What is a social enterprise?

Find out about the businesses that give something back

Melanie Wright – Virgin Money Living Mentor

by Melanie Wright | Independent Money Mentor

Award-winning freelance financial journalist

A social enterprise might sound like some sort of weird scheme where everyone’s really friendly to each other, but it’s actually about companies which give something back. A social enterprise is essentially a business which aims to help communities or good causes, rather than focusing solely on making profits.

Whereas many companies are run purely for the financial benefit of their owners, social enterprises want to change the world for the better. Here’s what you need to know.

How do social enterprises work?

The first social enterprise is thought to have its origins nearly two centuries ago in the 1840s, according to Social Enterprise, which is the biggest network of social enterprises in the UK. A workers’ co-operative was set up in Rochdale to provide affordable, quality food to workers who faced poverty due to the Industrial Revolution. All members received a fair share of the profits and played a role in decision-making, naming themselves ‘The Rochdale Society of Equitable Pioneers’.

The idea quickly caught on, and there are now numerous social enterprises operating around the world.

There’s no single legal definition of exactly what constitutes a social enterprise, but they hope to make a profit like other companies, with the aim that majority of these profits will be reinvested and used to create a positive social or environmental impact. So, for example, they might help create jobs for people who would otherwise struggle to find work, or profits might be reinvested in the local community. According to Social Enterprise, social enterprises are businesses that: 

  • Have a clear social and/or environmental mission laid out in their governing documents
  • Generate the majority of their income through trade
  • Reinvest the majority of their profits
  • Are autonomous of the state
  • Are majority controlled in the interests of the social mission
  • Are accountable and transparent

Social enterprises operate across a wide range of different sectors including restaurants, energy, healthcare and retail.

How many social enterprises are there in the UK?

There are currently around 70,000 different social enterprises operating in the UK according to Government data, employing about a million people, and many of which you may regularly have dealings with. For example, if you’ve ever bought a copy of the Big Issue magazine from a street seller, then you’ll have helped one of the biggest UK social enterprises. Half of the cover price of each magazine bought goes directly to the vendor. Vendors are often homeless, or face problems associated with inequality and poverty. 

Other well-known social enterprises include Jamie Oliver’s restaurant, Fifteen, which uses its profits to help disadvantaged young people to work in restaurants, and Divine Chocolate, whose aim is to grow a successful global farmer-owned chocolate company. Some charities are also social enterprises. For example, the Eden Project in Cornwall, which houses the largest rainforest in captivity, was paid for by grant money from contributors including the Millennium Commission and European economic regeneration funds, but all its running and maintenance costs are paid for out of earned income.

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