Social enterprises are created and run by businesses to solve persistent social problems using a commercial mindset. The way they work and the services they provide are designed to generate income, proceeds from which are invested back into the enterprise to allow it to provide more services to people in need.
While many social enterprises are stand-alone, some organisations choose to pursue this path rather than operate a charitable foundation that generally won’t have a commercial purpose. Social enterprises do earn a profit, but that money is invested back in the business rather than being distributed to shareholders, so the enterprise can increase the social impact it has.
Relationships Australia (RA), which provides counselling services across the country, is one organisation that is starting a social enterprise that sits alongside its main business.
Scott Beachley runs the social enterprise, which was founded at the start of 2016. Pursuing commercial activities is its first principle, but it is also committed to helping people feel better in an innovative way.
“It was felt that within the infrastructure of RA, it would be difficult for anyone to dedicate themselves full time to doing that. So we set up the social enterprise to look at innovative ways of solving social problems and generating revenue,” Beachley says.
The platform through which to achieve this is called Radiant, which provides consumers with easy access to mental health professionals.
“We're matching practitioners and clients in a considerate and empowering way using technology,” he adds.
Relationships Australia will be able to use Radiant’s commercial return to further develop programs to help vulnerable and disadvantaged people who can't afford to get help elsewhere.
Beachley prepared a business case for Radiant that was submitted for approval by the RA board, which undertook a rigorous interrogation process of the plan as an independent, risk-conscious investor. The business case supports Radiant’s vision to be a sustainable separate entity, initially fully funded by RA, but eventually contributing revenue to it.
His advice to finance chiefs thinking about establishing a social enterprise for their business is to recognise that it’s possible to both do good and make a profit.
“Don't try to be perfect, just get started and learn fast. Be clear about the purpose of the social enterprise and work out if it has a sustainable existence. Beyond that it can be anything you want it to be,” he advises.
Michele Goldman is the Chief Executive Officer of the School for Social Entrepreneurs (SSE) Australia. She explains that RA’s decision to set up Radiant as a separate entity and give it its own goals and focus released it from trying to make it work as an internal program.
“It has a greater level of independence and it can move faster, calling on the skills and infrastructure of the mothership as needed. Having that separate entity really does create that entrepreneurial speed, urgency and executional focus larger entities don't really have,” she says.
“But there’s also got to be accountability, compliance, and governance structures to tie the social enterprise back to its parent. It’s about having some flexibility and also making sure you don't lose sight of corporate responsibility,” she adds.
Social enterprises also have other benefits given they are designed to produce a commercial return, rather than rely on external funding or grants in the long-term, even if external funding is used at the start.
“Building a social enterprise means you can develop independent income to support operations, administration, innovation and evaluation, all the things needed for growth,” says Goldman.
She says creativity and innovation are other advantages. “Social enterprises bring a new wave of disruption. Design thinking and really understanding what customers want, their pain points and the opportunities to delight them are what makes them successful.” ‘Design thinking’ is a way of solving problems with human concerns at the centre of the solution, it is used across a number of disciplines.
According to Goldman, having the right people in place is one of the ingredients for a successful social enterprise.
“Many people go into the not-for-profit space because they're really passionate about tackling a specific social issue. They might have had lots of experience in community development. But a social enterprise is essentially a business; it’s different to a not-for-profit. If it's going to be successful, it can't just be run by the heart, it needs to have a strong head as well,” advises Goldman.
Her recommendation for finance chiefs exploring whether a social enterprise is right for their business is to ensure it aligns with the main business’s mission and purpose.
“Really understand who your customer is and what they think. You should take a look at your business and understand how your assets can help address the challenges your customers are experiencing. .”
“Those assets could be brand reputation or distribution channels. One organisation I worked for had a million unique website visitors every year and a strong reputation. So the idea is working out how you monetise an asset like that,” she adds.
The challenge is designing a business model that will provide a social purpose within a commercial framework. That’s the balance all social enterprises are trying to achieve. Its early days for this model and there is no set way to do this, as a emerging field the best way to achieve this is still being determined.
- Don’t lose sight of the social enterprise’s purpose: set clear values from the start.
- Recognise there may be many ways to achieve a beneficial outcome.
- Social enterprises should help support the main business' mission and purpose