Defining Social Enterprise

Dr Christopher Mason from the Faculty of Business and Enterprise at Swinburne University in Victoria explores the scope of the term ‘social enterprise’ and the potential implications of formally defining it.

The political landscape for social enterprise has never appeared more promising. Social enterprise features increasingly in public debates on the future of public services and among solutions put forward for heightened community engagement and economic regeneration.

Organisations such as the School for Social Entrepreneurs and Social Ventures continue their work of promoting social enterprises, both as an idea and as entities promoted through Federal Government programs.

Increased attention has placed the social enterprise cause at the centre of national politics as well as at the heart of community development, where social enterprises often originate and where they have the greatest impact.

Yet not all is as it seems when it comes to understanding what social enterprises are precisely. Competition in defining social enterprise has created significant debate across the third sector.

The Finding Australia’s Social Enterprise Sector (FASES) report defined social enterprise as being “…led by an economic, social, cultural, or environmental mission consistent with a public or community benefit”. They also cite the linked role of trading and income, as well as reinvestment of surplus.

These are common features of many other definitions, however the real problem comes when practitioners assess whether this description fits with their work and organisation.

Capturing the essence of such varied and challenging work into a definition never seems to fully reflect the needs of the people, organisations and communities engaging in socially enterprising activities. The scope is too broad, the mechanisms too many and the balance between trading and mission is contentious.

Some have noted that the terms social enterprise and social entrepreneur are over-inclusive and consequently meaningless. Yet others add to the debate by asserting that social enterprise should be a vehicle for individual wealth creation too. The problem with the resultant impasse is a fear that a good idea might be turned into a plaything for the private or even public sectors.

While ‘social enterprise’ is a new phrase, in many ways it describes old practices. Cooperatives and mutual societies have been operating as social enterprises for generations without referring to themselves as such.

New social enterprises are easily conflated with organisations already in existence. Some of these organisations may deny that they are social enterprises, others may recognise ‘social enterprise’ as one component of the work they do, and for others again the label is less important than the activities in which they are engaged.

One remedy can be found in regulation. In some countries such as the United Kingdom authorities have developed a legal form (the Community Interest Company) that in effect recognises an entity as a social enterprise.

Competition to define social enterprise is indicative of deeper divisions within the sector itself about efficiency and effectiveness in social service delivery. Nevertheless, the definitional question becomes acutely important for practitioners seeking to reduce ambiguities and uncertainties in their environments.

What does a social enterprise look like? How do they differ from existing types of organisations that do broadly similar things? Why are they being promoted strongly in public sector procurement debates? Would branding one’s own organisation a social enterprise help to position it better in the next round of program contracts?

A further issue is clarifying how social enterprises fit with other ‘third sector’ organisations. A harmonised policy framework and contractual funding opportunities are all to the good but the diversity of the sector complicates efforts to regulate organisations effectively while supporting their growth.

Linking social enterprise into the current social innovation policy stream is one thing – making sense of it across the sector is a more challenging task. A harmonising approach also risks riding roughshod over the important work that many philanthropic trusts, charities, and Not for Profits perform by asserting a ‘better way’ of working.

So does lack of clarity really make a difference to how social enterprises develop? In my view, yes. At the broader political level we need a clearer statement of intent and commitment about where social enterprises fit in competing political frameworks.

As the UK’s Big Society experiment looms over Australia, with the approaching federal election, the issue is likely to become even more intensely political. Greater clarity would allow practitioners to gain a better feel for what social enterprises can offer, and allow budding social entrepreneurs the start-up support and advice they need, through support infrastructure such as that offered by organisations like Social Traders.

Read about Dr Chris Mason here.