#Businessforgood. Trends in Social Enterprise.

Running Head: #BUSINESSFORGOOD: SOCIAL ENTERPRISE TRENDING 1
#BusinessforGood: Social Enterprise Trending
Tirrah Switzer
Webster University

#BUSINESSFORGOOD: SOCIAL ENTERPRISE TRENDING 2
Abstract
Social enterprises are innovative businesses that address the long-term needs of our
world. Social enterprises can be structured in several ways – non-profit, for-profit or hybrid.
Echoing Green, a seed-stage funder of social enterprises has seen an increase in applications of
both for-profit and hybrid models. An emerging trend for hybrid social enterprises is building a
for-profit and non-profit arm of the social enterprise that furthers the organization’s social
agenda. The social enterprise sector in the United States is estimated to be double the size of the
mining industry and three to five percent of the United States total gross domestic product. The
social enterprise movement soared in 2006 with sixty percent of today’s social enterprises
founded after 2006. Social enterprises are tackling the world’s problems. Last year, poverty
alleviation and economic development were the top program areas for hybrid and for-profit
funding applicants. As the social enterprise sector continues to grow, a trend we see more of is
more defined social and/or environmental impact. Tom Shoes, a well-known social enterprise,
has received much media attention and criticism of their business structure. Not only has TOMS
learned from the criticism but it has assisting in building structures for other social enterprises.
Funding is often referred to as an obstacle for social enterprises. New funding sources are
allowing social enterprises the ability to be original and ground-breaking in their funding pursuit.
Social enterprises are trending worldwide; something is happening in every corner of the world
regarding social enterprises. Consumers are willing to match their wallets and hearts when it
comes to spending money with social enterprises. Based on the activities of stakeholders,
entrepreneurs, investors, governments, media and consumers, we should continue to see the
movement of social enterprises advance.
Keywords: Social Enterprise, Business for Good, Corporate Social Responsibility, Trends

Corporate Social Responsibility and social impact plans have become the norm in
business today. Corporate Social Responsibility is taught in classrooms and discussed in
boardrooms around the world. Social enterprises take the concept of Corporate Social
Responsibility a few steps further by conducting business for good.
What is a social enterprise? There are about as many definitions as there are people
pursuing social enterprises. One of many definitions is “Social enterprises are for-purpose
businesses (for-profit or nonprofit) that use the methods and disciplines of business to advance
their social, environmental and human justice agendas” (Cabrera, 2014). Social enterprises are
innovative businesses that address the long-term needs of our world. Social enterprises “are
working in close collaboration with local communications, incubating groundbreaking (and often
lifesaving) innovations; modeling synergistic partnerships with governments, companies and
traditional charities; and building business models that deploy technology and enable networking
to creative wins for investors and clients alike” (Murphy & Sachs, 2013).
A social enterprise can be structured in several ways – non-profit, for-profit or hybrid.
The most popular non-profit structure for social enterprise in the United States is a 501C3 non-
profit. Some examples of non-profit social enterprises are Krochet Kids, The Empowerment Plan
and The Global Soap Project. A social enterprise that is structured as a for-profit business have a
multitude of business structures to choose from. Some newer structure options that are geared
towards social enterprises include a low-profit limited liability company (L3C), certified Benefit
Corporation and registered Benefit Corporation. The Honest Company, One Earth Designs and
Tom Shoes are examples are for-profit social enterprises. Echoing Green, a seed-stage funder of
social entrepreneurs for more than twenty-five years, continues to see an increase in for-profit
models seeking funding. In 2006, only fifteen percent of their applications were a for-profit

