Defining Social Enterprise –
Trading for a social purpose
Social Enterprise is probably one of the most currently debated business models around today. A Social Enterprise is not defined by its legal status but by its purpose and its ability to operate as a sustainable commercial entity. Its community can be defined by a geographical area or by an interest.
As Social Enterprise is seen as a concept rather than a structure, you may find different organisations or individuals have a much wider remit as to what type of organisation they would categorise as a Social Enterprise. However, you could refer to the guidelines listed below from the DTI (Department of Trade and Industry):
Test 1: registration – organisations should be registered with Companies House as a legal structure
Test 2: trading – the social enterprise should be actively trading, excluding income from grants, subsidies etc.
Test 3: pursuit of a social aim – principally re-invests its surpluses in the business or in the community
Social Enterprise London (SEL) identifies three common characteristics of social enterprises:
1 Enterprise orientation – they are directly involved in producing goods or providing services to a market. They seek to be viable trading concerns, making an operation surplus
2 Social aims – they have explicit social aims such as job creation, training or the provision of local services. They have ethical values including a commitment to local capacity building. They are accountable to their members and the wider community for their social, environmental and economic impact.
3 Social ownership – they are autonomous organisations with governance and ownership structures, based on participation by stakeholder groups (users or clients, and local community groups etc.) or by trustees. Profits are distributed as profit sharing to stakeholders or used for the benefit of the community.
