Social Enterprise: What It Is And Why It's Gaining Momentum
BEST PRACTICE RESEARCH
— What It Is And Why It's Gaining Momentum.
Warby Parker. Toms. Uncommon Goods. Adobe Systems. STREAT.
Can you guess what these companies have in common?
✎ Kat Guerrero
These companies are all considered to be social enterprises, meaning that they create and sell products that address a range of social issues. From a buy one, give one business model to minimising environmental impact to sourcing responsibly, social enterprises take a selfless step away from traditional entrepreneurship.
In our eyes, social enterprises are forging the future of how all companies should operate. Along the way, they highlight questions we should be asking about the companies we support and where our money is actually going.
Social enterprises aren’t a new or even groundbreaking concept. The idea of bringing change to eliminate social, environmental or humanitarian issues is interlaced in non-profit work and foundations dating back to the nineteenth century. The difference in social enterprises and traditional non-profit work is the establishment of a profitable model. A social enterprise is an active participant in the goods and services market. Just like any other business in the private sector, a successful social enterprise hopes to make a profit and then reinvest that profit into their chosen purpose.
So -- we’ve established that social enterprises have the potential to make an incredible difference through the strategic blend of business and passion for giving back. Since the social enterprise model is still evolving, they tend to face more financial and general challenges that traditional businesses. Investors must be committed to not only the cause of the company but to the idea that rapid and large growth is unrealistic in the short term.
Sourcing materials and manufacturers to build a sustainable supply chain can be tricky, timely and costly. As the social enterprise model continues grows, their mission may drift and be put on the back burner to financial and overall success. And overall – those who start social enterprises are playing a part in solving large-scale social problems sustainability while running a successful business.
We’re big supporters of the social enterprise and are excited to see the role they play in dictating the future of business. Social enterprises are slowly gaining momentum for a number of reasons. After careful thought, we’ve compiled a few reasons why we think social enterprises are going to continue to grow and change how we see business in the future.
We’re Creatures of Connection
By nature, humans want to connect – whether that is with other people, a larger cause or a life purpose. We like feeling good about what we do and how we do it. Aligning and supporting a company that incorporates selfless action in their DNA is a great way to target that need for a larger connection.
Multiple studies and interviews with the current workforce show that the need to feel good about our work and what we support is not only limited to what we buy but the work we do. In a recent Forbes study, 77% of individuals in the industry surveyed believed that ‘inclusive growth’ in relation to social enterprises’ were critical to progression. Social enterprises are not only attracting consumers but passionate and inspiring thought leaders that can contribute to movements.
These thought leaders fuelling the growth of social enterprises tend to prioritise using their skills to help their community, however large that may be, rather than exclusively making a profit. The Millennial Impact Report discovered that future and current leaders prioritise the organisation's primary purpose, workplace culture, and volunteer program.
We’re Relearning What It Means to Invest in Products
As a society, we are (at least in our minds) slowly transitioning towards purchasing items that are well-made and long-lasting. We partly believe this has to do with companies like Patagonia and Green Collect that are making transparency, buy-back programs and well-made products a little more mainstream. While these well-made
products tend to be more expensive, they have a track record of lasting longer than alternative products.
Thanks to the internet and its vast resource base, it’s becoming increasingly difficult to sell products that are poorly made, especially through a broken and unjust supply chain. Resources like Good On You and Good Guide provide a great base to find brands and business that match your values. Learning the labor rights and animal welfare stance of your favourite company is only a quick google away.
Then there is the actual support of organisations and companies. According to Deloitte’s Human Capital Trends 2018 survey, companies are judged by their relationship with workers, customers, and the larger community. 77% of respondents believed that citizenship and social impact are critical factors to a organisation’s success. Deloitte also includes that 86% of millennials believe that businesses should be deemed successful on more terms than just financial success.
Supporting Social Enterprises Provides a Vessel for Empowerment
Social enterprises are a powerful vehicle for providing empowerment to individuals, the community or a larger cause. In Australia, social enterprises employ about twice the number of individuals with disabilities and female managers than a tradition small businesses which promotes an inclusive economy and normalises employment for anyone capable.
Streat, a Melbourne-based cafe that employs homeless youth, exemplifies the power that social enterprises have in empowering individuals and communities. The cafe provides youth in difficult situations supported pathways to employment. Through the program, employees are offered assistance finding housing, provided vocational training and offered support to ensure their mental well-being. Streat is one of many social enterprise models that offers support and empowerment to disadvantaged communities throughout Australia and worldwide.
We Have A Chance to Re-define Our Market System
The consumer market primarily functions on the assumption that buyers purchase goods and services purely for consumption rather than resale. Given that the majority of the West participates in a consumer culture that encourages companies to keep producing products that result in a profit as an end game, companies that are not only fueled by profit have the potential to shift how the market works. In the US, only half of Americans have confidence in the free market system. We’re inclined to believe that Australia shares the same sentiments.
A social enterprises goal supersedes their desire to solely gain profit. If more companies prioritized social goals on the large-scale, that would completely change how our market system functions. Rather than purchasing items that are created to be used and only used, a market system composed of social enterprises would provide benefits for society at large each time an item was purchased. Consumers would still buy the products they need, but each purchase would have a larger effect on society.
It’s worth noting that just because a social enterprise has a larger goal than a financial gain, that doesn’t mean that they don’t generate significant profits. A 2016 report by Social Traders stated that as of 2016, there were over 20,000 social enterprises just in Australia. These social enterprises employed around 300,000 people, generated roughly 3% of Australia’s GDP and were dedicated to a diverse portfolio of social issues. Imagine the effect these social enterprises could have on a large scale!
We’re excited to see how social enterprises will continue evolving and disrupting traditional business models, in Australia and worldwide. Within the next decade, social enterprises are expected to contribute 4% of the Australian GDP and employ up to 500,000 Australians. We think that social enterprises are great for not only benefitting society but play a crucial role in shaping how consumers support companies.
Keep an eye out for our interview with the manager of Streat, Tarn Fisher, to soak in his learnings here.
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