It’s a common question I get asked…

• Are we a social enterprise?

• Could we be a social enterprise?

• Should we become a social enterprise?

And I think it’s because of our mis-understanding of what a social enterprise is. Many of us assume it’s a particular type of business (in terms of governance).

However in reality social enterprise is more of an ethos and approach to business which is committed to in your governing documents and you can decide what governance works best for the social and environmental mission you want to pursue, and the way you want to do this.

There are many “definitions” around the world for social enterprise and legal and governance definitions will differ in different countries.

However, I like to draw on two UK based organisations’ definitions which I think reflect the ethos and commitment to running a business as a social enterprise.

Social Enterprise UK definition:

• Your business has a clear social or environmental mission that is set out in its governing documents.

• You are an independent business and earn more than half of your income through trading (or are working towards this)

• You are controlled or owned in the interests of your social mission

• You reinvest or give away at least half your profits or surpluses towards your social purpose

• You are transparent about how you operate and the impact that you have

Social Enterprise Mark definition:

• Primarily be trading in support of social [or environmental] purposes

• Be independently owned and / or managed

• Generates the majority of it’s total annual income from trading activities

• Be committed to maximising income and the majority of any profits generated for social / environmental purposes

• On dissolution be committed to distributing all residual assets to social purposes

• Be able to demonstrate how social purposes are being achieved

So for me, you are a social enterprise (or can become a social enterprise) if you can sign up and commit to the following:

• Have a clear social and/or environmental mission written in to your governing documents and be driven by a commitment to prioritise and pursue this mission

• Are an independently owned or managed i.e. autonomous and able to manage your affairs in line with other requirements, without undue control by shareholders/members who do not share similar purposes

• Earn the majority (e.g. more than half) your income through trading (e.g. selling, and not from grant funding, fundraising or sponsorship). Aka it’s a business.

• You have a commitment to maximising income to pursue your mission and at least half of any profits made are reinvested back in to the business operations (pursue the mission) or donated to further pursue and deliver your social / environmental mission

• You are transparent about how you operate and the impact you create, and demonstrate how your social and / or environmental mission is being achieved

• And in most cases you have an asset lock, meaning upon dissolution you’re committed to distributing all residual assets to your social/environmental purpose (usually in the form of a gift to another organisations with a similar mission and aims)

Most of us are empowered by pursuing a social and/or environmental mission, with clear aims and a commitment to generating an income through trading to pursue these aims. If this is you and your business, you have a social enterprise.

The next stage is therefore deciding on a governance structure, and creating a business model that enables you to generate the income you need to pursue your aims.

Find out more about governance options for social enterprises (in the UK) here.

Read this blog to explore different business models for social enterprises.