Social Enterprise UK, the national membership and campaign body for social enterprises and their supporters in Britain, describes them as businesses that are changing the world for the better. According to the organisation, there are more than 100,000 social enterprises in the UK, which contribute 60 billion pounds to the economy and employ approximately 2 million people. But what makes social enterprises a point of interest? Why are they gaining prominence in recent years? And what makes them different from a charity on one hand and a corporate enterprise on the other? This blog post will pause and rewind the TEDxFromHome interview with Lewis Baxter, an award-winning 21-year-old social entrepreneur who is helping those suffering from mental health issues through his NGO, Chit-chat. In this article, I will take an in-depth look at the emerging and rapidly growing idea of a social enterprise and whether it can be regarded as, in the words of Lewis:
"The Future of sustainable business practices."
In the modern world, industries (be it agricultural, technological, or fashion etc.) are giving greater priority to sustainability; businesses have started taking serious account of the impact that their activities will have on their surroundings. The concept of ‘Corporate Responsibility’ is also becoming the talk of the town these days. In simplest terms, corporate responsibility seeks to add value to an organisation’s activities by making sure that they have a long-lasting positive impact on the workplace, marketplace, community and environment. Recognising corporate responsibility is essential to ensure that the society moves forward in an economically, environmentally and socially sustainable manner. But can corporations achieve sustainability without compromising on their profits?
This is where social enterprise comes in. Social enterprises are businesses that blend social objectives with profit-making. Like traditional business organisations, social enterprises aim to generate profits, but instead of distributing them to shareholders as conventional businesses do, they reinvest or donate those profits to create a positive impact on society. This investment allows social enterprises to tackle social issues, improve people’s livelihoods, provide employment opportunities for those who are furthest from the market, support vulnerable communities, and protect the environment. According to the State of Social Enterprise Survey, more than 30% of all social enterprises in the UK are working in the most impoverished regions of the country, and almost 60% of social enterprises employ at least one person from the disadvantaged sector of the labour market. Social enterprises are trying to make business work for everyone, not just for the wealthiest business tycoons and investors.
Although profits are not the primary source of motivation for a social enterprise, revenue still plays a vital role in the sustainability of such a business venture. A social enterprise is self-sustaining and creates surplus for expansion without constant outside investment. In fact, it is this sustainable revenue of a social enterprise that distinguishes it from a traditional charity which relies on external funding in the form of grants, donations and such to achieve its social goals. Moreover, charities tend to focus on rescue and immediate relief of sufferings and social problems. Social enterprises, on the other hand, are more long-term in nature. They systematically seek to find the root causes of the issues and focus on rebuilding. If you invest a pound in a charity, it goes towards a charity and ends there. However, if you invest a pound in a social enterprise, it creates a ‘snowball effect’, and that investment keeps on growing and growing, and we end up having an impact on a lot more people.
So, what do social enterprises look like in practice? From local start-ups to multinational companies, social enterprises comprise of a variety of businesses. Some social enterprises can directly address a social need through innovative products. An example of such a social enterprise is the Dutch company ‘Fairphone’, which aims to design smartphones that are produced and developed with minimal environmental impact. Other social enterprises serve social justice by employing deprived people at a fair wage. Divine Chocolate is a global social enterprise based on this model; they believe that producers should earn a share of the profits they generate, so a large shareholder of the company is Kuapa Kokoo Farmers’ Union. They’re a cooperative of around 100,000 cocoa farmers in Ghana, who grow the finest quality cocoa for the company’s everyday and seasonal collections. Some social enterprises even follow the give-back model and serve the common good by giving back to the community for every purchase made. Roma Boots, an American fashion company, can be regarded as a classic example of a social enterprise based on the model. For every pair of Roma Boots sold, a brand new pair filled with educational supplies is donated to a child in need. It is clearly evident that, in a variety of ways, social enterprises are revolutionising the way businesses and corporations function, aiming at a positive impact on local communities all around the world.
However, running a social enterprise isn’t always smooth sailing. In a constant attempt to help the wider, underprivileged community through business-for-good activities and social activism, owners of social enterprises find themselves at an economic disadvantage time and time again as their income is not assured because of the volatility of their revenue sources. It makes sense; if investors know that social enterprises tend to fail more often than standard businesses, they might be reluctant to invest in them. As rightly mentioned by Lewis, this attitude towards social enterprise needs to go, and
companies must be "applauded for their response to socially good projects."
And such a change in perception towards emerging social enterprises might even help them perform better in a business environment.
As highlighted by Lewis in the interview, as a social entrepreneur,
“You don’t wake up in the morning and check your email and see a huge pay cheque, but what you do see is that a lot of people have been hugely impacted by the work that you are doing.”
This spirit of generosity and selflessness that social enterprises bring to a self-centric and profit-oriented economy is what makes them so special. It is not sustainable for businesses in the modern-day world to be all about making money. Business should be about responsibility. It should be about public good and not private greed. A social enterprise is a business for good, and when it profits, society profits.
Written by Atharv Joshi. Edited by Robert Fletcher and Aada Orava.
You can view the full interview with Lewis Baxter by clicking here.
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