Social Businesses: Explanations & Examples

The concept of social entrepreneurship has been around for a while now. This business approach is gaining popularity as it brings development and sustainability on a global scale. The positive impact of social entrepreneurship is encouraging more and more people to join the trend.

Are you also planning to become a social entrepreneur? Great! But, if you’re new to social businesses, you might have some doubts or questions about the trend, such as:

• What are social enterprises?
• Why has social entrepreneurship become a buzzword?
• How to invest in social entrepreneurship?

This post covers everything you need to know about social businesses and how they make a positive social impact. So let’s get started!

What are Social Businesses? What is a Social Entrepreneurship?

A social business or social enterprise is an organization with specific social objectives. The primary goal of social enterprises is to boost profits while maximizing benefits to the environment and society. Also, the profits generated by these businesses are usually used to fund different social causes or programs.

Moreover, social entrepreneurship is an approach by startups, entrepreneurs, groups, and individuals to develop, implement, and fund solutions to cultural, environmental, and social issues.

The whole process is about recognizing and grabbing opportunities to create social value. This concept applies to various firms, which may vary in size, beliefs, and end goals.

Understanding Social Enterprises

Social enterprises can be both for-profit and non-profit businesses and may take the forms of different organizations. But, one common part of social businesses is their two main goals, such as:

• To make profits.
• To meet social, economic, environmental, and cultural outcomes listed in their social mission.

Another essential point you need to know is that a social enterprise operates under the structure of a traditional firm. No matter what, the key to understanding social enterprises is to know their mission.

Social Enterprises and Social Entrepreneurs

A social enterprise focuses on people who use existing business strategies and techniques to develop solutions to social or environmental issues. Their goal is to fulfill and solve societal requirements through their commercial activities.

On the other hand, social entrepreneurs have the potential to deal with community-based problems. They seek innovative ways or solutions to bring a positive change to society through their initiatives.

See Related: What is Social Arbitrage Investing?

Types of Social Businesses

As we all know, social enterprises are evolving. However, currently, there are four categories that may change over time. These business types are based on approach, mission, and target audience. The four categories are as follows:

1. Community Organizations

Community organizations are registered social enterprises. These businesses include community centers, community interest organizations, housing cooperatives, sports clubs, and certain stores.

These social businesses are basically membership firms with a specific purpose. They trade commercially to reinvest their profits into the community. The membership is often large, and all the members are dedicated to supporting the organization’s mission.

2. Trading Businesses

Trading businesses are collectives, cooperatives, and other enterprises co-owned by employees or workers. They vary in terms of organizational structure and size.

Compared to other business models, joint ownership in trading businesses enables improved profitability, efficiency, and revenue.

3. Financial Institutions

There are some financial institutions that also fall under the category of social businesses. These member-owned organizations may include credit unions, revolving loan funds, and cooperative banks.

For instance, credit unions’ structure enables members to become owners when they deposit money as customers. The deposited funds by new members are then used to support existing members.

Credit unions offer low-interest rates and higher savings rates. They also focus on helping respective members rather than making profits.

Similarly, cooperative banks are financial institutions that provide various financial services. They almost operate like traditional banks. For instance, they take deposits and offer loans to people. The only difference is that cooperative banks work on a cooperative basis.

See Related: Best Banks for Low-Income Earners

4. Charities and NGOs (Non-Governmental Organizations)

Charities and NGOs work on small or large scales to support various issues. These problems can be related to society, the environment, human rights, and other forms of activism.

The profits produced by these enterprises are used to reach their environmental and social goals. The profit amount is also a source of salaries for those who deliver services to specific people.

So, these are the four categories of social businesses. Though all types are different from each other, their end objectives are the same, which are as follows:

• Generating profits
• Addressing social issues

See Related: Best Green Credit Cards to Support the Environment

Do Social Businesses Make Profits?

The simple answer is — YES. Social businesses do make profits. In fact, they NEED to make profits to pay their rents, employee wages, and operating expenses, like other companies.

