The role of social enterprise - CCEA

Key facts:

• social enterprises: reinvest profits to benefit society
• not-for-profit organisations: provide public services, reinvest surplus
• charities: raise money for good causes, funded by donations
• entrepreneurial motives: financial (income, profit), non-financial (satisfaction, independence), and social/community (ethical practices)

Social enterprises operate like traditional businesses but reinvest profits to benefit society. They balance economic goals, such as creating jobs, with social and environmental aims like fostering community and promoting sustainable practices.

A not-for-profit organisation is a business that aims to do something other than to make profit for the owners, such as providing a public service or helping people. It needs to make enough money to cover its costs, but any surplus is reinvested into the business or used in other ways. Two examples of not-for-profit organisations are charities and social enterprise.

Charities are businesses whose aim is to raise money for good causes, or to help people, animals and the environment. Businesses with charitable status are funded mainly by donations, get some tax relief, and are eligible for certain types of grant.

Social enterprises make money by selling products or services like a traditional for-profit business, but they use their profits to benefit society. Some examples of social enterprises include businesses such as The Eden Project, The National Trust, The Big Issue, and Divine Chocolate.

Entrepreneurs set up businesses for a number of different reasons. Most commonly, these fall under three categories: financial, non-financial and social/community, e.g. social enterprises.

Financial motives relate to an entrepreneur setting up a business to make money, this can either be in the form of income or as business profit.

• Income is the money an entrepreneur takes as a wage or salary. Employees in any business can earn income, but an entrepreneur may prefer to do this whilst working for themselves.
• Profit relates to any money left after all business costs have been taken away from sales revenue. A business might make a large amount of profit, meaning that an entrepreneur could make more money from their own business, than working for someone else.

Non-financial motives relate to an entrepreneur setting up a business for reasons other than to make money. Reasons might include personal satisfaction, challenge, being your own boss and independence.

• An entrepreneur may feel a level of personal satisfaction that they have created a successful business. It may be that an entrepreneur is able to make a business out of a hobby or interest.
• Challenge relates to an entrepreneur setting up a business with the intention that making it successful will challenge them or take them out of their comfort zone.
• Being your own boss enables an entrepreneur to control the business and make decisions about how it is run. These decisions may relate to what the business sells, where it buys raw materials from, and how much its product or service is sold for.
• Independence means an entrepreneur working for themselves and running their own business. They will also make their own key business decisions. A desire for independence is a common reason for an entrepreneur to set up a business.

Social objectives are linked to doing things in an ethical or environmentally friendly manner, or having a business whose sole purpose is to meet a social or community need. For example, an entrepreneur may aim to provide only products that are sustainably sourced or use only solar energy to power their business. Businesses set up for social or community reasons are referred to as social enterprises.

Final check