A social enterprise is an organization legally created and protected to address a social and/or environmental issue that utilizes business principles, highly ethical internal operations, and the alignment of 100% of its resources to achieve its mission through the creation of sustainable earned revenue streams – while also positively influencing the larger systems around it.

This video explains this concept in greater detail, and also provide a relevant example:

Read more about "What a social enterprise" is in our blog post.

Ask 100 people why we need social enterprises, and you'll probably get 100 reasons.

However, these reasons will likely fall into a few main themes:

1. The current economy does not provide meaningful jobs to enough people (Ref: Brookings)
2. Today's form of capitalism has a giant market failure, which is ecological collapse, overutilization of limited resources, and climate change (Ref: The Guardian)
3. Social and income inequality is increasing across the globe. (Ref: World Inequality Lab)

As explained in the following video, a variety of forces exist that are creating a move towards social enterprises.

1. The business / private sector is being pressured to become more responsible via employees, consumers, investors, governments, and other supply chain partners.
2. The government sector is being pressured to become more efficient and provide more good to more people.
3. The nonprofit sector is being pressured to become more accountable and sustainable.

The social enterprise movement has been in motion for over 600 years as we argue in this popular article.

In the following video, we explain this history in greater detail. The most recent events worth noting include:

• The formation of Ashoka by Bill Drayton in 1980 to formalize the idea of the social enterprise movement
• The 2006 Nobel Peace Price to Muhammad Yunus for his working in developing the idea of a "Social Business"
• The 2008 formulation of the Social Enterprise World Forum
• The 2010 creation of B Labs, a nonprofit creating a "Benefit Corporation"
• The 2014 implementation of India's Corporate Social Responsibility "Tax"
• The 2015 ratification of the United Nations Sustainable Development Goals
• In 2019, 180 CEOs sign an updated pledge at Corporate Purpose Roundtable to evolve the “purpose” of businesses

In January 2013, the 30-member UN General Assembly Open Working Group on Sustainable Development Goals was established, established the 17 SDGs and 169 targets.

This was ratified by the entire United Nations in 2015.

You can see the full 17 goals here and the 169 targets here.

The goals are important because it represents the first time in humankind that the world unified around a common set of principles that inform whether something is contributing to a fair, just, and sustainable society and planet.

While the goals are not perfect, they do present a unified standard that every company, country, non-profit, and more can benchmark against.

Amongst other benefits, this creates a way for us to measure the progress of social enterprises, investments, and partnerships.

There are many definitions of a social enterprise. To help provide clarity, the Social Enterprise World Forum published this guide showing that all social enterprises share these six criteria:

1. Mission focused: Legally incorporated for a mission
2. Surplus invested in mission: Profits support growth and increased impact, not investors
3. Ownership tied to mission: Enterprise is owned and funded to retain impact
4. Ethically transparent and accountable: Fair, just, and equitable workplace across all aspects
5. Trade generated income: Creates revenue through activities that generate social good
6. Asset locked: The entity will continue to exist for impact in event of merger or acquisition

Read more about these criteria on the Social Enterprise World Forum webpage here.

It's not easy to confirm that a social enterprise is a social enterprise, and these days, you have to be very careful about "greenwashing".

As you saw in the previous lesson, there are 6 criteria that make up a social enterprise. The below are the tangible things that we do to review and screen if a social enterprise is set up to achieve the 6 criteria from the previous lesson:

• Executives measure performance and make decisions, always integrating the social mission – as enforced in Board governance documents
• Legal incorporation documents declare that the entity exists for a social mission while also preserving the environment
• The organization’s Board and Executives measure performance and make decisions, always integrating the social mission
• The organization has controls, processes, and reports on internal factors, including care of employees and carbon emissions
• The company is built with equity and inclusion from day one, making it a safe, fair, and equitable place for all employees
• The company manages its externalities to protect against any environmental or social issues, like carbon emissions or pay inequity, and information is available publicly on progress

Certification agencies play an important role in verifying that the entity you are partnering with is actually a social enterprise. They ensure all the criteria (shared on the previous page) are being achieved by the organization.

The following are the most common certifying and convening organizations for social enterprises:

1. World Fair Trade Organization (Global)
2. Benefit Corporation (Global)
3. Euclid Network (European Union)
4. Good Market (Global)
5. MovingWorlds (Global)
6. Buy Social (USA, Canada, UK)
7. Social Traders (Australia)
8. Social Enterprise Alliance (USA, but moving globally)
9. Society Profits Social Enterprise Certification (USA)
10. People + Planet First Certified (global)

Beyond the certification at the organizational level that confirms a social enterprise is in fact a social enterprise (shared in the previous lesson), there are additional certifications that many companies -- social enterprises and non-social enterprises -- can pursue to ensure their products and services are achieving the highest ethical and environmental standards.

It is common for social enterprises to pursue these certifications in addition to their organizational certification, and include things like:

• Organic
• Fairtrade
• Rainforest Alliance
• Forest Stewardship Council (FSC) certification
• NON-GMO Project
• MANY MORE

The following organizations are sharing news, insights, research, and case studies that all contribute to help grow the social enterprise movement:

1. Social Enterprise World Forum
2. Euclid Network
3. Acumen Academy
4. Skoll Center for Social Entrepreneurship
5. World Economic Forum COVID Response Alliance for Social Entrepreneurs
6. Duke University's Center for the Advancement of Social Entrepreneurship (CASE)
7. NextBillion News
8. World Fair Trade Organization
9. Aspen Network for Development Entrepreneurs (ANDE)

The idea of "ESG" investing is growing rapidly. It stands for environmental, social, governance, and it requires companies to start disclosing more information about their positive and negative ESG factors.

