Master of Human Capital Strategy (MHCS).

Contact us

To learn more about how MNP can help your organization explore the benefits of adopting a social enterprise strategy or pursue organizational renewal, contact Len Nanjad, Partner.

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