Commercial and social enterprises exist for different purposes as each category is motivated by a distinct set of goals and objectives. Social enterprises refer to ventures that utilize business expertise and market-based skills to make income for meeting social objectives. On the other hand, commercial enterprises utilize market-based expertise to achieve objectives that align with economic gain for the benefit of the organization or business owner. However, various differences exist between social enterprises and commercial enterprises. Some of the main themes that distinguish these two enterprises include: the role of social market failure in the establishment of either; the core mission served; human and resource mobilization; and performance measurement. It is, however, viable to argue that none of these enterprises exists without elements of the other. This is due to the fact that charitable activity ought to reflect economic realities just as economic activity ought to generate social value.
In this discussion, a clear distinction between social and commercial enterprises will be provided. Consequently, it will be possible to determine whether it is possible for social entrepreneurs to maximize profits without diluting the ideology of social entrepreneurship. The arguments presented will be grounded on the assertion that it is possible for social entrepreneurs to maximize profitable gain provided that they do not deviate from the objective of attaining social welfare.
Part 1: Differentiate Between Social Enterprise and Business Enterprise
While many scholars attempt to define social entrepreneurship, there may not be a single definition that exhaustively expounds the meaning of this concept. This is because social enterprises exist for different objectives with each using diverse but unique sets of approaches to address social needs. Hence, social workers ought to exhaustively understand the meaning and implications of social enterprises in order to promote individual and community empowerment through their professions. According to Gray, Healy, and Crofts, social enterprise refers to a set of activities undertaken using entrepreneurial strategies but with public interest in mind (142). Social enterprise is founded on the ideal that business expertise can be applied to social courses to project social and economic resources to disadvantaged members of society. It is, thus, grounded on the idea that, by utilizing non-competitive principles to attempt to achieve good, it is not possible to transfer maximal benefit to target groups. In turn, operational efficiency is maximized by way of innovating new ventures or reorganizing activities to bring about profitability. Social enterprise, in turn, refers to a broad range of activities. Such activities include: cross-sectional initiatives involving communities, community agencies, businesses, and government; profitable operations undertaken by social enterprises to support social initiatives; and community economic development.
Defining commercial entrepreneurship is less laborious considering that enterprises that serve to enrich individuals, stakeholders, or organizations have existed for much longer compared to social enterprises. Commercial entrepreneurship is defined as the process of setting up commercial activities with the aim of deriving profitable gain. Until recently, business owners had the liberty of innovating tactics and strategies of maximizing profit, as long as they competed fairly. Today, businesses are charged with ensuring that the measures they employ to remain competitive do not undermine social and environmental welfare. By being held accountable for social sustainability, commercial enterprises end up serving a dual social/commercial purpose.
Entrepreneurs in any given setting are not united by a single political ideology. However, a majority of scholars acknowledge that governments have a critical role to play in supporting social development (Berzin 186; Gray and Gibsons). A majority of social enterprises commit to social development based on the shared concern; that is welfare policies and practices. Such enterprises base their work on the grounds that while government-issued social assistance may address social needs in the short-term, it hardly provides a way out of disadvantage for target groups. According to Botsman and Lathan, a commonly-shared perception regarding welfare programs is that they focus on passive forms of welfare, which disempower instead of empowering individuals and communities (n.p.). Such factors, coupled with the changes in the political and organizational context of community service provision, serve to explain why there is a renewed focus on social enterprise. The critical role of political ideology in guiding the establishment of social enterprises is an important distinguishing factor from commercial enterprises. In the event that commercial enterprises are unable or unwilling to serve a social role, social enterprises step in on behalf of the disadvantaged in society.
It is possible to differentiate social and commercial enterprises based on the manner in which they treat different variables. Such variables include; market failure, mission, resource mobilization, and performance measurement. While the survival of commercial enterprises is largely dependent on market success, social enterprises tend to thrive in environments where commercial enterprises would fail. This justifies James Austin et al.’s contend that a failure for the commercial enterprise is an opportunity for the social enterprise. While commercial entrepreneurial ventures may emerge from a failure by other commercial enterprises, social enterprises focus on solving the social problems that emerge from market failure. A real-life example of an enterprise that has taken advantage of market failure for maximal social benefit is Ashoka. The organization seeks to empower the youth to innovate and come up with solutions for an uncertain job market. Notably, current economies, while acknowledging the volatility of markets, continue to prepare the children to secure stable jobs in the future, despite that 65% of school-going children will work in job types that do not exist yet (Ashoka). Hence, the social work of organizations like Ashoka is necessary in an increasingly uncertain market.
