What is a Social Business or Social Enterprise?

A typical business sells a product or service for the highest marketable price and seeks to maximize profit. Every decision made in a traditional business model is to increase profit therefore employee, social and global impact is not a main factor of consideration. This type of business model is referred to as a PMB (Profit Maximizing Business) according to Professor Mohammed Yunus, a professor at Harvard Business School and published author.

The opposite extreme of a PMB would be a nonprofit organization. A nonprofit has a singular mission to help others, however, it relies on grants, donors and volunteers for the organization to function. Because a nonprofit’s income is often unpredictable, it runs on skeleton budgets and is many times short staffed which causes an inefficiency in operations.

A social business is somewhere in the middle between a PMB and a nonprofit. A social business exists to help others like the non profit, however, it is a true business in that it is entirely self funded and does not rely on grants or donations. A social business can make a positive impact through existing to employ those who live in an area where there isn’t employment opportunities or by providing jobs which pay livable wages in an area where wages are typically miniscule. Other ways of making an impact can be offering a product or service for a price just high enough to cover overhead costs in low income areas. Alternatively, a social business can operate like a typical business except that all profits would go to charity.

Another category of business is a social enterprise. A social enterprise, like a nonprofit and social business, is to make a positive impact in the world. The difference between a social business and a social enterprise is that a social business is entirely in business for the people it helps and therefore in a sense, if not literally, owned by the people. A social enterprise is still controlled by owners seeking some compensation, however, the social or environmental benefit is the primary principle of the company.

If you are reading this article then you are probably seeking ways to help others. The easiest and most immediate way to help is by supporting social businesses and enterprises whenever you are able to. Consider starting a business or side business with
A social or environmental mission. If you are currently working for a company, try to influence your company to integrate social and environmental practices. you can make a difference!

9 thoughts on “What is a Social Business or Social Enterprise?

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