What is social enterprise?

image of hands with coins in themA social enterprise is an organisation that seeks to tackle social, cultural or environmental challenges.  Like a traditional business, a social enterprise sells goods and services.  However, instead of profits being distributed to shareholders or individuals, they are used to support the organisation’s mission.

Often social enterprises exhibit a mix of the characteristics of both businesses and not-for-profit organisations.  A large variety of organisations call themselves a ‘social enterprise’.  These generally fall into two broad categories; organisations that are established with social enterprise in mind, and organisations that adopt social enterprise practices to replace or supplement existing fund raising activities. (Kirkman 2012)

There is no single definition of social enterprise. Government and non-government organisations around the world use a variety of characteristics to define social enterprise. The Department of Internal Affairs and the Office of Ethnic Affairs define a social enterprise as an organisation that demonstrates:

  • a social, cultural, or environmental mission;
  • a substantial portion of its income is derived from trade, and
  • the majority of its profit/surplus is reinvested in the fulfilment of its mission.

Additionally, social enterprises are self governing, not part of the State and have the independent authority to wind up their own operations.

Survey of social enterprise in New Zealand

In 2012, the Department of Internal Affairs surveyed a range of organisations and individuals working in social enterprise in New Zealand (PDF - 539k).  The purpose of the survey was to get a clearer sense of the types of social enterprises operating in New Zealand and the challenges they face.

Why social enterprise is important

Social enterprise is not a new idea.  Over the years many people have sought to use their businesses to benefit wider society.  However, social enterprise is being increasingly recognised as a credible means to address social, cultural or environmental challenges that cannot be solved by not-for-profit organisations, the private sector or the government alone. (Bloom 2009; Smith, Cronley and Barr, 2012)

A number of things have contributed to the emerging popularity of the social enterprise business model, including increasing competition for both public and private economic resources, the economic downturn leading to restricted philanthropy, increasing awareness about social enterprise, and the potential for unrestricted income. (Smith, Cronley and Barr, 2012; Weisbrod, 1998)

Essentially, social enterprise has become an important means for those trying to address social, cultural or environmental challenges because it provides an opportunity to develop sustainable and independent funding for activities that have traditionally required charitable donations or government grants. (Weisbrod, 1998)

Read more about the social enterprise sector in New Zealand and around the world.

You can find a range of reports, presentations, YouTube videos, articles and website links that provide information about social enterprise.