Tomorrow, Social Enterprise Day, we celebrate the great work that social enterprises are doing all over the world.
But what exactly is a social enterprise, and how does it differ from other social good initiatives? Even as they become more mainstream, there remains uncertainty around differences between a social enterprise and a corporate social responsibility (CSR) program.
Simply put, a social enterprise is proactive in its approach to social change, while CSR is reactive. Doing good is a permanent fixture of a social enterprise’s business model. It is weaved in to the corporation’s fabric and is part of the organization’s foundation. On the contrary, a CSR program is merely how corporations create positive social impact through their existing practices.
But let’s dig a little deeper.
According to Social Enterprise Alliance (SEA), there are three ways to be a social enterprise:
- employ people whose access to mainstream jobs is inhibited
- create social or environmental impact through products and services
- contribute a portion of profits to nonprofits that fill the gaps of social need
TOMS, the shoe company, is a social enterprise. Its business was founded on an idea to create positive social change. For every pair of shoes it sells, it gives a new pair to a child in need. It also reinvests profits into positive social change and provides work for people in developing countries.
Social enterprises can be either for- or non-profit, but one reason the for-profit model is such a force for social change is the double bottom line—meaning these organizations use business metrics to measure the success of their social impact and fiscal performance. Analyzing social impact this way allows a company to reexamine and capitalize on its effectiveness for change.
An example of CSR, on the other hand, can be found at clothing manufacturer, Levi Strauss. Levi’s looks to reduce its environmental footprint by incorporating sustainable practices in its manufacturing. Its Water<Less initiative, launched in 2011, works to minimize the amount of water used during the manufacturing process and with this, the company has been able to save more than two billion liters of water to date. Not only do they incorporate over 20 water-saving techniques in their own production, but they share those techniques with others to “inspire industry-wide progress.”
The difference between TOMs and Levi’s is in their origins. When Levi’s opened for business, its goal was to sell jeans. Its social programs were reactive. TOMs was created to put shoes on the feet of children in need―it is proactive in pushing for social change.
More and more, consumers and business partners are favoring companies that strive toward positive change. A 2017 study by Cone Communications found that 63 percent of American consumers wanted businesses to lead social and environmental change and that 87 percent would buy a product or service based on a company's advocacy for a social issue. This arises in the hiring process as well. Millennials, soon to be the largest population in the workforce, are far more likely to apply for or take a job at a company that pushes for social change.
With this constantly evolving consumer landscape and standards in which we hold business to, it’s more important than ever to understand organizations’ social impact. We hope that we’ve been able to help you better understand the difference between these approaches to positive change and equipped you with the knowledge to ignite some powerful discussions within your own organizations.
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