Compared to traditional organizations, social businesses focus on boosting positive social impact through their contributions. But, their focus is not only limited to the betterment of society. They also ensure to continue sustainably in the long run.

Additionally, social enterprises are not dependent on external sources for donations and funds. They are self-sustainable and produce their own profits to keep the business running. The more profitable a social business is, the more it can invest in resources and activities that offer social benefits.

See Related: Anti-Capitalist Investing: Meaning & Can It Work?

How Does a Social Business Work?

Social entrepreneurship strives to produce long-term solutions to social, environmental, financial, and cultural issues. Either they raise funds to support a cause or donate their profits to help needy people.

A social entrepreneur operates a social enterprise and fulfills both profit and nonprofit purposes. With the goals of achieving financial sustainability and social impact, a social enterprise follows a unique set of business models to meet its goals.

Though there are several business models, some of the common ones that social enterprises use are as follows:

Skills Training & Employment

The primary goal of social businesses is to provide effective on-the-job training, skills development courses, and living wages to employees and/or beneficiaries.

Service Fee

People pay for the services and goods offered by a social business.

Cross Compensation

A group of consumers pays for a particular service or product. The profits from those sales are used to fund the services for other underserved groups.

Independent Support

A social business offers a service or product to the external market. The generated funds are used to help social programs for the beneficiary.

Market Intermediary

A social business acts as a distributor or an intermediary to the expanded market. The beneficiaries are the suppliers of services/products that are distributed on a global scale.

Cooperative

Owned by its members, this nonprofit or profit enterprise delivers all types of services or goods.

Market Connector

A social business that supports trade connections between new markets and clients. Moreover, social entrepreneurs are more concerned about making a positive social impact than earning money. Though there are several approaches, two common ones are:

• Environment, Social, and Governance (ESG) Investing
• Socially Responsible Investing (SRI)

Also, fundamental challenges that a social enterprise can handle include community development, poverty alleviation, women empowerment, and child rights restoration.

See Related: Best Socially Responsible Stocks To Invest In Today

Principles of Social Entrepreneurship

Social entrepreneurship is about recognizing social problems and addressing them to create social value. Here are the principles of social businesses:

Cause-Driven

A social business is an organization without profit maximization purposes. The goal is to overcome environmental education, poverty, health, and technology access issues.

Economic & Financial Sustainability

Like any other business, cash flow and financial numbers should be sustainable in the long run.

Investors’ Returns

Investors must get a return on their investments. They receive a return based only on their invested amount — no dividend.

Profit Stays in the Company

After returning investors’ investments, the rest of the profit is reinvested in the business for further expansion.

Better Working Environment for Staff

The focus is on the well-being and happiness of employees at the workplace. It is a great way to foster long-term relationships with the workforce. Happy workers are literally better workers – and the longer you can keep them the more experts you have to hand.

Joy in Work

You gotta love what you’re doing, how you’re doing it, and who you’re doing it with – otherwise, what’s the point?

See Related: What is the Pyramid of Corporate Social Responsibility?

Why You Should Invest in Social Enterprises

Social businesses are more likely to experiment and innovate, which means you could be investing in something on the cusp of something big like the next Tesla – or something less impactful, like Pro-Yo yoyos.

Considering the outcomes, most entrepreneurs and investors like the idea of investing in a social enterprise. But, they also have some doubts, such as:

• What might happen to my money?
• What is the end goal of a social business?
• Can a social business succeed in this cut-throat industry?

Regardless of your doubts, it is evident that social businesses have transformed the way of doing business. They are growing in popularity and will certainly bring a positive change to communities and people’s lives. Though there are challenges, social enterprises are in a healthy and strong position right now. Here are some top reasons to become a social entrepreneur.

• Revenues of interesting social enterprises are growing.
• Social businesses are expanding into new markets.
• Social enterprises have proven to be sustainable.
• Social businesses promote management diversity.
• Consumers tend to prefer the social business model.

