Social enterprise – Do definitions matter?

It is essential to note that ‘social enterprise’ is not defined within Canada’s Income Tax Act. There is no certification or other program to enable a venture to be officially deemed a social enterprise.

There is, however, a legal structure in British Columbia which has been expressly designed as a ‘container’ for social enterprise. That said, the Community Contribution Company (C3) is not the best choice for all ventures, and adoption of a different legal structure than the C3 does not negate its identity as a social enterprise. There are around 50 C3’s registered in BC. The option has been available since 2013.

The introduction of a second purpose-built social enterprise structural option is also in the works for BC: the Benefit Company

Click here to view a slideshow called The Structure Shop, reviewing options for structuring a social enterprise in Canada.

The widest definition

Social enterprises are revenue-generating businesses with a twist. Whether operated by a non-profit organization or by a for-profit company, a social enterprise has two goals: to achieve social, cultural, community economic and/or environmental outcomes; and, to earn revenue.

On the surface, many social enterprises look, feel, and even operate like traditional businesses. But looking more deeply, one discovers the defining characteristics of the social enterprise: mission is at the centre of business, with income generation playing an important supporting role (from The Centre for Community Enterprise).

Are you running a social enterprise?

One test for a non-profit or charity that believes it is operating a social enterprise: what are you selling? It could be that you are operating with an entrepreneurial mindset within your organization, but if you are not selling a good or service into the marketplace, you aren’t running a business: you may be running a social program, but not a social enterprise.

And a test for a traditional business that believes it is operating a social enterprise: to what degree do social / environmental goals steer your ship? If profit is paramount (and particularly if individual owners or shareholders are personally benefitting), you may be engaging in socially conscious purchasing or corporate social responsibility, rather than operating a social enterprise.

Another possible definition: A social economy enterprise operates like a business, produces goods and services for the market, but manages its operations and redirects its surpluses in pursuit of social and environmental goals. (from Western Economic Diversification).

An equally noble goal of social enterprise (aside from generating revenues to pursue a mission) is the training and/or employment of people who are typically excluded from the mainstream economy, thus creating capacity and self-sufficiency for individuals, and impacting their communities and lessening reliance on the social safety net. This element alone can denote a social enterprise.

Some complementary definitions:

  • Social enterprise applies an entrepreneurial approach to addressing social issues and creating positive community change.
  • A social enterprise is a business that uses entrepreneurial methods to accomplish social goals and/or feed profits to a parent charity or non-profit to enable it to fulfill more of its own social mission.
  • A social enterprise is a revenue-generating business with primarily social objectives whose surpluses are reinvested for that purpose in the business or in the community, rather than being driven by the need to deliver profit to shareholders and owners.