(Photo by J. Lawrence for Visit Philadelphia)
At Generocity, we write about social entrepreneurship often. But what exactly does that term mean?
We use it somewhat loosely, though generally, we think of social entrepreneurship as the act of attempting to solve some social or environmental problem through a for-profit company.
We use it when referring to, at times, any for-profit with a mission attached, whether that mission is inherent to the business’ existence or not. But more often, we mean triple-bottom-line businesses, which inherently value people (employees) and planet (sustainable practices) as well as profit, or B Corps, which are certified by a regulatory body to meet strict socially conscious guidelines. This does not include for-profits that happen to have corporate social responsibility (CSR) arms.
But some folks in this space even refer to the occasional nonprofit as a social enterprise. It can all be a little confusing.
To help out, and to kick off social entrepreneurship month of Generocity’s editorial calendar, we enlisted six impact experts to share their definitions and discuss the nuances during a roundtable discussion last week:
- John Moore — Executive chair of ImpactPHL, a local impact investing advocacy organization, and longtime impact investor
- Kate Houstoun — Program officer of the Barra Foundation, which invests in both for-profit and nonprofit social enterprises, and former managing director of the Sustainable Business Network
- Heather Qader — Manager of business development for the City of Philadelphia’s Department of Commerce
- Cory Donovan — Program manager for ImpactPHL
- Simran Sidhu — Executive director of The HIVE at Spring Point, a new funding venture, and former executive director of education nonprofit YouthBuild Philadelphia
- Megan McFadden — Social impact strategist and former national director of brands and services for B Corp Mission Hub
Here’s what they had to say.
From our Partners
John Moore, The Venture Capitalist
A social enterprise to me is something that is using a for-profit business model to try to address a social, environmental issue, and I think it can be relatively broadly defined. When we look at venture investments, we’re looking for a narrow definition of it, which is, the product or the service that’s provided will actually have positive social externalities on a net basis.
And we’re [impact investors], more specifically, looking for something that’s very innovative in the early-stage venture world. But I think there’s two pieces to it: One is about the product or service that’s being delivered and how that externality could be positive, and then [on the other] hand here, you’re talking about how is that delivered.
Megan McFadden, The Systems Thinker
I have referred to social enterprise as for-profit and nonprofit organizations many times in the past, and there have been times when I have made a distinction between them, but I think bifurcating the two sometimes gets tricky. When we look at systems change, and how we’re centering the issue at hand, there is a place for nonprofit organizations and for-profit to work independently or together to solve an issue.
Social enterprise is in what you do and how you do it. Also, [on the consideration of] “social” and “environmental” [factors in social enterprises’ impact] … I’ve typically added “economic” and sometimes added “cultural change” as well, because I think cultural change is sometimes at the root and heart of some of these other things.
Simran Sidhu, The Nonprofit Pro
I think we [The HIVE] take the broader definition as well. But it’s interesting, I think, from a funder’s perspective — sometimes you make the distinction between what is an investment and what is getting something to the point of being an investment, and I think that’s where looking at both sectors matters. For example we support [a Philadelphia-based enterprise], which is a nonprofit and doesn’t make a positive return at this point in financial terms, but could get there with some support.
… And it is intriguing to see who this definition leaves out. Generally the table has become less and less diverse as you talk social enterprise, and I think that alone is an issue. … When we’re in the nonprofit world, [leaders] tend to be a little more diverse, and I wonder if there’s some bridging that needs to happen in the middle of that, and if we start out with a very strict definition, whether we’re leaving some people out just by where it’s been defined so far.
Kate Houstoun, The Equal Opportunity Funder
To your point, Simran, it takes a lot of capital to start a business, and I think you see that in the social enterprise space, it might be even harder, because you have these other associated costs to doing it well and doing it well for the community, and I just think if you don’t start out with a family that can provide money or funders that can support you in the ways that you need, it’s really hard to get these things off the ground.
… [Also,] when nonprofit enterprises get to a certain scale, … it’s difficult to attract capital outside of grant capital and maybe some loans from impact investing foundations.
Heather Qader, The City
To the diversity part, I think being recognized as a social enterprise and having your certifications like B Corp, it’s very expensive. There are tax incentives available for B Corp companies [in Philadelphia]. There’s also a cap on that number. But I think initiatives like ImpactPHL that are kind of a midway point [where] you can get some kind of recognition or some kind of background knowledge of what you’re doing … makes being a social enterprise a little more accessible.
… As far as how we [the City of Philadelphia] define social enterprise, I would say “large-scale, sustainable and systemic,” whether that’s your intention to create it or you’re actually doing it.
Cory Donovan, The Cheerleader
I think one word that hasn’t been mentioned yet is intent — an organization has an intent to do something positive, and that’s built into their mission, instead of sort of attaching it on. To use an analogy: a two-pocket system as opposed to a one-pocket system, in terms of what they’re doing. The two-pocket system is CSR: “This is what we do [for our core business], and then, we’re [also] going to donate money” or whatever it is, as opposed to, “… it’s built into the mission of the organization.”-30-
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