Even with all of the recent buzz surrounding social enterprises, many people are still left in the dark about what exactly a social enterprise is and what they do. Perhaps even worse, there are several common misconceptions about social enterprises that are leaving people confused about how social enterprises are effective mission-driven businesses. While there’s still some debate around what exactly a social enterprise is, we know for sure what they are not. That being said, here are 5 common misconceptions about social enterprises.
A Social Enterprise is a Glorified Charity
This is probably the most common of the misconceptions about social enterprises. For some people, the line between a social enterprise and a charity is blurred. While donations in the social entrepreneurship world are certainly welcomed—and sometimes asked for—a social enterprise is not dependent upon charitable donations. While the general aims of a charity and a social enterprise may be the same, a charity's dependence upon generous donations limits its impacts. Because a social enterprise incorporates a successful business model, it is able to combine donor contributions with revenues in order to produce meaningful and sustained impacts. This could look like a charity being able to provide a single free meal, versus a social enterprise providing education and resources to support a community in growing their own food. Additionally, while a social enterprise may choose a not-for-profit structure (which is a must for a charity), there are certain legal characteristics under the Charities Act 2013 that will be difficult to meet given their business structure.
For Social Enterprises, Mission and Profit are Equally Important
While we're on the topic of profit, we can touch on this common misconception: that social enterprises focus equally on profit and mission. While they operate as a business, a social enterprise’s main focus is impact, not the bottom line. Simply put, a social enterprise exists to fulfil a certain mission, not make money. Unlike a traditional business, a profitable year is not the main indicator of success. Instead, success depends on the achievement of a specific social or environmental outcome. This isn’t to say that a social enterprise shouldn’t focus at all on profits. In many cases, a social enterprise’s revenues will go back into supporting their mission—and are absolutely necessary. However, when a focus on profits outweighs the focus on mission, it could compromise the latter.
Social Enterprises Only Exist in Certain Sectors—Like Education and Healthcare
When we think of “doing good,” many of us commonly think of certain sectors where there is a demonstrated need for support. Healthcare and education are quick to come to mind but in Australia, where there are an estimated 20,000 social enterprises, it’s safe to say that the impact of social entrepreneurship can be felt far and wide. There certainly are social enterprises that are tackling some of the world's biggest problems in the education and healthcare sectors, but there are also social enterprises operating in a wide range of range of other industries including transport, manufacturing, food service, construction, environment, social assistance, and more. From producing orange juice to designing dresses, impact and innovation come in many forms—and we’re thankful for that.
Social Entrepreneurship is Just Another Way to Talk About Corporate Social Responsibility
Simultaneously making a profit and a positive impact sounds pretty familiar, doesn't it? While some people are quick to conflate social entrepreneurship with corporate social responsibility (CSR), this couldn’t be further from the truth. There’s one main distinction between the two: CSR is generally reactive when it comes to social change, whereas a social enterprise is proactive. Doing good and making a positive impact is what a social enterprise is all about. Alternatively, a corporation may be trying to counteract some of their negative environmental and social impacts by creating a program that ties into their existing practices but is designed to benefit society.
Social Enterprises Are Unsustainable
Between concerns about scale and financial sustainability, there is some general scepticism when it comes to social enterprises and their long-term impact. In a departure from traditional business models that are focused on profit, some are concerned that the “double bottom line” focus on profit and impact are problematic. While we can see the problem with a focus on profit that undermines an organisation’s mission, the success of millions of social enterprises around the globe goes to show that social enterprise can in fact be sustainable, or at least viable. This opens up a can of worms, as sustainability is perhaps an unreasonable and unrealistic metric for many social enterprises—at least how we understand it. Social entrepreneurship is hard. And when it comes to having transparent supply chains, paying living wages, using ethical practices, earning sustainable profits, and having a positive impact—this misconception becomes a good talking point about the demands placed on social enterprises.
That said, these common misconceptions about social enterprises give way to exciting conversation and collaboration. There’s never been more interest in social entrepreneurship and how business can be used as a catalyst for positive change. To continue to learn and do more, check out our membership. Perfect for a variety of changemakers, it’s your one-stop-shop for impact opportunities and connection.