Social Enterprise Confusion

Even an award winning and experienced, globetrotting social entrepreneur can find the the term ‘social enterprise’ confusing! Daniel Flynn, Co-Founder of Thankyou Group takes a close look at the terminology.

I still remember the night we were awarded the Australian Youth-Led Social Enterprise of the Year. I felt humbled as I looked around the room of finalists because the social enterprise sector is one I’m proud to be part of. I’ve been referred to in hundreds of articles as a ‘social entrepreneur’ and I’ve run workshops and tours for the social enterprise bodies in Australia.

Myself and one of our co-founders were even lucky enough to recently be flown (all expenses paid) to the Skoll World Forum on Social Entrepreneurship. But, after attending the forum, I have to honestly admit that, with all my so-called expertise, I came away more confused about social enterprise than when I arrived.

For the last five years, I’ve thought a social enterprise is a business that exists for the sole purpose of a social outcome. Of course, there are creative ways to structure the business to ensure the right funding model for growth but all of that is done for one purpose only: maximisation of social impact.

The label ‘social enterprise’ has always been very inclusive and some might say too broad. Organisations like Social Enterprise UK and Social Traders in Australia have solid definitions that frame what a social enterprise should be – definitions that our organisation and others like Streat and The Big Issue subscribe to. But unlike the charity sector, there is no regulating body to ensure these definitions are adhered to. My concern is that because there is little, if any, regulation in the social enterprise sector, there is too much room for abuse – abuse that I believe could have a serious negative impact on the sector as a whole.

Let me explain. A couple of weeks back, I was sitting in a workshop room with 150 conference delegates at Skoll World Forum and I heard someone say: ‘It’s great to have Coca Cola in the room today. They are doing great work in the social enterprise space’. I literally had to pinch myself. Did I just hear that? And it didn’t stop there. Many more major corporations were present at the event to share about their work in the area of social impact.

By the end of the conference I was left with more questions than answers. After three days of hearing keynote presentations and watching awards being handed out to ‘social enterprises’, I came to the following conclusions: looking through the Skoll World Forum view of the world, if you’re an entrepreneur and your business has some slight link to social good, you’re a social entrepreneur; if you’ve succeeded in business and now have a foundation on the side, you’re a social entrepreneur; if you have a business that employs people (like every business in the world), your business is a social enterprise and if you do any form of business in the developing world, you can call your company a social enterprise. You’re probably thinking, ‘Well, what isn’t a social enterprise and who isn’t a social entrepreneur?’ Funny, because that’s the exact thought I had after the conference.

I’m certainly not against corporates or private enterprises making a positive impact. In fact, I applaud them for thinking beyond the needs of their immediate stakeholders. I do, however, think it’s a little confusing to hear these big corporates being referred to as social enterprises and strongly believe that we need greater clarity about what social enterprise is, and what it is not.

Let’s look at the charity sector for a moment. It’s a given fact that there is a very clear definition on what a charity is, and what a charity should look like. The industry is heavily regulated and as a result people generally trust the system. Unfortunately the social enterprise sector doesn’t have the same protection. And personally, I believe that this lack of regulation could result in far-reaching consequences for the social enterprise sector as a whole. If, claiming to be a social enterprise, a company markets the social impact that they make to win consumers and supporters and then doesn’t quite follow through on the claims they’ve made, there’s the danger of failing the public and fuelling the criticism and scepticism that the NFP and social enterprise sector has been fighting for decades.

When I come across articles like this one on socialenterprisebuzz.com, it makes me think that there needs to be some kind of official certification process that determines whether or not a business is a social enterprise. I was a little shocked to read that apparently the social enterprise I’ve been part of building for five years may not even be one after all. The article stated: “Looking at Thankyou Group as an example, it would seem that social enterprise is just another name for CSR”.

Now, Thankyou Group is 100 per cent owned by our charitable trust, which ensures that 100 per cent of our profits fund our projects. No directors or individuals can ever get a cent of profit (we receive a salary based on charitable sector standards but have no equity share in the business). From our perspective, our business model is as social-centric as they come, but it seems that a lack of certification can open up any social enterprise to unfair scrutiny.

With all this said, I want to recognise the importance of Social Enterprise Awards run by Social Traders each year which recognise ‘real’ social enterprises. All of last years award winners were deserving and run amazing businesses that exist exclusively for community benefit and we are looking forward to seeing this years amazing crop of winners. These awards are the only peer reviewed measure of social enterprise excellence in Australia. We need to take this thinking a step further.

We are at a point where the term social enterprise could be captured by enthusiastic audiences doing good-on-the-side rather than businesses born out of social purpose that exist solely to provide community benefit.

The term social enterprise needs to be protected through a legal form or accreditation process to ensure clear delineation between social enterprise, charities and CSR. The definition for social enterprise developed by Social Traders together with the Community Interest Company form developed in the UK would be good places to start this work.

I, for one, want to see the social enterprise sector continue to grow in this country. I want to see the ‘real’ social enterprises that have already put in the hard yards continue to do great work and for the sector as a whole to keep doing what it was first designed to do – create lasting social change and impact lives for the better.