Navigating the impact sector: Defining social enterprise

Courtney Ennor

November 26, 2021

At Supergenerous, we’re proud of our social enterprise status. In fact, we often shout about it to our donors, supporters and charitable partners. 


Phrases like ‘purpose driven’, ‘social business’, ‘impact-led’, ‘tech-for-good’ or ‘for-purpose’ are often thrown around by organisations to underpin the ethos of social enterprise, but there still remains a lack of clarity around what those concepts look like in practise. The concept of a social enterprise is relatively new in the not-for-profit world, so it’s not surprising when we are met with confusion around what it means.


Let’s start by delving into just how a social enterprise functions in comparison to a traditional charity. This helps to clarify how two entities with the same intent (to create positive impact) are actually two very different organisation types.


Defining social enterprise


A business model intertwining profit and purpose in a combined effort to address a complex social or environmental issue.


Similar to charity, a social enterprise is charitable in nature, however there is one defining difference between the two: a charity doesn’t technically make a profit whereas a social enterprise does. But it's what a social enterprise does with their profit that sets them apart from for-profit companies.


At the core of social enterprise is an ethical business model with the simple overarching principle: purpose over profit. Regardless of the cause, systemic issue or problem the entity is trying to improve - the organisation is devoted to innovatively addressing it and investing the majority of its profits for social or environmental good.


Over the past decade, social enterprise has expanded its reach throughout Aotearoa, growing into a sector of its own. New Zealand even hosted the Social Enterprise World Forum (SEWF) in Christchurch in 2017 to showcase our thought leadership on the world stage. 


The social enterprise sector is varied, meaning it’s hard to actually pin down a model example of what a typical social enterprise looks like. One of our favourite social enterprises is a big name in New Zealand, Eat My Lunch. With a buy one, give one model providing lunches to kids in need, they showed Kiwis that you can make a profit and re-invest it to tackle real issues like poverty and hunger.


At Supergenerous, we’re considered a social enterprise because we take a portion of profits made and put them straight back into our for-purpose business. Our key driver is creating funding for the non-profit sector and schools.


How do we do it? Using tech to automate donation tax rebate claims. Making it hassle-free for donors to get their hands on the one billion dollars of unclaimed rebates, with the ability to transform their rebates into new donations to schools and the nonprofit sector - who in-turn create positive outcomes in their communities. 


Learn more about what we do here.


Where the money comes from


Unlike a charity, social enterprises typically don’t seek out donations, have a fundraising function or try to hit fundraising targets. Instead, they operate on a trade rather than aid basis, requiring the individual to purchase or pay in exchange for the product or service they will receive. 


Put plainly, you pay for something and you get something tangible in return, it’s not tax deductible and as a result of your payment, a positive social or environmental outcome is achieved (e.g. a business selling compostable bottles and using the majority of profits to carry out waste reduction projects). In comparison, charitable donations solely contribute to an end-cause, are tax deductible and give you that feel good moment, knowing your donation will benefit the wider community.


For example, at Supergenerous we don’t ask for donations, we operate a fee-for-service model. Individuals who sign up with us, pay a small ‘lights on’ fee for the service we provide (claiming your donation rebates with the IRD so you don’t have to - and regifting them to charitable organisations if you choose). Revenue made goes directly towards helping us to continue to operate, scale and grow our impact! 


Impact investment is also a huge part of social enterprise and it takes a social entrepreneur with a big vision to lead a funding round to gather the money needed to get a social business off the ground.  


Where a charity has corporate sponsorship and regular givers, social enterprises count on philanthropists, charitable foundations and individual impact investors who believe in the purpose, allowing organisations to lean into growth and development comfortably. 


At Supergenerous we’re grateful for our backers that helped us launch including support from former Prime Minister Sir Bill English, VMG Ventures, Sir Stephen Tindall’s K1W1, the late Sir David Leven’s Lewis Holdings, Westpac Innovation Fund and help from Akina Foundation.


Learn more about how Supergenerous got ready for impact investment here.


Governance


So, who ensures social enterprises are keeping up their end of the bargain?


Unlike charities in Aotearoa, who must register with and provide annual reporting and financial statements to Charity Services, volunteer Advisory Board members keep social enterprises in check. Founders are held accountable through monthly growth meetings where transparency is key to evaluating the positive impact of the business. 


An Advisory Board is typically made up of impact investors and corporate executives all with the experience and knowledge - and most importantly the personal buy-in to the organisation’s vision and mission - to help analyse and support the business to keep it on the right track.


Check out our Board here.


Although there is not yet a governed percentage of profit to impact margin for social enterprise, there are third parties emerging to help social enterprises solidify their positive intent. Certifications like B-Corp are helping businesses across the globe verify their social, environmental and economic impact. Keep an eye out for more news on this from Supergenerous!


In summary

While charity can be seen as the more traditional way of tackling social or environmental issues, think of social enterprise as its younger sister, often using new technologies and out of the box ideas to influence change. 


It’s clear that the shape a social enterprise takes can differ based on the issue it’s trying to solve, but each starts with an entrepreneur, an innovative idea to inspire change and action and a community of people and employees behind it who are striving to create a positive impact.


With a spotlight on climate change, a greater awareness of socio-economic challenges and Covid-19 increasing the wealth gap, there is a real thirst for individual positive contribution. It’s no wonder social enterprise is becoming more prevalent in New Zealand. Kiwis are clued up on what causes they care about and are leveraging the growing number of social enterprises to take action.

Keen to join the Supergenerous revolution? You can sign up here.