Definitions of Social Enterprise

As early as 1996 The Roberts Foundation Homeless Economic Development Fund1 defined social enterprise as "a revenue generating venture founded to create economic opportunities for very low income individuals, while simultaneously operating with reference to the financial bottom-line."2

NESsT, on the other hand, uses the term social enterprise to refer to "the myriad of entrepreneurial or 'self-financing' methods used by nonprofit organizations to generate some of their own income in support of their mission."3

Both definitions capture the social and financial characteristics of the social enterprise; however, The Roberts Foundation's definition emphasizes social enterprise as a program approach, whereas NESsT's definition stresses it as a funding approach.

The Nonprofit Good Practice Guide offers a holistic definition: "A nonprofit venture that combines the passion of a social mission with the discipline, innovation and determination commonly associated with for-profit businesses [...]"

The UK-based Social Enterprise Coalition reminds us that the simplest definition of social enterprise - as business trading for a social purpose - allows for a wide range of interpretations and there is still an ongoing debate among practitioners and academics over the exact definition of social enterprise.

The Coalition invites us to consider some of the common characteristics that social enterprises display:4

  1. Enterprise Orientation - they are directly involved in producing goods or providing services to a market.
  2. Social Aims - they have explicit social and/or environmental aims such as job creation, training or the provision of local services. Their ethical values may include a commitment to building skills in local communities. Their profits are principally reinvested to achieve their social objectives.
  3. Social Ownership - Many social enterprises are also characterised by their social ownership. They are autonomous organisations whose governance and ownership structures are normally based on participation by stakeholder groups (eg employees, users, clients, local community groups and social investors) or by trustees or directors who control the enterprise on behalf of a wider group of stakeholders. They are accountable to their stakeholders and the wider community for their social, environmental and economic impact. Profits can be distributed as profit sharing to stakeholders or used for the benefit of the community.

The Coalition also supports the UK Government definition which many of its members were actively involved in helping to develop5: "A social enterprise is a business with primarily social objectives whose surpluses are principally reinvested for that purpose in the business or in the community, rather than being driven by the need to maximise profit for shareholders and owners. [...]"

Virtue Ventures proposes the following working definition of social enterprise, inspired by these definitions and others, that captures the specificity of purpose and approach while encompassing the broad range of practical applications:

A social enterprise is any business venture created for a social purpose--mitigating/reducing a social problem or a market failure--and to generate social value while operating with the financial discipline, innovation and determination of a private sector business.

In its widespread usage, "social entrepreneur" is the individual and "social enterprise" is the organization. Therefore, social enterprise is an institutional expression of the term social entrepreneur.

Additional information available on the World Wide Web:

  • 1. The name was changed from The Roberts Foundation Homeless Economic Development Fund (HEDF) to The Roberts Enterprise Development Fund (REDF) in 1997.
  • 2. Jed Emerson and Fay Twersky, New Social Entrepreneurs: The Success, Challenge and Lessons of Nonprofit Enterprise Creation, The Roberts Foundation Homeless Economic Development Fund, 1996.
  • 3. Definition provided by NESsT (www.nesst.org); in 1997 NESsT began referring to self-financing--what today is referred to as social enterprise.
  • 4. Social Enterprise Definitions, Social Enterprise Coalition website
  • 5. Social Enterprise - a strategy for success DTI, 2004