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What is a Social Enterprise?

Sally Little, ACSW, MBAEntrepreneurial Solutions, LLC

www.enterpreneurialsolutions.bizslittle@hawaii.rr.com

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Social Enterprise includes both nonprofit and for-profit organizations focused on delivering a double bottom line – financial and social returns

Business activities that generate earned income to support a nonprofit mission

Traditional Nonprofit Activities

Traditional Nonprofit Activities

Nonprofit Earned Income

Nonprofit Earned Income

Businesses with Social Outcomes

Businesses with Social Outcomes

Traditional Business Activities

Traditional Business Activities

Definition

Objectives

Examples

Social return on investment through achievement of mission

Financial and social return on investment

Financial and social return on investment

Financial return on investment

Mercy Corps American

Cancer Society

Greyston Bakery

Pioneer Human Services

Edison Schools Microfinance Solar/green

power cos.

General MotorsAmerican Express

Profit/Mission Continuum

Mission-focus

Profit-focus

A for-profit company that pursues financial return and simultaneously generates social outcomes

Activities motivated by the primary purpose of returning profits to shareholders

Tax-exempt, mission-related activities that are not commercially motivated

Conducted by Nonprofit Organizations Conducted by For-Profit Organizations

Focus for Social Enterprise Track

Social Enterprise Track

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UH Business Plan

Competition Social

Enterprise Track

UH Business Plan

Competition Social

Enterprise Track

The UH Business Plan Competition is reflecting growing trends of incorporating social outcomes by adding a Social Enterprise Track

Growth of socially responsible

investment funds

Growth of socially responsible

investment funds

Social Enterprise Track

Increasing earned income (business venture) activities in nonprofit sector

Increasing earned income (business venture) activities in nonprofit sector

Development of social enterprise

curriculum at leading business

schools

Development of social enterprise

curriculum at leading business

schools

Businesses developing cause related marketing partnerships with

nonprofits

Businesses developing cause related marketing partnerships with

nonprofits

Businesses held to increasing

socially responsible standards

Businesses held to increasing

socially responsible standards

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Definition of Social Enterprise

Social enterprises are defined as nonprofit or for-profit business

ventures that strive to achieve a quantifiable double bottom line of financial and social returns. These

ventures are financially self-sufficient.

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Double Bottom Line

Social return on investment--

Social impact

Financial return on investment--

Profitability

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What is social return on investment?

Quantifiable social impact of the venture

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Types of Social Enterprises

Nonprofits with income from products/services supplemented by external support and subsidies

Nonprofits with income from products/services not supplemented by external support and subsidies

For-profit company that pursues financial return and simultaneously generates social outcomes

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Wai’anae Organic Farmers CooperativeWai’anae Community Re-Development Corporation

www.waianaeorganic.com

Nonprofit with income from products or services that are provided or produced and

supplemented by external support and subsidies.

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3 elements of Waianae Organic Farms

Mission- Operate a youth leadership development training program for low-income and at-risk youth using agriculture as the teaching methodology

Social Return on Investment- Educate community on health and wellness, distribute organic fruit and vegetables via farmers markets, Café in Waianae serving organic foods, teach young men and women how to farm the land-Quantifiable

Financial return on investment- $145,100 profit in 2004, Sales- $85,400, Grants-Fundraising-$154,200.

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Goodwill Industries of Hawaiiwww.higoodwill.org

Nonprofit with income from products and services that are provided or

produced and are not supplemented by external support and subsidies

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3 elements of Goodwill Industries of Hawaii

Mission—Provide training, job placement, and support services to people with barriers to employment since 1959

Social Return on Investment—Served 6,470 people, placed 1,079 in employment-quantifiable

Financial Return on Investment--$38,916 profit (figures 6/30/04)

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Greyston Bakerywww.greystonbakery.com

A for-profit company that pursues financial return and

simultaneously generates social outcomes

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3 elements of Greyston Bakery

Mission- Part of Greyston Foundation’s integrated system of nonprofit and for-profits that offer a wide array of community development programs including job training, housing, and child care.

Social Return on Investment- Actively recruit and hire employees who have difficulty finding employment in the past. Management services provided by Greyston Foundation. Greyston Foundation is sole shareholder.- Quantifiable

Financial Return on Investment- Yearly generate $3.5 million in revenues

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Other Examples

Edison Schools—For profit, www.edisonschools.com

Stoneyfield Farms, www.stoneyfield.com

Microlending, Unitus, www.unitus.com, Accion, www.accion.org

www.fastcompany.com, go to Social Capitalists Awards 2006

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Definition of a nonprofit tax-exempt corporation

Generally talking about nonprofit corporation that has received 501(c)(3) tax-exempt status from the Internal Revenue Service

Many tax-exempt classifications

501(c)(3) must be organized for one or more of the following purposes:

— Religious— Scientific— Charitable— Educational— Testing for public safety— Literary— To foster national or international amateur sports competition— For the prevention of cruelty to children or animals

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How does a nonprofit differ from a for-profit?

Nonprofit is essentially owned by the community; It is governed by a board of directors that generally serve without compensation; there are no shareholders.

Upon dissolution, all assets must revert to a 501(c)(3) that generally has a similar mission or the government; As a founder you cannot recover your investment at dissolution

Profit in a nonprofit cannot inure for the benefit to the benefit of the board of directors and compensation for employees cannot be excessive

Donations to a 501(c)(3) are tax deductible.

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To judge the social enterprise track entrants, UH will consider traditional business criteria as well as socially specific assessments

Traditional Business Criteria (in line with UH’s current judging criteria)• Feasibility of business model in chosen marketplace

• Marketability of product or service to customer base

• Potential for financial return

• Attractiveness for funding from additional investors

• Management team strength, experience, and readiness

• Sophisticated understanding of risk and contingency plans

Social Enterprise Track Criteria • Integration of the venture’s social and financial missions

— Is it reasonable to expect that the financial and social goals can be achieved simultaneously? Do these goals make sense together?

• Social Return on Investment

— How does the enterprise serve a social purpose

— Are socially responsible core values expressed throughout the venture

— What is the venture’s potential to meet its social goals

— What is the social impact both monetized and non-monetized of this enterprise?

Social Enterprise Track