model. Today, applications with for-profit aspects account for nearly fifty percent of applications
(Echoing Green, 2015). A hybrid social enterprise contains both for-profit and non-profit
attributes. Story Pirates, Parent Earth and Mozilla Corporation are examples of hybrid social
enterprises. Echoing Green continues to see an increase in hybrid applications and last year saw
an increase of seven percent over the last year with hybrid funding applications (Echoing Green,
2015).
An emerging trend for hybrid social enterprises is building a for-profit and non-profit arm
of the social enterprise that furthers the organization’s social agenda. In a 2009 Community
Wealth Survey, 32 percent of surveyors had both a for-profit and non-profit business in their
social enterprise (Young, 2001). This model works best when the for-profit helps manage the
non-profit’s philanthropy and each entity needs something offered by the other. Deux Main and
REBUILD Globally are a prime example of utilizing a for-profit and non-profit business to
further a social cause.
REBUILD Globally is a non-profit organization that was founded after the devastating
2010 Haiti earthquake. REBUILD Globally’s mission is to implement “long-term solutions to
ending poverty by establishing an innovative social business ecosystem” (rebuildglobally.org,
n.d.). Deux Mains is the for-profit arm of REBUILD Globally that supports the social cause of
poverty in Haiti. In collaboration with REBUILD Globally, the non-profit arm, Deux Mains
employs Haitian artisans to manufacture handmade sandals from recycled tires. The sandals are
then sold throughout the world.
According to the REBUILD Globally website, Deux Mains “employees receive equity in
the company and employment that pays an average of 225 percent more than Haitian minimum
wage. Seventy-four women, men, and children who became homeless as a result of the

earthquake have permanent roofs over their heads due to their employment. The business
structure of Deux Main addresses some of the root causes of poverty furthering REBUILD
Globally’s mission and impact. Not only are the two organizations impacting a social issue,
Deux Main shoes have an environmental impact as well. As stated by REBUILD Globally, 6,000
discarded tires have been recycled into sandals, saving the Earth’s atmosphere from 480,000 kg
of co2” (rebuildglobally.org, n.d.).
Although the social enterprise sector is still in its infancy stages, it is projected that social
enterprises in the United States employ more than 10 million people and generate annual
revenues of $500 billion. That is double the size of the mining industry and three to five percent
of the United States total gross domestic product. Approximately forty percent of social
enterprises have fewer than five employees. Only eight percent have more than 100 employees.
Approximately half of social enterprises generate revenues of less than $250,000 a year and one
fifth are larger than $2 million (Khan, Menon, Nicholson & Swarup, 2015).
Social enterprises experienced steady growth throughout the 1970s in the United States.
Some of the first social enterprises consumers experienced were Goodwill, Ben and Jerry’s Ice
Cream and The Body Shop. During the 1990s and 2000s, the United States saw a rapid increase
in social enterprises. As described by Young, there were five interrelated trends from the
previous two decades that started driving social issues into the marketplace and providing the
concept of social enterprise. Those trends included: slowing of government support, nonprofit
organizations utilizing more business and earned income models and corporate philanthropies
(Young, 2001). The movement of social enterprises really took off in 2006. Sixty percent of
social enterprises were founded after 2006 and twenty-nine percent since 2011 (Thornley, 2012).
Two international headlines helped fuel the increase of social enterprises in 2006. Bill Gates

announced he was moving to his foundation full-time thus prioritizing social impact and
Mohammed Yunus and the Grameen Bank won the Nobel Peace Prize. 2006 also saw the release
of Civic Ventures first survey of baby boomers concluding that at least half were interested in
“encore careers” helping others (Smith Milway, 2014).
Social enterprises are tackling the world’s problems. Last year, poverty alleviation and
economic development were the top program areas for hybrid and for-profit applicants seeking
funding from Echoing Green. For-profit applicants are also focused on environmental issues
(Echoing Green, 2015). Although social enterprises are tackling the world’s problems and the
sector continues to grow, a struggle for social enterprises is expressing and/or quantifying the
social and/or environmental benefits of the social enterprises. Some social enterprises measure
the number of lives impacted by their organization, others measure their environmental impacts
such as lower emissions. There is a variety of measurements done by social enterprises which
makes the impact fuzzy. As social enterprises continue to grow, a trend we will begin to see is
more clarity of the social and/or environmental impact. The British Council predicts that in
Europe by 2020 “people will no longer care what sector your organization notionally sits in, they
will care only about the long-term results that you produce and how much it costs to deliver
those. Also, by 2020 all social enterprises “will produce an annual impact statement covering
social, environmental and economic impact” (Catherall and Richardson, 2014).
Tom Shoes is one of today’s most well-known social enterprises. TOMS is built on a buy
one, give one philosophy. The buy one, give one philosophy has been debated by economists and
philanthropists. TOMS has received public criticism for the model and the societal and economic
impact of the model. Does the buy one, give one model actually fight the root cause of the social
issue? Does the buy one, give one model hurt the local economy? These questions have been

