The most common form of not-for-profit is the social enterprise. The model has been around for decades and has been a common reference for charities, but it’s a misnomer. A social enterprise has never been part of the charity system. It’s a real business with its primary goal of using surpluses of the operation to reinvest into the business and the community rather than the profit being rolled back into the pockets of shareholders.
We used to refer to NGOs as non-profits, but the shortfalls caused by the overuse of fundraising and population malaise over continued calls for funding made people rethink the model. When I worked with a large Canadian NGO, this model of not-for -profit was unknown. People would suggest to me that I meant “non-profit,” but I soon corrected them. We WANT to make a profit, but it’s what we do with it that counts as social enterprise.
As part of this NGO we worked in a division that used business strategies and procedures to run a community social program. The division made money in the first year, a substantial amount, and the charity’s leadership had a fit because they didn’t know what to do with the surplus. Additionally, they were afraid the “government might find out we made money.” Silly but true!
Obviously, as a social enterprise, the money was simply rolled back into the division to further fund the program.
The first time I’d heard of a social entrepreneur was when Muhammad Yunus won the 2006 Nobel Peace Prize (and, in 2009, the US Presidential Medal of Freedom). A Bangladeshi, Yunus is a social entrepreneur, banker, economist, and civil society leader who was awarded these accolades for founding Grameen Bank and pioneering the concepts of microcredit and microfinance for the poor in Bangladesh who had no access to financing.
Today, social entrepreneurs are more activists than business owners, but many high-profile leaders are, in some cases, turning the social enterprise into an alternative to government financing. Whereas an entrepreneur measures performance in a business by profitability, the social entrepreneur is driven by social capital.
My favorite actor, Paul Newman, created the Newman’s Own food brand in 1982, with an initial offering of salad dressing and 100% of the profits going to charity through the Newman’s Own Foundation, which has donated over $525 million worldwide since inception.
More often than not, forward-thinking companies are following the trend towards being consumer driven, a more ethical approach to making money. The vision of the Wall Street tycoon becoming rich without consideration for others is no longer welcome. Society is driving this move, and I think it has everything to do with the millennial demographic born between 1982 and 1996.