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What is social enterprise?

publication date: Oct 20, 2014

This is the third of a series of excerpts from David Oyler’s feature article “How Does Social Enterprise Translate to the Charitable Sector?” The entire article will be posted on his website,oylerconsulting.ca, after the final instalment in Hilborn Charity eNews.

What is social enterprise?  Depending on whom you talk to it could be:

  • the provision of essential goods and services by charities and non-profit organizations (NPOs)
  • the promotion of self-sufficiency for marginalized persons
  • a business with a social agenda
  • the social benefits of economic activity
  • all of the above and more

David OylerThe combination of ambiguousness and what feels like the unquestionable integrity of SE almost makes this article a non-starter.   There is not a universal definition for SE. It has many broad, sometimes contradictory, interpretations, and the SE community has been trying to agree on a definition for years.

Multitude of unchallenged definitions

Social enterprises may also be called social impact organizations, community businesses, or community impact corporations.  As mentioned in Part 2 - The Regulatory Environment, every type of legal structure, taxable and tax exempt, is referred to in SE resources.  It seems that any type of activity operated by a business, nonprofit, or charity can describe itself as SE, and no-one, or more significantly no formal body, can dispute it. 

In some SE narrative and resources, it seems to be more of a cause rather than a tangible application or approach.  Sweeping proclamations that SE is ‘business for good’ that is ‘responding to market failure’ and could unleash ‘billions in untapped social investment capital’ if changes to ‘archaic charity regulations’ were made seem to be far more prevalent than the nuts and bolts about what SE actually is, how non-SE business presumably is not good, the source of the investment capital, or a list of proposed amendments to Canada Revenue Agency policy.  According to one SE promoter, “rather than fitting into a specific legal structure, SE is more of a verb,” an action, it seems, that is above reproach. 

In this muddle of vagueness and ‘doing good’, it is a challenge to have a strategic discussion on SE in any context, let alone on how it applies to registered charities.        

The foundational concept of SE

In searching for a solid foundational concept to determine what SE is, the only consistent and clear notion in resources and narrative is what it is not: a for-profit entity whose sole motivation is to benefit its shareholders or, more aptly, does not make any kind of ‘social’ distribution or contribution.  This means an organization incorporated as a business that:

  • is not owned by a registered charity, or by a marginalized community or group  
  • does not have a democratic ownership model
  • does not have a social or community purpose
  • does not contribute socially either through its operations e.g. in an environmentally friendly manner or in an economically depressed community or region, or through gifts or sponsorships to community causes

It seems that any organization that has any of the above-named qualities can describe itself as a SE.  By my count it includes businesses, hybrid organizations, charities, nonprofits, and co-operatives.  Trying to fit all of these under an umbrella term or fashion as a singular concept is a questionable endeavour in my opinion, as there are many fundamentally different philosophies and intentions amongst them.  This is best exemplified by the fact that a co-operative can be either for-profit, a nonprofit, or registered as a charity.

In some SE resources, business or nonprofit model continuums place SE in an area between charity and for-profit business entities, but what seems to be lacking is recognition or understanding of:

  • the context in which charitable programs charge fees
  • the context in which registered charities can fundraise
  • the natural conflict between for-profit and public benefit motives

It is not surprising that trying to come up with a universal definition has proven to be difficult and SE is not legally recognized in Canada.

Business activity

Business (or commercial or market-oriented) activity is also consistently mentioned in SE resources, but without clarity or differentiation between business activity and the business-like activity of NPOs and charities.  The focus seems to be almost exclusively on the earning and distribution of ‘social’ profits and the opportunities for capitalization that go with it.  It is sometimes mentioned that SEs can be ‘mission-based,’ i.e. cost-deferring or non-profit, but it is positioned as by choice or motivation rather than by regulation.

For the sake of this article, I define SE as ‘the marketplace sale of goods and services by a nonprofit’ which I believe captures the prominence in SE narrative of ‘social profits’ earned from apparent commercial activity.          

Disclaimer:  I am not a lawyer nor connected with the Canadian Revenue Agency.  I am not offering any opinions as to what types of activities would or would not be in compliance with federal or provincial/ territorial regulations.  

Oyler Consulting works with registered charities and non-profit organizations to increase their effectiveness and capacity to deliver their programs and services. Services include practical guidance on Canada Revenue Agency policy for registered charities, helping organizations build successful fundraising programs, program and service development, and social enterprise. Visit www.oylerconsulting.ca; contact David Oyler by email.



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