Social Enterprises Use Market Forces for Good
Many nonprofit organizations have made innovative social enterprises part of their daily operations to help them achieve their missions while creating sustainable sources of income to fund programs.
Social enterprises don’t eliminate the need for charitable donations but, rather, supplement donations and grants by creating predictable revenue streams while serving the broader mission of the organization.
The term “social enterprise” is defined by the Social Enterprise Alliance as an entity whose primary purpose is the “common good” using the “methods and disciplines of business and the power of the marketplace to advance their social, environmental and human justice agendas.”
Previous columns have examined social enterprises in the for-profit sector.
Social enterprises in the nonprofit sector usually come in one of two forms. The first is where the core work of the nonprofit organization is the social enterprise itself.
For example, Goodwill Industries of Denver annually recycles more than 64 million pounds of items donated by more than a million people. This generates mission-supporting income from the sales of such goods, while providing career development and skills training for at-risk youth, struggling families and individuals with disabilities.
The Women’s Bean Project teaches job readiness and life skills to women for entry-level jobs in gourmet-food production and a handmade-jewelry manufacturing business. Revenues from sales of those products provides 75 percent of the nonprofit’s operating costs.
Bayaud Enterprises provides work opportunities and vocational training for people with disabilities and other employment barriers in jobs like paper shredding and scanning.
Bud’s Warehouse creates job opportunities for people rebuilding their lives from prison, addiction and homelessness at a warehouse of donated home-improvement items.
The second type of social enterprise is where a nonprofit establishes an associated commercial entity where the mission of the organization is accomplished and income supports the nonprofit’s work.
Examples include Aspen Pointe operating three cafes, two in Colorado Springs and one in Castle Rock, training and employing the disabled, seniors, at-risk youth and veterans; Café Options, a downtown Denver restaurant, providing employment and training for impoverished women, with proceeds supporting Work Options for Women; and Emily’s Coffee, serving as a job-training program for refugees and immigrants with proceeds supporting the mission of the Emily Griffith Technical College.
A social enterprise isn’t right for every organization. Nonprofits considering this option need to answer many hard questions, including:
- Do they have the business expertise?
- Does their culture support the enterprise concept?
- Will the startup and operating costs drain the nonprofit of other needed funds and donations?
- Have they received legal and tax advice concerning Unrelated Business Income?
- Will the social enterprise ultimately help them achieve their mission?
Colorado is a national leader in the social enterprise movement and has its own chapter of the Social Enterprise Alliance.
Social enterprises can be an ideal win-win. Consumers purchase goods and services from mission-related businesses, nonprofits generate needed revenue, and important social problems are ameliorated.
This post originally appeared in the August 19, 2012 edition of the Denver Post. Reposted by the author.