What is Social Purpose Business?

Within the growing social economy sector, many new terms are starting to gain recognition. Yet the differences among often overlapping terms can be confusing…

Traditionally, business ventures would be founded upon one of two dichotomous business models. Either a commercial enterprise would be established to maximize financial returns, or a not-for-profit or charity would be created to maximize social and environmental returns. But times have changed, in turn transforming the way companies do business.

With growing social awareness among consumers, a greater sense of accountability among businesses and tighter government regulations, a relatively new continuum of business models has emerged. Ontario’s MaRS Discovery Centre and SocialFinance.ca illustrate the types of value, and by extension, the types of returns that various companies seek to generate today:

At polar ends of this continuum, commercial enterprises seeking pure financial returns still sit opposite operational charities seeking pure social returns. In the widening gap between them, the growing social economy sector gives rise to many other types of business.

The Middle of the Continuum

Social entrepreneurs are establishing ventures that fall in the middle of the continuum, between pure financial and pure social returns. These innovators are striving to create “blended value”, a non-divisible combination of financial, social and environmental value that in turn generates blended returns. Merging entrepreneurial spirit and sound business principles with an interest in achieving social and/or environmental goals, social entrepreneurs are gathering support by like-minded investors and consumers.

Ventures in the middle of the continuum measure their success based on profit as well as through their impact on, and commitment to, community and society. It’s what is commonly referred to as the “triple bottom line” – people, planet and profit. Read more about measuring social impact.

Who are Social Entrepreneurs?

In recent years, interest in social entrepreneurship has grown and both business owners and leaders of not-for-profit organizations are now proud to distinguish themselves as social entrepreneurs. Social entrepreneurs are risk-takers and innovators that establish either for-profit or not-for-profit organizations addressing social or environmental needs using sound business principles. They have been described as leaders in the field of social change, combining an entrepreneurial spirit with a concern for both the “social” and economic bottom line and recognizing that strong, vibrant communities are critical for sustaining economic growth and development.³

The social enterprises emerging from such innovation can address a range of global or local issues, from affordable housing, sustainable agriculture and green energy projects to poverty reduction, job creation and micro-finance initiatives.

Tal Dehtiar, a Futurpreneur Canada entrepreneur, is the owner and founder of Oliberté Limited, a company based in Oakville, Ontario that manufactures and sells premium leather footwear and accessories made in Africa. Oliberté creates valuable employment opportunities in communities in Ethiopia, Liberia and Kenya and provides equitable salaries to workers. In Tal’s view, “Doing good should just be part of how we all do business. While based on some measures Oliberté would be considered a ‘social purpose business’, I don’t believe that ‘social’ and ‘business’ should be considered separately so we do not categorize ourselves there.”

How Social Purpose Business Fits In

Within the growing social economy sector, many new terms are starting to gain recognition. Yet the differences among often overlapping terms can be confusing in this relatively new territory. The following table outlines the three key venture types that fall in the middle of the spectrum.

Term	Definition	Example
Corporate Social Responsibility	A form of corporate self-regulation integrated into a business model with the goal of taking responsibility for the company’s actions and encouraging a positive impact through its activities on the environment, consumers, employees, communities, stakeholders and all other members of the public sphere.	Ink Isle sends customers pre-paid shipping boxes to recycle used plastic printer cartridges, reducing waste while meeting business objectives by re-using and re-selling cartridges.
Social Purpose Business (defined by Futurpreneur Canada and Trico Charitable Foundation)	The utilization of entrepreneurial principles to organize, mobilize and manage a for-profit business that has a social mission at its core and the goals of creating both economic and social value.	DeliverGood connects not-for-profits who need anything from computers to bottled water with individuals and businesses who have excess to donate.
Social Enterprise/Enterprising Not-for-Profit (defined by Social Enterprise Council of Canada)	Businesses owned by non-profit organizations in order to generate income as well as address social, cultural or environmental needs.	Habitat for Humanity’s ReStore retail outlets sell used and new surplus building materials for a lot less than market value, helping the environment while proceeds fund the construction of new homes within the local community.

