What is a Social Enterprise?

Sally Little, ACSW, MBA

Entrepreneurial Solutions, LLC
www.enterpreneurialsolutions.biz
slittle@hawaii.rr.com

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 Social Enterprise Track

Social Enterprise includes both nonprofit and for-profit organizations

focused on delivering a double bottom line – financial and social returns

Profit/Mission Continuum Focus for Social Enterprise Track

Mission- Traditional Nonprofit Businesses Traditional Profit-

focus Nonprofit Earned with Social Business focus
Activities Income Outcomes Activities

 Tax-exempt,  Business A for-profit  Activities

mission-related activities that company that motivated by
Definition activities that are generate earned pursues financial the primary
not commercially income to return and purpose of
motivated support a simultaneously returning profits
nonprofit mission generates social to shareholders
outcomes

 Social return  Financial  Financial  Financial

on investment and social and social return on
Objectives through return on return on investment
achievement investment investment
of mission

 Mercy Corps  Greyston  Edison Schools  General Motors

 American Bakery  Microfinance  American
Examples
Cancer  Pioneer Human  Solar/green Express
Society Services power cos.

Conducted by Nonprofit Organizations Conducted by For-Profit Organizations

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 Social Enterprise Track

The UH Business Plan Competition is reflecting growing trends of

incorporating social outcomes by adding a Social Enterprise Track

Businesses held
to increasing
socially
responsible
standards

Businesses UH Business
Increasing earned
developing cause Plan income (business
related marketing Competition venture) activities
partnerships with Social in nonprofit sector
nonprofits
Enterprise
Track

Development of
social enterprise Growth of socially
curriculum at responsible
leading business investment funds
schools
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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 Cooperative
Wai’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
 SocialReturn 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 Hawaii
www.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
SocialReturn 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 Bakery
www.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?

 Nonprofitis 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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 Social Enterprise Track

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?

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