Study Notes: Business Finance & Accounting

Social enterprises

One kind of business structure that has grown rapidly in the UK in recent years is the “social enterprise”. Social enterprises are the most common form of “not-for-profit” enterprises.

The clue in the phrase “not-for-profit” tells you much about the aims and objectives of social enterprises.  It is important to appreciate that a social enterprise is not a charity.

Social enterprises are defined as:

“Businesses with primarily social objectives whose surpluses are principally reinvested for that purpose in the business or community, rather than being driven by the need to maximise profit for shareholders and owners’.

In other words, a social enterprise is a proper business that makes its money in a socially responsible way. These ventures are not necessarily formed to reinvest all profits into the communities. Social entrepreneurs can make a good profit themselves.  However, their business model is also designed to benefit others.

Social enterprises complete alongside other businesses in the same marketplace, but use business principles to achieve social aims.

A few things all social enterprises have in common are:

• They are directly involved in producing goods or providing services
• They have social aims and ethical values
• They are self-sustaining, and do not rely on donations to survive (i.e. they are not charities)

Well known examples of social enterprises include Divine Chocolate, the Eden Project and fair-trade coffee company Cafedirect.