Social enterprise is one of the hot new buzz words these days. Other buzz words include social entrepreneur, impact investing, philanthrocapitalism, and social innovation. These words sound really exciting, maybe a bit foreign.
Don’t panic. Social enterprise is less confusing or foreign than it sounds. In fact, we see it almost every day. . . After all, it is Girl Scout cookie season.
Girl Scout cookies are a prime example of social enterprise:
- There is a profit created by the sale of cookies.
- There is a social good realized when the girls learn entrepreneurship and when the money from the sales provides funding for the overall program.
Not so scary anymore, huh?
Now, let’s talk about practice. There are two primary ways in which a nonprofit can be or have a social enterprise:
1) Earned Income: nonprofits engage in social enterprise activity when they create earned income. These business-like activities create a profit for the agency which then is reinvested to further the mission. For example:
- A nonprofit theater company charges for a ticket to a performance.
- A nonprofit hospital charges patients for services.
- A disaster preparedness agency sells earthquake kits.
2) Creating a for-profit company: nonprofits can actually create and own a for-profit company.The for-profit provides a revenue stream for the nonprofit corporation.
- Jewish Family Services (JFS) created and owns CARS, Inc. (Charitable Auto Resources, Inc.) CARS helps people to recycle old vehicles. It provided about $1.5 million in 2011 to JFS according to JFS’ 990 tax return on Guidestar.
- CalNonprofits is a nonprofit organization that owns a for-profit company called CAN Insurance Services. CAN provides insurance services to nonprofit organizations. In 2010, CAN provided CalNonprofits more than $4.3 million in income according to 990s listed on Guidestar.
There are lots of other types of social enterprise which I’ll discuss in further detail in other posts. These include cause marketing, L3C corporations, Benefit Corporations, and cross-sectoral partnerships.
In case you’re curious, the granola pictured in this post is from a for-profit social enterprise (L3) called “Your Choice Brands.” Consumer can log onto a website and donate a portion of the proceeds from the purchase to the nonprofit of their choice. . . I’ll tell you more about these types of social enterprises another day.
The bottom line though is that social enterprise is not rocket science and you don’t have to be Gandi-like to be a social entrepreneur.