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What is a social enterprise?

July 31, 2020   ·   0 Comments

By Luis Chacin

With the ongoing scandal involving WE Charity and certain high-level government officials, the ME to WE Social Enterprise has also been covered in the news. Most people know the basics of how a charity is supposed to operate. However, many people do not fully understand what is a “social enterprise”.

You may be familiar with the notion that a social enterprise is a for-profit business with a twist. Generally speaking, a social enterprise is a business model that seeks to achieve a social purpose, such as helping the environment or providing employment to vulnerable populations, while, at the same time, earning a profit. If you ask a lawyer -and manage not to fall asleep halfway through the answer-, you may find it interesting to know that the basic concept of “good corporate citizenship” is now codified in the Canada Business Corporations Act since 2019 and that, even though Ontario has no statutory equivalent to Nova Scotia’s community interest company or British Columbia’s community contribution company and benefit company, there are a number of ways to bring together social investors and other stakeholders.. 

When I immigrated to Canada in 2003, my native Venezuela was in the early days of a so-called revolution towards “Socialism of the 21st century”. This is probably the reason why I often get the impression that the answer to the question “what is a social enterprise?” varies depending on the political ideology of the person you ask.

For example, to some detractors of the social enterprise model the answer to the question is typically limited to the fact that all enterprises benefit society by efficiently distributing the risks inherent in the process of resource allocation and thereby increasing the overall wealth of employees, customers and society as a whole. In this sense, the social enterprise model is simply capitalism, pure and simple, and there is nothing new to it other than -perhaps cynically- the use of the term as a marketing gimmick to appeal to customers who may value a particular social cause above price or quality or who may want to feel good about their own spending patterns.

To others, the social enterprise model is a makeshift solution to the fundamentally flawed philosophy of rational self-interest at the core of capitalism, where the self-interest of the individual is only artificially and temporarily reconciled with the social good in the pursuit of profits. In this sense, the social enterprise model, which is not as effective as the not-for-profit model, opens the door to a so-called “stakeholder capitalism”, as was the theme of the Davos Manifesto 2020 at the World Economic Forum in January. However, -and perhaps cynically- the concept, they say, may at the same time be used as an excuse to promote the erroneous idea that capitalism can fix itself before it ultimately destroys the environment or otherwise leads to revolution. 

And then, there are the dreamers, social entrepreneurs of all stripes, from farmers to computer developers using blockchain technology, who have no time for political ideologies and only worry about how to tackle complex social problems in a manner that consistently attract social investors and reliably deliver value to their communities. 

It is always easy to criticize those who, understandably worried about the world being on fire, fail to see how effective the free market has been in reducing overall poverty rates throughout the world and leading to a naturally declining rate of population growth as more women are able to access education and join the workforce; as well as those who fail to appreciate that, in spite of how our individual circle of interest determines our calculations of value, not to mention the so-called “tragedy of the commons”, there are social causes the value of which is not yet determined by an established market.

However, with everything that is wrong in the world today, particularly in politics as recent scandals continue to show, the fact that the social enterprise model is gaining momentum is something that should make us all optimistic about the future. 

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