argued from all sides and leans toward the negative effects of the model. Not only has TOMS
learned from the criticism but it has assisted in building structures for other social enterprises.
In 2014, TOMS expanded their social impact model to address the root causes of poverty
by providing more employment opportunities and started to manufacture some of its shoes in
Haiti. TOMS also pledged that by the end of 2015, one third of their shoes would be produced
overseas (Hackel, 2013). Water for People works with local governments and communities to
install water pipes, latrines and other sanitation infrastructures to impact the root cause of water
issues. “What we’re really challenging is the endless project-by-project approach of
philanthropy. The point of our investment is not to do another project. It’s to get the water
flowing at scale so they never need another project” said Ned Breslin, CEO (Murphy & Sachs,
2013).
TOMS was also in the spotlight for their relationship with their partner non-profit
organizations that distribute the shoes. TOMS was largely criticized for utilizing religious
organizations that only distributed the shoes to children of that religion. Mealshare, a Canadian
buy one, give one company has used the woes of TOMS in building their partner programs.
“TOMS was definitely one of the innovations we looked at as we were coming up with our own
model” (Townsend, 2014). Proof and transparency with collaborative partners is one of the
newest trends that social enterprises are embracing. Mealshare requires that all partner charities
share their impact monthly. Many social enterprises are built on a model that includes working
collaboratively with partners. Making sure the values of each partner is aligned helps built a
partnership with shared values and vision and provides the accountability and transparency that
stakeholders are requiring.

Funding is often cited as a barrier to launching and/or growth for social enterprises. An
increase in funding sources for social enterprises has occurred around the world. Traditional
funding from foundations, donations, and grants are typically the first sources of funding for
social enterprises, but can be limiting in its funding. Overhead costs are typically not included in
these funds. There are many organizations that do provide seed funds for social enterprises.
Echoing Green is just one example of a seed funder. Echoing Green has assisted approximately
600 social enterprise leaders and dispersed more than $33 million in funding through their
fellowship program over the past 25 years (Echoing Green, 2015).
With new funding sources emerging, social enterprises have the ability to be creative and
innovative in their funding pursuit. Up nineteen percent from the previous year, roughly $12.7
billion in “impact investing funds were looking for investment-worthy social ventures” in 2014.
Although there is an increase in funds available, the majority of investments are looking for
social enterprises with a track record. Start-ups are not on the radar for investment funders
(Khan, Menon, Nicholson & Swarup, 2015). Overseas Private Investment Corporation recently
adjusted their funding programs to allow for funding for small, early stage social enterprises
which they have not supported in the past. Banks are also changing their policies to open funding
to social enterprises. Chase Bank Kenya announced in 2015 that it was pledging $600 million to
fund small to medium sized social enterprises, with an emphasis on those lead by women and
young people (Saldinger, 2015).
“Triggering a sustainable social enterprise ecosystem should be at the heart of policy
making for governments worldwide” (Khan, Menon, Nicholson & Swarup, 2015). Government
agencies in Australia, Canada, Israel and the United Kingdom have been researching the
potential of social impact bonds. Social impact bonds would “pay an investor if the costs or

incidence of something (foster care or prisoner recidivism) is reduced, with comparable or better
results, than a government program” (Cohen and Sahlman, 2013). The U.S. Agency for
International Development in 2014 launched the Partnering to Accelerate Entrepreneurship
initiative, investing $10 million in social entrepreneurship. The U.S. Overseas Private
Investment Corp is building a program to incentivize local banks to lend to small to medium size
social enterprises (Saldinger, 2015). In January 2015, the United Nations began the United
Nations Social Impact Fund to assist building sustainable social enterprises. Investment
opportunities up to $5 million are available through the fund (unsef.org, n.d.).
An alternative financial source that is trending for social enterprises is collaborative
funding otherwise known as crowdfunding. Crowdfunding allows social enterprises to raise
funds online through a large amount of people. There are a multitude of websites dedicated to
crowdfunding. In 2012, $2.7 billion was raised for more than one million individual campaigns
around the world and 2013 saw $5.1 billion raised (Barnett, 2013). Kickstarter, Indiegogo and
others have utilized crowdfunding to fund their enterprises. Crowdfunding allows flexibility and
freedom in the use of funds raised to be utilized at the discretion of the social enterprise
(Chaudhary, 2014).
The British Council believes that social finance will soon become the mainstream in
Europe. By 2020 the traditional foundation investment model will become outdated and
unnecessary. Hybrid funding sources will increase available money for social enterprises that
reduce the risk to both the public and the social enterprise. Although the shift from grants to
investment will be positive, a danger is that funding will shift back towards those proven ideas
and concepts opposed to new innovative ideas (Catherall and Richarson, 2014).