These reasons are enough to convince social entrepreneurs to invest in social enterprises.

See Related: How to Build a Socially Responsible IRA Portfolio

Social Enterprises and Employment Opportunities

One essential point that makes social businesses unique is their endless employment opportunities. These enterprises often hire individuals who belong to disadvantaged communities.

People from underserved communities often face discrimination and prejudice. As mentioned before, this is where social businesses come into the frame. One of the primary goals of these enterprises is to train and hire individuals with at-risk backgrounds.

See Related: Best Impact Investing Books to Read

Characteristics of Social Entrepreneurs

Social entrepreneurs’ characteristics are the details that define their objectives and works. Some common characteristics are as follows:

Passion

Social entrepreneurs are passionate about their unique ideas and apply them for social change. They want to work on social problems to improve people’s lives.

Innovation

Social entrepreneurs use innovative solutions to identify and resolve issues. Apart from this, they also practice different approaches to solve public problems and bring positive change to society.

Self-Sufficiency and Financial Independence

Social enterprises must not be dependent on government subsidies to survive and produce funds to support social causes.

Entrepreneurial Approach

Social enterprises determine market possibilities, collect resources, and plan innovative solutions to make a long-term positive impact on society. Also, they use feedback to have an idea of their current performance and make changes wherever required.

Scale Improvement

The primary focus of social businesses is to expand the scope of their actions to maximize their social influence. Thus, they can convince governments and large corporations to aid social entrepreneurship ideas to transform society for the better.

See Related: Different Types of Social Responsibility to Know

How to Choose a Social Entrepreneurship Idea

1. Know Your Areas of Interest

Are you a social activist for charities? Do you want every child in the US to have a roof? Do you love to volunteer at food pantries on weekends? Do you support local vendors by making purchases from them?

First of all, you need to define your passions and areas of interest. Once you find your interests, move to the next step.

2. Find Out Existing Market Gaps

Once you know your passions, the next thing is to identify gaps in existing services or products and discover solutions to fill them.

For instance, if the food pantry you’re volunteering at can’t distribute fresh produce as soon as someone donates, you need to think about solutions to make the pantry’s services fast.

Being a social entrepreneur, you can provide a service that makes it easier for the pantry to deliver donated fresh items to needed communities in your region.

3. List Your Key Skills & Strengths

No matter your profession, you need to know your key strengths & skills and discover how they can help you with your mission.

Besides this, you should also identify your weaknesses. It will help you understand your low points and who to contact for help.

4. Finalize a Business Model

Being a social entrepreneur is not always like opening a nonprofit. There are a few things that you must determine, such as:

• Whether you will monetize your entrepreneurship idea or not?
• How should you monetize your idea?
• Is a specific business model suitable?

To plan an ideal business model, you must understand how your company will be structured.

If you are still confused, don’t worry. We know that starting a social business may feel like a tedious process. But, there are several successful social entrepreneurs that you may follow for inspiration.

See Related: Examples of Collective Impact Model

Examples of Social Entrepreneurship Companies

Social enterprises are usually designed to contribute to social goods. In this section, we will talk about successful social enterprises. Though the list is expansive, here are some of the best social entrepreneurship business examples from around the world.

Let’s see how these social enterprises are helping underserved individuals and communities.

1. STATE Bags

STATE Bags is one of the best-known social entrepreneurships on this list. This US company supports underserved and underprivileged families and children as per their needs.

The primary goal of STATE Bags is to address the needs of American children living in critical and challenging circumstances. The company’s policy states that for every bag you buy, the company donates a backpack to a child (with school supplies).

They also shed light on social injustices and fund projects with partner schools & charities. STATE Bags is a Benefit Corporation supported by fellow businesses. All these fellow companies build public significance by making a positive, material impact on society.

