Not all social enterprises have an excellent reputation; as a result, some don’t make it, i.e. their business fails. The bar is higher for companies that say they are social enterprises. Yet the same commercial viability rules apply. Therefore social enterprise startups need to balance the need for profit with their social impact. The good news is that consumers prefer to buy from brands that give back to the environment or people in need. If there is a choice, most buyers will choose the social enterprise, and this is good news for startups keen to make a difference and right some wrongs. So if you’re considering setting up a social enterprise, read on.
Social Enterprise Meaning
What is a social enterprise? Loosely speaking, a social enterprise in business can refer to a commercial project that addresses a particular social need. This could be an effort to improve an environmental issue or benefit a social group in need, such as refugees.
Often, this concept meshes with the idea of social innovation, which is the process of aiding social causes in an engaging, unique or innovative way.
Social Enterprise Origins
The concept of a social enterprise, an organization that aims to achieve social objectives while being financially sustainable, has been around for decades. However, the term was first coined by Nobel Peace Prize winner Muhammad Yunus in his 2009 book, ‘Banker to the Poor’.
Some argue that the idea of social enterprise was first described by Freer Spreckley in 1978, leading to debate over the true origin of the term. Regardless, social enterprises continue to grow in popularity as a way to address social issues while also generating revenue.
Regardless, the term is now used to describe large and small companies with a social cause.
For example, a business with outstanding hiring practices and that treats its employees well may use the term social enterprise, albeit loosely, as its true meaning suggests the company has more profound social objectives.
There are six types of social enterprises according to B The Change.
- Entrepreneurial nonprofit
- Socially responsible business
- Give one, get one & donate a portion of proceeds
- Conscious company
- Conscious brand
Plus, the outliers have some sort of social responsiveness built into the business model.
The type of social enterprise examined in this article is new companies based on a social conscience idea that still makes a solid revenue level. It’s growing because a recent report revealed that a third of the UK’s social enterprises are startups.
But what type of businesses are making their mark on the market and buying in with a socially conscious concept at their business?
Allotments And Biofuel
Social enterprise businesses in the UK have existed for years, and some have been incredibly successful.
One particularly prominent social enterprise is Divine Chocolate. The company was formed in 1998 as a partner with a Ghana cocoa farmer cooperative. The farmers of the beans gain a 45% share of the company’s profits and a 2% annual turnover. This benefits the farmers with economic stability.
The Big Issue
Other companies like The Big Issue have also seen great sales and helped people in need, but who are the new kids on the block making an impression with investors and customers due to their socially conscious business ideas?
In 2001, a team of individuals banded together to create OrganicLea on an abandoned allotment in east London. Working on renovating the property, they transformed it into a location where vegetables could grow once more.
With organic planting techniques, the aim was to keep the site as environmentally friendly as possible and perfect for seasonal produce. The business moved slowly, selling seasonal produce from the allotments and carefully managing the twelve-acre site. The small company now sells food to over 330 households and is constantly growing.
What’s fascinating is that this company is an entire business with fifteen full-time employees, and it does make a solid profit each year, selling produce across London.
The aim of the business continues to be to sell locally grown produce and entirely affordable for all. With food prices rising, the company felt it was essential to provide a food source that people could afford.
As well as this, the business aims to combat the environmental damage and impact on the environment that other larger farming companies have, offering buyers a more eco-friendly alternative.
With no shareholders, the business is entirely financially independent. As well as being a profitable business, the company set an example to inspire people and show the true potential and value allotments could still bring.
Another example of a social-conscious enterprise movement can be seen in 734 Coffee.
Knowing that social enterprise businesses prioritize social and environmental impact. 734 Coffee fits the mould as it is a company that partners with local co-op farms in Gambella to grow and harvest coffee while supporting Sudanese refugees.
They have focused on the USA market, and by selling their products to U.S. retailers, 734 Coffee can allocate a portion of its profits towards funding scholarships for refugees in need.
Being a social enterprise does not mean you don’t want financial success. This model demonstrates how businesses can positively impact society while still being profitable.
A World Without Plastic
Social enterprises are recycling plastic waste, including PlasticBank, which has stopped 1 billion plastic bottles from ending up in oceans. Concurrently with recycling strategies, there’s the need to remove plastic and use other materials. For example, in another part of the world, a company in New Zealand has taken its personal care products to a new level by not using plastic in its cosmetic products.
Ethique was born in 2012 when a university biologist had an epiphany while washing her hair that there was business potential in a company that offered cosmetic products without plastic bottles.
Instead, the company exports its products in biodegradable cardboard. While the business started through crowdfunding sites, it has grown 330%, with an OTE of NZD 2.2 million for the financial year ending March 2018. As well as this, the company has stopped 150,000 bottles from being manufactured, and their next aim is one million!
Indeed, while the company gains recognition for its innovative plastic bottle movement, the business is based on social enterprise. Certified climate neutral, cruelty-free, and a living wage employer, the company is also a startling example of how successful these startup social enterprises can be and the buying potential on the market.
Reputation Is Everything
Social enterprises need to ensure they have a good reputation. Otherwise, they will be called out, and customers may choose to take their business elsewhere like any business.
What can social enterprise businesses do to maintain a good reputation?
All businesses must be transparent about their operations, including their financial records and social impact. This helps build trust and confidence among customers, partners, and stakeholders.
Social enterprises should also engage in ethical business practices, such as fair trade and sustainable sourcing of materials. This helps them maintain their social mission and values.
Communication is vital, too, so customers, partners, and stakeholders know the excellent work being done. This can be through reports, case studies, and testimonials.
Engaging with the local community and other stakeholders helps build a strong relationship and support system for the business. The feedback will help them to improve their operations and social impact. Plus, it demonstrates a commitment to their social mission and helps build a positive reputation over time.
Social enterprises should be accountable for their actions and take responsibility for making mistakes. This helps build trust and credibility with customers, partners, and stakeholders.
It seems then that there is no reason why social enterprises cannot be ultimately profitable.
Discerning owners and entrepreneurs are catching onto the potential of setting up businesses that can do a lot of good for the environment and humanity, plus satisfy their need to get a healthy return on investment.