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Defining Social Entrepreneurship

October 24, 2011

The term “social entrepreneurship” is being thrown around so carelessly that a disambiguation of the term is well needed. Widely referenced features a few especially helpful pages that help us understand social entrepreneurship and enterprises. We’ll summarize their definition below, but feel free to explore their site, and its extensive list of link to others.

Social enterprises use a “market-driven business model to address critical social and environmental issues.” Social enterprises may provide goods and services to seek profit, similar to a traditional business. What distinguishes social enterprises from traditional business enterprises, though, is that the pursuit of social and/or environmental goals supersedes the pursuit of profit. Profit merely plays a supporting role. The priority of the “mission” over profit distinguishes social enterprises from a standard business.

What then, distinguishes a social enterprise from a non-profit (not-for-profit) organization or a non-governmental organization? Just as businesses can fit the definition of social enterprise, so too can non-profits and NGOs. Many non-profits and NGOs utilize social entrepreneurship to produce profits that they can re-invest in their organizations to better achieve their goals. Here lies the justification behind the movement to use the term “not-for-profit” in place of “non-profit.”

There are great benefits to profit-seeking. A social enterprise need not depend entirely upon donations from individuals, organizations, or governments to operate. Dependence upon donations exposes organizations to the unpredictable whims of their benefactors. Donations may be harder to secure in tough economic times. Governments may have specific requirements controlling the distribution of grants. And donations from these sources have quantitative limits. The independence afforded social enterprises allows them to scale up and meet the needs of a greater portion of society with the reinvestment of profit, thus transcending the limits of outside-funding.

As we continue, this definition of social entrepreneurship only constitutes a foundation upon which we can build. Questions still remain, including: How much profit need a social enterprise generate to constitute a success? What are the consequences when the line between social enterprise and for-profit business becomes blurred? Does a social enterprise’s responsiveness to market forces strengthen or weaken its ability to serve its goals?

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