See Related: What is a Serial Entrepreneur? Definition & Examples To Know

2. FIGS

Founded by Trina Spear and Heather Hasson in 2013, FIGS is a mission-driven e-commerce company. This fashion-forward medical apparel business is committed to making scrub sets and selling them to healthcare providers on its online platform.

FIGS makes super comfortable scrubs using antimicrobial fabric technology to lower infection rates and ensure durability. FIGS works on an initiative known as Threads for Threads. The company donates a pair of high-quality scrubs to a healthcare provider in need for each pair of scrubs bought.

Usually, these healthcare providers don’t have access to scrubs and perform their duties in regular clothes. The company’s goal is to provide scrubs so that healthcare personnel can work in sanitary apparel.

This helps lower possible cross-infection chances. A survey by FIGS has found a 66% decrease in the infection rate in clinics with their scrubs.

The company is donating scrubs to healthcare professionals in over 30 countries and planning to add more to the list in the future.

Also, the company partners with Mount Sinai, Stony Brooks University, and UCLA Health to reach its mission.

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3. Helpfreely

Founded by Guillaume Renault, Helpfreely is the first project of The Help Freely Foundation. This social business allows people to invest in desired products while contributing to a cause of their choice. This online platform connects consumers, online shops, and nonprofit organizations.

Helpfreely is currently working with around 1500 NGOs, charities, and nonprofits. It has built a massive donation network.

This global fundraising platform allows users to raise funds while shopping without costing them money or time. You can buy a product of your choice for a regular price with a percentage of the profit going towards your favorite cause or charity.

Helpfreely also raises social awareness and empowers individuals to embrace social goodness.

See Related: What is Corporate Socialism? Definition & Examples

4. TOMS

TOMS believes that children should have adequate shoes, and thus they introduced TOMS Shoes. This is a for-profit social business that collects charitable donations by making sales.

TOMS operates on a Shoes for Shoes model; buy a pair of TOMS shoes, and the company will donate one to a needy child. The right pair of shoes will enable needy children to go to school and play safely, improving health and life quality.

TOMS has donated more than 50 million pairs of shoes to needy children, and the number will continue to increase over time.

See Related: Best Impact Investing Apps | ESG Investing Options

5. SEKEM

Founded by Dr. Ibrahim Abouleish in 1977, SEKEM is one of the best examples of social businesses. This Egyptian firm was first launched with the mission to give back to the community and ensure sustainable development.

SEKEM helps society, individuals, and the environment by following a holistic approach. This approach integrates economy, ecology, and cultural life.

Some of the changes that SEKEM has brought over the years are as follows:

• It has built an education center to help children emphasize their analytical thoughts and creativity.
• It has produced herbal, gastronomical, and medicinal products to serve customers’ varying needs.
• It has improved the environment through biodynamic farms.
• It has opened a healthcare center that deals in holistic medicine.

6. Aravind Eye Care System

This eye care organization is another example of the best social entrepreneurship enterprises. This Indian eye care hospital is a scaled social business. It has been offering cataract surgery and other eye care services for over 40 years.

The organization lets people pay for their eye care services as per their ability to pay. Aravind Eye Care System comprises a research foundation, many eye clinics & hospitals, an eye bank, and a training center to spread the model.

This globally renowned eye care hospital delivers high-end eye treatments to people, no matter how much they can afford. The company offers eye treatment to over 3 million people each year.

See Related: How to Invest in Community [Step-by-Step Guide]

7. Baron Fig

Baron Fig makes pens, notebooks, or other accessories for creative thinkers who love writing, sketching, and drawing. Baron Fig features an extensive selection of notebooks to fulfill the needs of everyday hobbyists.

Though Baron Fig sells notebooks, it aims to make the earth a better place and promote environmental consciousness. Considering the negative impact of paper production on trees, the company makes sure to plant a tree for every notebook they sell.

Founded in 2013, this social enterprise has already planted more than 50,000 trees in over 30 developed or developing countries.

8. TranSanta

TranSanta is a community-led unique social entrepreneurship business. This mutual aid social media campaign highlights Instagram stories of trans young people in need and connects them with Santas from across the globe.