Another differentiating aspect between social and commercial enterprises is mission. The objective of social enterprises is creating social value for the benefit of communities, while commercial enterprises exist to generate profit for private gain (Austin, Stevenson, and Wei‐Skillern 371). Hence, commercial enterprises, by serving their purpose, do social good. By introducing new goods, for instance, commercial enterprises meet a need that could hardly be met without their intervention. They are also important drivers of the economy as they provide employment opportunities and contribute taxes, which, in turn, serve to improve communities. However, their core missions are divergent. Social enterprises focus exclusively on bringing about social good, while commercial enterprises prioritize profitable gain. As such, the distinguishing aspects of both enterprises will emerge in multiple areas of enterprise management and personnel motivation.
Resource mobilization forms another differentiating aspect between social and commercial enterprises. According to Austin et al., the economics of social entrepreneurship are designed to restrict social enterprises from compensating their staff competitively, unlike commercial enterprises. Commercial enterprises use pecuniary forms of compensation to sustain the motivation of their employees, while social enterprises adopt alternative forms of compensation. In turn, human and financial resource mobilization is a key differentiating factor for commercial and social enterprises.
Performance measurement forms another differentiating factor for commercial and social enterprises. Commercial enterprises rely on calculable measures of performance such as financial indicators, market share, customer gratification, and quality, among others. On the other hand, nature of work done by social enterprises is hardly quantifiable, particularly for those that rely on a non-profit model. It is also difficult to quantify the attainment of a social goal, considering that social needs are bound to evolve over time.
Part 2: Possibility for Social Entrepreneurs to Seek Profit Maximization without Diluting the Ideology of Social Entrepreneurship
In recent years, the sustainability debate has raised questions on the capacity for organizations to maximize profitability while meeting social goals. This debate is largely attributed to the fact that even the most renowned global brands tend to fall short of meeting the bare minimum, which is selling products that are beneficial and not harmful to consumers. The Coca-Cola Company, for instance, threatened the clean water reserves of an Indian community by hoarding the precious resource through a bottling plant (Walsh and Dowding). The situation is exacerbated by the fact that the company’s cola beverage has unhealthy sugar content, which threatens the health of consumers (Walsh and Dowding). This trend is common in multiple other industries, whereby the desire for profitability prompts organizations to violate human rights. The wellbeing of consumers is also compromised when organizations withhold valuable information, such as the use of harmful ingredients in edible products. However, following years of innovative attempts by commercial enterprises, it is possible for organizations to pursue profitability while upholding the principles of social and environmental sustainability. The most successful company at achieving this is Everlane, a relatively new fashion brand whose principle of radical transparency has helped the enterprise to sell designer brand-quality merchandize at a low cost, while guaranteeing that its practices do not in any way undermine the social welfare of those involved in the supply chain (Gerlick 87). Everlane has demonstrated that it is possible for commercial enterprises to operate profitably while meeting social goals.
While commercial enterprises demonstrate that it is possible to pursue profitability without undermining social and environmental sustainability, the same question, when applied to social enterprises, is harder to answer. This largely owes to the fact that the work of social enterprises is hardly quantifiable (Healy 28). Profit-generating social enterprises commonly employ similar approaches as those used by commercial enterprises to generate profits (Healy 28; Thompson 7). The manner in which profits are utilized trickles down to the nature of the social enterprise in question and the mission of the enterprise in question. Social enterprises with ambitious financial goals will use the same aggressive approach used by commercial enterprises with potentially detrimental outcomes in the market (Leadbeater 65). This is particularly true for organizations that focus on a niche area, which may have dismal focus on unrelated industries. For instance, a social enterprise that focuses solely on promoting child welfare may have little interest in environmental welfare. In an attempt to generate profits in order to achieve its duty to children, such an organization could engage in practices that undermine the welfare of the environment. In this case, the welfare of the environment could be compromised by simple practices like the deposition of plastics used by children in recreational activities. Similarly, well-intended practices by social enterprises in other fields could come at the expense of other social ideals if poorly executed.