ESG and impact investing are oftentimes confused or used interchangeably, but they are very different.

The video below helps explain the difference.

In summary:

• Impact investing is investment specifically for the purpose of accelerating the growth of social enterprises.
• ESG investing represents capital deployed to any enterprise that reports on ESG factors (a company like Apple is often included in ESG funds)

In 2019, a set of 9 principles were created by ImpactPrinciples.org to help define impact investing.

The 9 principles are explained in the video that follows:

1. Define strategic impact objective(s), consistent with the investment strategy.
2. Manage strategic impact on a portfolio basis.
3. Establish the Manager’s contribution to the achievement of impact.
4. Assess the expected impact of each investment, based on a systematic approach.
5. Assess, address, monitor, and manage potential negative impacts of each investment.
6. Monitor the progress of each investment in achieving impact against expectations and respond appropriately.
7. Conduct exits considering the effect on sustained impact.
8. Review, document, and improve decisions and processes based on the achievement of impact and lessons learned.
9. Publicly disclose alignment with the Principles and provide regular independent verification of the alignment.

Additional reading further defining impact has been published by:

• The Impact Management Project, and its 5 dimensions of impact
• The United Nations SDG Impact Investing movement

The following are organizations worth following to learn more about Impact Investing:

• Acumen
• Social Capital Markets (SOCAP)
• The Global Impact Investing Network
• Impact Alpha
• United Nations Principles for Responsible Investment
• Global Impact Investment Rating System (GIIRS)
• SDG Impact

growing number of global corporations are making audacious Environmental, Social, and Governance (ESG) claims.

Employees, consumers, governments, investors, and other business partners are putting pressure on corporations to become more responsible, and this pressure will continue to grow.

According to pwc, 72% of companies report on the SDGs, but only 14% mention specific targets. However, as this grows, in order to achieve these goals, they will need to partner with social enterprises.

In doing so, Deloitte reports that they will recognize 5 benefits:

• Creating new opportunities
• Taking regulatory relationships from reactive to proactive
• Inspiring, attracting, and retaining top talent
• Enhancing brand value with key stakeholders
• Building resilient, sustainable supply chains

Some companies, like SAP, have made commitments to increase their spending with social enterprises, giving rise to the movement of "Social Procurement" which is critical to achieving the SDGs.

ocial Procurement is the intentional use of procurement activities as tools to generate positive social, cultural, economic and environmental outcomes by purchasing goods, services and works from social enterprise suppliers.

Read this case study from Change Please Coffee, Compass Group, and SAP to see Social Procurement in action, and this article about the background of social procurement.

Governments, international policy organizations, employees, and investors are putting increasing pressure on companies to partner with social enterprises. This includes things like:

Government-required reporting Corporate social responsibility taxes Mandatory ESG disclosing

Read about Kasha, a social enterprise that partnered with Unilever to expand its impact.

More great examples of partnerships are featured in this World Economic Forum report.

On the following lesson page, we share 7 different frameworks useful in supporting social enterprises. These 7 frameworks are:

1. Systems Mapping
2. Creating Shared Value
3. Theory of Change
4. Human-Centered Design
5. Network Leadership
6. Collective Impact
7. Partnership Structures

Frameworks provide direction on how to best proceed in supporting social enterprises, as well as best practices for building constructive partnerships with them and their key stakeholders.

When do you use these frameworks?

For each phase of your work:

• Be clear about goals
• Analyze the frameworks above and choose the one best for your current stage
• Revisit the framework you are working with and move to the next framework as needed.

Here is an example of when and how these are used:

• A social enterprise will likely use a combination of System Mapping and Human-Centered Design to identify the key stakeholders and then co-design a solution.
• To help scale the solution, it will develop a Theory of Change and then use the Shared Value framework to engage the right partners
• The partners will then choose a Partnership Structure and build trust using Network Leadership
• The partners/network will use Collective Impact to guide ongoing collaborations, and the Theory of Change to track progress.
• Together, they will continue to use Human-Centered Design and System Mapping to bring in more stakeholders and continue to innovate their solution(s).

1. Systems Mapping Social enterprises are working to make entire systems more effective. As such, it’s important to understand the full system, and all the stakeholders involved. The Systems Mapping framework from FSG helps us do that effectively.

2. Creating Shared Value Partnerships with social enterprises will only sustain if it creates value for all of the key stakeholders, including the social enterprise and your business. The Shared Value framework, measurement method, and building blocks from FSG helps us do this.

3. Theory of Change Social enterprises exist to create a meaningful impact. The Theory of Change logic model helps us confirm that our inputs and activities result in positive outputs, outcomes, and ultimately, impact. Understanding how your contributions will result in a meaningful impact are key to the building blocks of a partnership, and we recommend you draft this early, and continue to revisit it.

4. Human-Centered Design (HCD) tells us that even the most intractable problems – like poverty, disease and gender inequality – can be solved, and the solutions to the world's greatest problems are with the people who are experiencing them. The HCD framework helps us partner with people to develop solutions that work and make the world better.

5. Network Leadership Most social enterprises work with and through networks. Building effective networks requires “Network Leadership”, the four principles of which are below, following by the five steps to building impactful networks.

6. Collective Impact Collective Impact is a complement to Network Leadership, and provides tactical guidance on how to work effectively, especially with partners that have different end-goals.

7. Partnership Structures There are many different ways to develop partnerships. Being mindful about a partnership structure that works for your social enterprise and your organization is critical to ensure all goals are met. This guide from Resonance Global helps develop the partnership model that is right for your specific case.