Social enterprises might not be trending at the scale of the hashtag, but social enterprises
are trending worldwide. Something is going on in practically every country regarding social
enterprises. Since 2011’s political uprising in Egypt, more young Egyptians are leaving
traditional career paths and running towards careers in social enterprises; fueling the increase in
social enterprises in the country (Younis, 2015). It is estimated that sixty percent of the best jobs
in the next ten years in Africa haven’t been invented yet and a driver of those jobs will be social
enterprises (Hatira, 2014). In 2012, Australia reported that social enterprises had grown thirty-
seven percent in the previous five years, “making it one of the fastest growing sectors of the
Australian economy” (Baldassarre, 2012).
The United Kingdom has been an international leader in social enterprises. There are
more than 700,000 social enterprises that employ almost one million people in the United
Kingdom. Social enterprises have contributed more than $40 billion to the United Kingdom
economy. In 2012, social enterprises outperformed the small and medium sized enterprise
segment. One third more social enterprises than small and medium sized enterprises increased
their revenue in 2012 (Khan, Menon, Nicholson & Swarup, 2015). The United Kingdom is also
taking an active role in becoming a leader in financing for social enterprises. In 2012 Big Society
Capital was launched with unclaimed bank funds with the purpose of developing a “sustainable
social impact investment market” in the United Kingdom (Guillaume, 2015). By the end of 2014,
Big Society Capital had $150 million of investment commitments. Besides Big Society Capital,
there are also a multitude of both for-profit and non-profit organizations providing opportunities
for social impact investments.
China is still in the infancy stage of social enterprises, but really experienced an influx in
social enterprises after a 2008 earthquake. Some social investors have predicted that social

enterprises in China will soar over the next five to ten years mostly due to the aging population,
massive rural population and the education gap between rural and urban China. It is forecasted
that many social enterprises in China will address elderly services and special education as these
sectors can deliver the largest social impact and financial return. For a little more than five years
through a partnership between the Chinese government, social investors and the British Council,
training, mentoring and funding opportunities have been available to social enterprises in China.
In the beginning, their clients were mostly non-profit organizations. Today, there has been an
increase in for-profit businesses. “At the beginning the needs were very one-way: how to change
from non-profit to social enterprise. As more participants from the business sector joined,
another need emerged: changing from a commercial organization to a social enterprise. The
needs changed from a ‘one-way street to a two-way highway’” (British Council, 2015).
The continued influx of social enterprises around the world have moved social enterprises
into a movement, not a fad. Consumers are willing to match their wallets and hearts when it comes
to social enterprises. In a recent Nielsen study, “fifty-five percent of global online consumers
across sixty countries say they are more willing to pay more for products and services provided by
companies that are committed to positive social and environmental impact – Asia (64%), Latin
American (63%), North America (42%) and Europe (40%)” (Nielsen, 2014). Ninety-one percent
of global consumers are likely to switch brands to one associated with a good cause, given
comparable price and quality (Cone Communications, 2013).
It has been said that for Millennials social responsibility is their new religion. Millennials
will comprise more than one in three adult Americans by 2020 and eighty-nine percent have
expressed that they will buy from companies that support solutions to social issues (Cone
Communications, 2013). According to a 2011 study, seven in ten millennials considered

themselves a social activist; double from 2010. One in three millennials boycott or support
businesses based on the social issues they care about and three in four believe that business “should
create economic value for society by addressing its needs” (Swinand, 2014).
Social enterprises are a complete 180 degrees from Milton Friedman’s 1970 New York
Times Magazine article The Social Responsibility of Business is to Increase its Profits. Social
enterprises challenge Friedman’s notion that business is only social responsibility is to make a
profit for shareholders. Social enterprises are built to affect the bottom line while making an
impact. You could say that social enterprises have a double impact on the bottom-line when the
benefit is social and financial and a triple impact on the bottom-line when the benefit is social,
financial and environmental. Based on the activities of market and nonmarket stakeholders, we
should continue to see the movement of social enterprises advance. Sir Richard Branson, CEO of
Virgin Atlantic stated, “Only businesses with a purpose beyond profit will succeed” (Wong,
2015).

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