Social Enterprise ✨ vs DWDG 🚀
Social Enterprise ✨ vs DWDG 🚀
What's the best way to create high-growth social impact?
👋🏽 Welcome to Doing Well by Doing Good: The New Startup Model, a newsletter highlighting the startups aiming to be profitable with a purpose.
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Social Enterprises are nothing new in today’s day and age — they have been around for decades. From Muhammad Yunus and Grameen Bank to Ben & Jerry’s. Social Enterprise is best defined by the Social Enterprise Alliance as
Organizations that address a basic unmet need or solve a social or environmental problem through a market-driven approach.
I love this definition — it’s clear and direct and covers global organizations, institutions and everyone in between. But how do the high-growth and high-impact Doing Well by Doing Good startups fit into this definition?
As a quick reminder, our definition of companies Doing Well by Doing Good is defined as below in our introductory post.
Doing Well by Doing Good is a concept characterized by for-profit companies that creatively tie in capital incentives through products and services that directly feed into immediate good for society from Day 1. These companies are differentiated by their ability to tie close to 100% of their operating revenue to contribute towards Doing Good rather than a fraction like many other companies.
In this post we want to address the question: Aren’t Social Enterprises just companies that are Doing Well by Doing Good? What’s the difference? Let’s dive a bit deeper.
Breakdown of Social Enterprises
Social Enterprises can be nonprofit or for-profit and span 3 different categories according to the Social Enterprise Alliance:
Opportunity Employment: organizations that employ people who have significant barriers to mainstream employment. [Examples include Goodwill Industries, Greyston Bakery & Nisolo.]
Transformative Products or Services: organizations that create social or environmental impact through innovative products and services. [Examples include Benetech, Growing Sound & Soles4Souls.]
Donate Back: organizations that contribute a portion of their profits to nonprofits that address basic unmet needs. [Examples include Everly, The Thx Co.&Songs Against Slavery.]
Let’s break this down one-by-one (zoom over to the TLDR; if you want the key conclusions.
Opportunity Employment as defined and evidenced by examples above, covers for-profit and nonprofit entities. The examples of opportunity employment focused organizations abound; another example is the Delancey Street Foundation, which provides opportunities to “substance abusers, ex-convicts, homeless and others who have hit bottom”. This definition can also expand to initiatives run by large Fortune 500 companies (e.g. Diversity & Inclusion commitments like Microsoft’s for the disabled). While a number of Doing Well by Doing Good companies will inevitably have such policies, it often isn’t the sole motivator or driver of their business.
Transformative Products & Services are exactly the kinds of companies that we talk about here. Companies that deliver products and services that create social or environmental impact, can tie nearly 100% of their revenue generation to the impact their create. While the examples above cover both nonprofit (Soles4Souls, Benetech) and for-profit (Growing Sound) companies, our focus for Doing Well by Doing Good on the high-growth for-profit companies that deliver these products and services and aim to scale them globally.
Donate Back is the tried and true method of Doing Good. It is one of the key methods that companies, from large Fortune 500s to small businesses, contribute to the causes they care about most. Movements like the Pledge 1% are a good way to do this, where companies pledge 1% of time or money to nonprofits directly creating societal and environmental impact. These methods broadly, much like the Pledge 1% movement, often contribute only a fraction of organizations’ profits or revenues. Doing Well by Doing Good companies might do some of these activities because of their ethos and character through company initiatives, but do not use this as their primary means of making a difference.
TLDR;
Doing Well by Doing Good companies, by definition, are for-profit Social Enterprises run by Social Entrepreneurs because they build transformative products and services that directly contribute to global societal and environmental change.
Social Enterprises are a superset of all companies Doing Well by Doing Good, and there are a number of them that are local, nonprofit, and contributing to change in their own way. These companies contribute to very real change and do it through a number of different means. In short, there is no way that is better than another in creating positive change—each has its own strengths and weaknesses.
However, in this series, we continue to explore how and why the Doing Well by Doing Good approach is a faster, more sustainable and more impactful way to create positive global societal and environmental change — or in other words
Until next time,
Anand