The campaign allows transgender youth to create a wishlist of things they need the most. Interested community members browse their wishlists and send them what they need through safe and anonymous gift-giving.

This program is designed for non-binary and trans youth who are houseless, in detention, or in unsafe housing situations. People from all around are participating in this campaign and supporting trans youth by sending them things they need the most.

Additionally, there are no criteria to be a Santa for this TranSanta. That means TranSanta can be one of the best social enterprises to work for if you want to contribute to the community.

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9. 734 Coffee

734 Coffee is a social business committed to supporting Sudanese refugees. This venture collaborates with local cooperative farms in Gambella to produce and harvest coffee. It then sells produce to US retailers and uses a percentage of profits to fund scholarships for Sudanese refugees.

Led by Manyang Reath Kher, 734 Coffee is currently hosting more than 700,000 refugees from South Sudan. This social entrepreneurial venture sources coffee from farmers who work with South Sudanese refugees.

Also, it reinvests around 80% of its profit to fund scholarships and education programs for refugee youth in Gambela.

734 Coffee uses the world’s favorite (beverage, i.e., coffee) to drive an impact on refugees’ sustainability.

10. Belu

Launched in 2007, Belu is a UK-based social enterprise that puts the environment and people first. The company sources and delivers water to hotels and catering companies with the lowest possible carbon footprint.

Belu reinvests its profits to block carbon emissions from entering the air and ending water poverty.

The company also donates its profits to WaterAid. This company is committed to offering clean water solutions to underserved communities.

See Related: Best Community Solar Companies for Subscriptions

11. Cracked It

Cracked It is a London-based smartphone repair business staffed by youth with convictions. This mobile repair service teaches life skills, and offers employment opportunities to young people (which helps prevent people from reoffending) who find it hard to find a job after serving their debt to society.

12. Company Shop

Based in the UK, Company Shop is a social supermarket chain that delivers food at discounted rates. The company provides members with direct access to super discounted food and learning & development programs.

The company does so to build stronger and more confident communities and individuals.

13. Better World Books

Located in the United States, Better World Books is another example of social enterprise in education. The company is known for selling new as well as old books online. They collect them from different sources, such as bookstores, libraries, and college campuses.

This self-sustaining business is dedicated to balancing social, economic, and environmental values.

They use a part of the total earnings to fund literacy initiatives worldwide. Besides, Better World Books donates hard-to-sell books to at-risk communities in the US.

See Related: Best Green Companies to Invest In

14. Goodwill Industries

Goodwill Industries is a US-based social venture. It is known for employing poor individuals who work on donated products from wealthier regions. The company deals with repairing goods for resale.

Goodwill Industries then uses sales profits to fund job training programs. Moreover, the company has helped over 100,000 people train for careers in different sectors, such as healthcare, IT, and banking.

15. LivelyHoods

LivelyHoods works on a business model that provides people with job training and employment opportunities. The company’s mission is to help unemployed women and youth become independent by offering jobs.

The company hires youth and women to sell renewable energy goods to the community on a commission basis. This door-to-door distribution model features various opportunities to lower poverty and improve life quality & health of communities through its products.

16. Solar Sister

Solar Sister is another social enterprise example. This business focuses on bringing clean or renewable energy technology to rural areas of Africa by empowering women.

They provide training and help women entrepreneurs build sustainable clean energy businesses.

The company has already helped over 5,000 women entrepreneurs. The company visualizes a brighter and better world powered by women’s enterprises!

Start a Successful Social Enterprise!

Social entrepreneurship can be successful and make a visible social change when you start it after a detailed analysis. If you have an idea for a social business, consider all factors before implementing your business idea.

For more exclusive tips, you can reach out to the industry’s successful social entrepreneurs.

Related Resources:

• How to Create a Social Impact Measurement Framework
• Why Companies Have a Social Responsibility to Investors
• Enhance Energy Efficiency in Business