Organizations that adopt Corporate Social Responsibility practices into their business foundation realize that helping to solve a social issue is an important part of doing business, while a Social Enterprise is built with the intention of solving a social issue. A Social Purpose Business straddles the two, but what they all have in common is that they recognize that a social issue exists.

There are two distinct types of Social Purpose Business:

• A for-profit business built to help solve a social issue
• A for-profit business that, besides running their business everyday, is passionate about helping to solve a social issue

DeliverGood, a Futurpreneur Canada-funded organization, is an example of a for-profit business founded to help solve a social issue. Founder Robb Price was working at the not-for-profit THE DOORWAY in Calgary when a fire destroyed much of their office equipment. While they asked themselves, How do we tell our community and our donors what we need?, individuals and small businesses were offering to help by purchasing something for them rather than just donating cash. People like to see their donations in action, as this gives the gratifying feeling of having helped solved a problem directly.

That got Robb thinking, If I have something to donate, how do I find an organization that needs what I have? But when he searched for such a matching tool, he discovered that one didn’t exist. That gave Robb the incentive to establish DeliverGood in early 2009, “to build efficiencies into the charitable giving process by connecting charities and non-profits who need stuff with people and companies who have stuff.”

Blanc Cosmetics, also funded by Futurpreneur Canada, illustrates how a company found passion for solving a social issue that was related to, and added value to, its business. Blanc Cosmetics teamed up with Operation Smile, a charity that helps children around the world get the cleft lip surgery they desperately need. A portion of the profits derived from certain dental services at Blanc Cosmetics was donated to Operation Smile, with the goal of providing $10,000 – enough to give 42 children life-changing cleft lip surgery.

So, while DeliverGood was founded to solve a social issue and in turn become profitable, Blanc Cosmetics was established to be profitable and in turn help solve a social issue.

Drivers Fueling the Change

The increase in social entrepreneurship and growing number of Social Purpose Businesses in Canada can be attributed to two driving forces – a shift towards entrepreneurship and a shift towards social and environmental awareness.

Entrepreneurial activity across Canada has grown substantially over the past few years. This rise in entrepreneurship is in part due to the current economic climate and its impact on hiring practices. In the midst of the recession, companies have shifted away from committing to full-time employees and instead are hiring contract, temporary or part-time workers. As young, highly educated and over-qualified workers are competing for low-paying jobs with no benefits, many are being encouraged or forced to pursue an entrepreneurial venture.

But young people aren’t just being forced into entrepreneurship; they’re actively choosing it. According to the authors of Impact Investing, “Talented young people increasingly hunger for employment opportunities that allow them to address social and environmental benefit, a hunger no longer satiated by participating in the annual corporate charity run or pro bono assignment or the classic non-profit approach that ignores the positive potential of business.”³

The other force that is sweeping across Canada and the world is a focus on social and environmental issues. People now have immediate and global exposure to information and news through social media channels and the Internet, helping them grow more aware of social issues and become more informed, concerned and discerning consumers. With this renewed social consciousness, people have the power to express their views through the consumer choices they make. In turn, businesses have had to respond to the heightened expectations of consumers by making Corporate Social Responsibility a part of their mandate, and social entrepreneurship is finding an ever-increasing market that’s receptive to its foundation of blended value.
Together, the shifts towards entrepreneurship and social and environmental awareness continue to expand profitable opportunities for Social Purpose Businesses supporting social changes that resonate with a well-informed public.

References

1. MaRS Centre for Impact Investing and SocialFinance.ca. Your Guide to Social Finance: Are you operating an enterprising non-profit? MaRS Centre for Impact Investing and SocialFinance.ca. [Online] [Cited: February 23, 2012.] http://socialfinance.ca/guide/am-i-eligible/are-you-operating-an-enterprising-non-profit.
2. Social enterprises: Definitions and boundaries. Brouard, Francois; Larivet, Sophie. Fredericton : Conférence ANSER – ARES 2011 Conference, 2011.
3. Bugg-Levine, Antony; Emerson, Jed. Impact Investing: Transforming how we make money while making a difference. Hoboken : Jossey-Bass, 2011.