- A social enterprise is a business or organisation that aims to generate revenue and achieve social, environmental, or cultural objectives
- It combines the principles and practices of traditional business with a focus on addressing social issues and creating positive social impact
- Social enterprises typically reinvest a significant portion of their profits back into their mission rather than maximising profits for shareholders
Social enterprises in the private sector
- Social enterprises in the private sector look to make a profit whilst improving one or more aspects of society such as environmental, education, or health concerns
- Many social enterprises aim to create jobs, improve social mobility or provide opportunities for marginalised groups
- A proportion of profits is invested into achieving these social aims
Advantages and Disadvantages of Social Enterprises
Advantages
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Disadvantages
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- Social enterprises often develop creative and innovative solutions to social challenges
- By generating revenue social enterprises can become financially self-sustaining
- This financial independence reduces their reliance on donations and grants, making them less vulnerable to political and economic change
- Social enterprises create jobs which supports economic development particularly in developing communities
- They often provide training and employment which can lead to increased social mobility and better quality of life
- Social enterprises work with a wide range of stakeholders
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- Achieving financial stability can be difficult, especially during the initial stages
- Balancing a social mission with making money can be a delicate balancing act
- Social enterprises have to navigate complex legal frameworks and tax structures
- It may be difficult to quantify and measure the success of social enterprise activities
- Social enterprises may find it difficult to grow
- Obtaining additional finance to expand into new markets or reach a larger audience is likely to be difficult
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Social Enterprises in the public sector
- In the public sector a range of organisations provide socially-focused services with the aim of making a profit or surplus
- Services are often provided to other public sector organisations, communities or government departments
Cooperatives
- Cooperatives are a form of for-profit social enterprise that are owned and run by and for their members with the principle that working together means more power
- Each member owns one share and has one vote on key decisions
- Profits are either shared equally between members or reinvested for their benefit
- Although cooperatives are often celebrated as businesses that take a broader approach to business than the generation of profits and provide some key social benefits they do have some drawbacks
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- Decision-making in cooperatives can be time-consuming as members have the right to have a say
- When a member leaves a cooperative their share is relinquished and they receive no further benefits
- Disagreements can occur when members possess differing social and commercial objectives
Diagram Showing the Different Forms of Cooperatives
Cooperatives exist in many industries and provide a means of empowering stakeholders
An Explanation of the Different Types of Cooperatives
Employee Cooperative
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Community Cooperative
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Retail Cooperative
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- Owned equally by workers within the business
- Each employee has a vote in business decisions
- Profit is shared equally between employees
- E.g. Flaskô in Brazil which was purchased by its employees in 2003
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- Owned by members of the local community
- Members usually contribute time as well as finance to the cooperative
- Profit is commonly reinvested to continue providing socially valuable products
- E.g. Hour Exchange Portland in the USA, a time-bank organisation
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- A group of independent retailers come together and operate under one brand name
- Buying power is increased and marketing costs are shared
- E.g. DIY retailer ACE Hardware in the Philippines
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Producer Cooperative
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Financial Cooperative
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Housing Cooperative
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- Groups of manufacturers work together during the production process
- Sharing and maximising the use of expensive capital equipment is often a key aim
- Producer cooperatives are common in agriculture
- E.g. The German Wine Group cooperative brings together small wine producers in the country's main wine-producing regions
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- Organisations that provide financial services to individuals that may not otherwise qualify for standard banking products
- Often focused on a particular community
- Social aims take precedence over profits
- E.g. in the UK, Medway Credit Union provides loans and savings facilities to those living with challenging circumstances
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- Organisations that provide housing for members
- Members collectively own and benefit from socially cohesive and lower cost dwellings
- E.g. Almost 30% of housing in Poland is owned through housing cooperatives with
Spółdzielnia Mieszkaniowa in Warsaw being one of the most well-known
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