How Can Charities Benefit From Social Enterprise?

Social enterprise is an exciting sector, and it can only benefit from the hard work of charities and not for profits when the two work together, writes Sally Cunningham, communications manager at FrontStream.

Addressing global problems of poverty, health and environmental decline is an expensive endeavour. Dedicated charities and not for profits have traditionally tried to address these important issues – albeit with a focus on rather short-term outcomes.

But the recent rise of social enterprise has added another valuable pathway to addressing these challenges, even going so far as to influence how big business can and should give back to the community.

Securing a sustainable funding source is one of the greatest challenges that charities and not for profits face, and one that can result in them devoting a lot of their limited time and energy to asking for funding, donations and volunteers. In contrast, social enterprise begins with a sustainable business model for revenue generation and dedicates the profits to chosen social concerns.

Social enterprise is loosely defined as a business for purpose, as opposed to profit. While they operate in commercial markets and are still very much focused on generating profit, this is then passed on to a dedicated and defined cause – be that a cultural or environmental goal or another kind of community benefit.

Australian Social Enterprises service site Social Traders, estimates there are 20,000 social enterprise businesses in Australia generating up to 3 per cent of GDP and employing 300,000 Australians. An amazing figure that is no doubt a surprise to many. Social enterprise is on the rise, and Australia is embracing it by shifting their purchasing habits for the double benefit of useful products with a feel-good benefit of supporting a cause, ultimately to become part of a solution.

One of our favourite local social enterprises is Thankyou, whose mission is to “end global poverty in this lifetime, together”. 100 per cent of the profits from Thankyou’s wide range of water, food, personal care and baby products go into the Thankyou Charitable Trust, which then distributes it to carefully chosen sustainable development projects designed to eradicate poverty. Best of all, Thankyou’s customers can track the impact of their purchase by entering a product code and seeing where their money went.  

Another excellent local success story is Who Gives a Crap – the recycled toilet paper and tissue company that donates 50 per cent of profits to sanitation projects delivered by charities to people in most need. To date (June 2018) they say they have donated 1.2 million to toilet projects while also saving trees, water and energy, by using 100 per cent recycled paper and bamboo to produce their products.

Social enterprise and charities can and do work together to deliver on compatible missions. It’s fair to say that charities are usually the best at service delivery, while business is usually better equipped at acquiring funding. This is the key lesson that charities can learn from social enterprise: to either create perfect funding partnerships or adopt the same sustainable funding model so they can continue their excellent service delivery.

Funding and sustainability are a hot topic for charities as opportunities for government funding have declined over the last 10 years. Dependency on alternate income streams has become paramount to continue the mission. In contrast, social enterprises rely on their own trade-based business model which makes their work sustainable.

Charities are often criticised for spending money on business activities such as administration and marketing, something recognised as standard business and social enterprise practice. Instead, charities should be enabled to adopt better business models so that they may become more sustainable and do more good.

Social enterprise is not the only solution. In fact, while it demonstrates a highly effective economic model, it’s not always the best method, and there’s still very much a role for charities to play. Charities are better advocates for social need, highlighting shortfalls in community need and reminding us that the world relies on its people to nurture and look after it. Charities try to fill the gaps that the market finds unprofitable – a sometimes frustrating, but very necessary role.

Peer-to-peer fundraising events are an excellent example of good charity income generation as well as advocacy. Peer-to-peer fundraising events inspire conversations, connect like-minded community members and it’s a “feel-good” way to give.

Social enterprise is an exciting sector, and it can only benefit from the hard work of charities and not for profits when the two work together. Through this synergy, the whole world will prosper, and that is something to feel very good about.  

About the author: Sally Cunningham is the communications manager at FrontStream, a digital fundraising platform and has worked in communications positions in commercial and not for profit organisations for more than ten years. With a fascination for the constantly changing digital environment Sally is always looking at what people are doing next to predict how digital will evolve.