The Advantages of Social Enterprise

Image of an Opportunity SignSocial enterprise can provide a range of benefits to organisations looking to address social, cultural or environmental challenges.

Undertaking social enterprise can help organisations achieve financial independence, grow their activities, improve their ability to achieve their aims and make themselves a more attractive prospect for donations. These benefits have the potential to allow the organisation in question to use traditional sources of funding, such as charitable donations or government grants, in a much more effective way. (Weisbrod, 1998).

Sam Rye on the advantages of social enterprise

Sam Rye, Co-founder of the Collaboration Cafe in Wellington, says “social enterprise offers autonomy through independence, emancipation through entrepreneurship”. Hear his description of social enterprise and its benefits on YouTube.

Financial independence

The most obvious of social enterprise’s potential benefits is the opportunity to gain financial sustainability and independence.  Generally, the organisations that have sought to address social, cultural and environmental challenges have been non-profit organisations that have relied on charitable donations and government grants to fund their activities.

This reliance means that organisations are not in control of how much funding they will receive.  This is decided by factors outside their control, such as changes to government rules and regulations, economic conditions, and competition for limited donations or grants.

Social enterprise means having a stream of funding under your control.  Funding derived from business profits can be used to replace or supplement charitable donations and government grants. (Lazarevski, Irvine, and Dolnicar 2008)

The Auckland based Chinese New Settlers Services Trust uses funds from business activities to supplement the other funding they receive.

Growth of scope and size of services to community

Under traditional models of funding through grants and donations, organisations have a difficult time growing the size or scope of their services.  The addition of financial resources from a business allows the organisations to spend money on trying out new services not otherwise funded. It also allows them to invest in growing the scope of the business and social service.  Essentially, social enterprise provides a way for an organisation to make their funds go further. (Smith, Cronley, and Barr, 2012)

Business can contribute to the mission

Beyond providing purely financial resources, social enterprise also gives organisations opportunities to explore innovative ways of achieving their mission.

For instance, a business could hire only workers who have a disability or a financial institution could provide loans at a discounted rate to environmentally friendly businesses.  Ultimately, social enterprise may not only increase funding but also help organisations carry out their social missions directly.

The InsideOut Project in Wellington hires people with learning difficulties to provide pet care services and undertake odd jobs. Their experiences give staff an opportunity to develop workplace skills and a connection to their local community that they may not otherwise have.

Perceptions of the organisation by staff and donors

Undertaking social enterprise may also have an impact on how an organisation is perceived.  For instance, donors from a business background may view the use of business activities to achieve social missions as a positive and pragmatic approach.   Additionally, the characteristic of developing sustainability could make potential donors eager to support an organisation – knowing that their money could go further. (Smith, Cronley and Barr, 2012)