Social Enterprises
Business: AQA A Level (2023 Specification), topic 1.2.5
Social Enterprises
Social enterprises trade to tackle social problems. Social enterprises can take different forms.
Definition
- Social enterprises are businesses that trade to tackle social problems or improve communities.
- Unlike pure charities, they generate their own income through selling goods or services, which is reinvested into the social mission.
- There are different legal forms a social enterprise can take.
- Some examples are the Big Issue or Change Please helping the homeless, Belu Water with clean-water projects and Divine Chocolate helping cocoa farmers.
Forms of Social Enterprise
- Some social enterprises choose to register as a standard private limited company (Ltd) to protect owners with limited liability.
- A Community Interest Company (CIC) is a limited company that has an asset lock, which means all profit must be kept within the business to support its social mission.
- Co-operatives are businesses owned and run democratically by their members. Some pursue a social aim.
- There are also charities with a trading arm to generate income for the charity work.
Advantages of Social Enterprises
- Sense of purpose motivates employees and employers.
- They have access to special funding, such as social investment, community grants or crowdfunding.
- It is beneficial for the brand reputation, as customers are willing to support social impact.
- They respond to social needs.
Disadvantages Social Enterprises
- Limited access to traditional finance, as profit is not the priority.
- Balancing the social mission with the financial survival may be difficult.
- It may be more difficult to compete with larger, profit-driven businesses.
- Social impact is harder to measure than profit.
Test yourself on Social Enterprises
What is the main feature of a social enterprise?
What is a major disadvantage faced by social enterprises?