A social enterprise lacks the grounds for justifying socially-irresponsible behavior, regardless of how its activities affect the target social group. Hence, a socially-responsible organization would find it in its best interest to employ an all-inclusive approach to protecting the welfare of all involved parties, even while generating profitability for a good cause. Notably, various scholars contend that a social enterprise only qualifies to be responsible if it shows an overlap in social value creation, morality, social justice, and client interest (Gray and Askeland; Berzin 360; Berzin and Pitt-Catsouphes 186; Gray and Gibbons 225). Seeking profit maximization while diluting the ideology of social entrepreneurship is morally irresponsible, thus a social enterprise that seeks to engage in its activities effectively must consider the implication of its profit-generating ventures (Payne and Askeland 107). Championing the cause of a social enterprise necessitates that the entity gains a critical understanding of the social group it seeks to assist.
It is necessary to consider the long-term implications of the various courses of action that the enterprise may take in order to generate profitability. This would be helpful in negating the possible adverse implications of profit-generating activities. It is this concept that Gray and Askeland describe when they call for the need to counterbalance “tick infestation” in social work. Tick infestation hereby means that social work is tainted by its far-reaching collateral (Gray and Askeland). An example of a for-profit social enterprise that has demonstrated the capacity to seek profit maximization without diluting the ideology of social entrepreneurship is Grameen Bank. Over the past 40 years, the enterprise has demonstrated the ability to use business solutions to tackle underlying causes of poverty. The bank uses its justly earned profits to provide small loans and banking opportunities to small business enterprises without the requirement for collateral (Grameen Bank). Social enterprises can emulate Grameen Bank’s example by using viable business models to generate profitability without diluting the ideology of social entrepreneurship. To achieve this, such enterprises would need to foster the concepts of social value creation, morality, social justice, and client interest.
Critical Reflection: Lessons Learned from this Module
Before taking this course, I barely understood the true meaning of social work. Although I understood that social work involves helping at-risk populations, I did not have an idea of the multi-dimensional nature of social work. Previously, I held the notion that social enterprises are incapable of engaging in practices that are not necessarily socially responsible. However, after completing this module and learning about the nature of profit-generating social enterprises, I now understand that social enterprises, just like commercial enterprises, are capable of engaging in unethical business practices.
The course has equipped me with invaluable knowledge on the distinction between social and commercial entrepreneurship. I learned that the motives for engaging in social entrepreneurship differ significantly from those of commercial entrepreneurship, thus warranting a critical mindset on the long-term repercussions of social work. I learned that, unlike commercial work, which can eventually be terminated at some point following the attainment of a certain quantifiable goal, it is impossible to terminate social work, as a human need is infinite.
Ashoka. Ashoka Young Changemakers: Co-Leading a Movement for Change.Available at: https://www.ashoka.org/en-at/story/ashoka-young-changemakers-co-leading-movement-change
Austin, James, Howard Stevenson, and Jane Wei‐Skillern. “Social and commercial entrepreneurship: same, different, or both?.” Entrepreneurship theory and practice 30.1 (2006): 1-22.
Berzin, Stephanie C. “Where is social work in the social entrepreneurship movement?.” Social Work 57.2 (2012): 185-188.
Berzin, Stephanie, and Marcie Pitt-Catsouphes. “Social innovation from the inside: Considering the “intrapreneurship” path.” Social work 60.4 (2015): 360-362.
Gerlick, Joshua. “Transparency in Apparel: Everlane as a Barometer for Global Positive Impact.” The International Journal of Ethical Leadership 6.1 (2020): 87.
Grameen Bank. Banking for the poor. Available at: http://www.grameen.com/
Gray, M., and G. Aga Askeland. “Social work as art: Counterbalancing the tick infestation in social work.” IASSW Conference, Montpellier. 2002.
Gray, Mel, and Jill Gibbons. “There are no answers, only choices: Teaching ethical decision making in social work.” Australian Social Work 60.2 (2007): 222-238.
Gray, Mel, Karen Healy, and Penny Crofts. “Social enterprise: is it the business of social work?.” Australian Social Work 56.2 (2003): 141-154.
Healy, Karen. Social work theories in context: Creating frameworks for practice. Macmillan International Higher Education, 2014.
Leadbeater, Charles. “Social enterprise and social innovation: Strategies for the next ten years.” A social enterprise think piece for the Cabinet Office of the Third Sector (2007).
Payne, Malcolm, and Gurid Aga Askeland. Globalization and international social work: Postmodern change and challenge. Routledge, 2016.
Thompson, John L. “Social enterprise and social entrepreneurship: where have we reached?.” Social Enterprise Journal (2008).
Walsh, Heather, and Timothy J. Dowding. “Sustainability and The Coca-Cola Company: The Global Water Crisis and Coca-Cola’s Business Case for Water Stewardship.” International Journal of Business Insights & Transformation 4 (2012).