The Social Enterprise: A Model for Shared Value

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In competitive business, a “race to the bottom” can appear unavoidable. Oftentimes, businesses do not know how to get around the race to offer products or services at the lowest possible price. But this model can have negative effects. Prioritizing merely low prices as a supplier or purchaser has been known to contradict ethical and sustainable business practices.

So how can businesses be motivated to abandon a lowest cost model?

For some firms, understanding sustainability as integral to financial success has come about organically. Thirty years ago, the Brundtland Report helped trigger a shift in business thinking. It demonstrated that development decisions weren’t sufficiently considering environmental resources and limits. Environmental issues became the foundation of the early sustainability movement across business sectors. An entire set of environmentally aware consumers and businesses came into being.

A variety of influences, or even a push from consumers, will lead some firms to add a social consideration to their sustainability efforts. The now famous consumer boycotts of NIKE, for example, pushed the company to review its social responsibility and transparency. Today, companies and researchers consider NIKE to be a prime case study and a sustainability leader.

Whatever the motivation, the harsh dichotomy between social or financial goals is disappearing. New models of shared value that create financial and social value are emerging. And, an often smaller, more humble type of business is proving to be particularly exemplary in applying this model: the social enterprise.

A Valuable Contribution

Michael Porter and Mark Kramer of Harvard Business School made a major contribution to this effort by introducing shared value about ten years ago. Shared value, as a management principle, “focuses on identifying and expanding the connections between societal and economic progress.”

Opportunities to contribute to social value through a business supply chain can include buying from local businesses, considering living wages of employees and incorporating Fair Trade products.

Sharing is Caring: Social Enterprises and Shared Value

Social enterprises put shared value into their core. These community-based businesses sell goods or services in the marketplace to achieve a social, cultural or environmental purpose; they reinvest their profits to maximize their “social mission.”

Social enterprises strive to achieve a shared value return on investment of both social impact and financial sustainability. The defining aspect of a social enterprise is not its specific corporate form, but rather the practice of prioritizing community benefits and social impact in favour of private profit or shareholder returns. Models of incorporation for social enterprises can include non-profits (with or without charitable status), community service co-operatives, hybrid corporations with caps on dividend and asset distribution and for-profits owned by non-profits.

Specific ways that social enterprises prioritize community contributions can take many forms. For Mosaic, a non-profit that supports the integration and inclusion of new Canadians, that way is operating a translation and interpretation business service. In Vancouver, commercial janitorial services, The Cleaning Solution, provides employment for persons with mental health issues.

Whether the social enterprise is creating employment for youth and persons with barriers or championing cultural diversity, ultimately the business sees the shared value in responding to social needs.

Decisions made by social enterprises are creating positive ripples within the environment and communities. If enough firms begin to adopt the practices of social enterprises or include them in their value chain then it can move us from a marketplace merely about the economics of business transactions and into a marketplace that is pivotal in transforming and building healthy communities.

About the Author

David LePage is a Founding Member & Chair of the Social Enterprise Council of Canada. He is also a Principal with Accelerating Social Impact (ASI), one of Canada’s first Community Contribution Corporations, a for-profit business with an entrenched social mission and a legal limit on dividend distribution. He is a partner in the recent launch of Buy Social Canada.

With more than 35 years of experience in non-profit and social enterprise sectors, David has led efforts to expand development and training for such enterprises across Canada.

For more information visit buysocialcanada.ca and socialenterprisecanada.ca.

  • manik datta

    its a great platform on learning on Social Responsibility, its a way to get in touch of people in our society. Writing a essay is essential for student and , studyfaq writers can help student to know more about essays writing help with the best. Thanks

  • Avantika Jalan

    I am in a CSR class at Berkeley, and we have been getting a lot of insights from experts i the field. This is a reflection from that class:

    The CSR class has been a great platform for learning about where Corporate Social Responsibility sits in relation to the rest of the corporate world. Through several speakers that we have had in class, and discussions with Prof. Strand, it is clear that the integration of sustainability into the regular practice of business is still not fully mature. Several industry leaders, such as Ikea have been making a lot of progress in their sustainability issues, and have been recognized for their initiatives. However
    given how large the corporate sector is, and the financial strength of the corporations, the initiatives that have been taken on seem to be minimal. Since CSR is a voluntary component of business, and most businesses are being forced to introduce CSR / Sustainability initiatives because of heightened consumer awareness, it leaves me wondering if making CSR mandatory for certain size of businesses would be a good way to allocate fair percentages to the CSR objectives. This would allow the positions for Chief Sustainability officer to be more effective, and help them move forward on the initiatives they identify, without having to convince the rest of the C-suite on the importance of those initiatives. India has incorporated the mandatory CSR law, where a minimum of 2% of their profits, for the top tier companies are required to be spent on CSR. While this concept is a huge shift in the corporate thinking, it leaves

    questions on whether it corporates will use this effectively, to make meaningful

    impact, or would it become another compliance, that would get checked off. As I

    enter into the job world, keeping these perspectives is important, especially

    when looking at positions that call in for sustainability managers / experts.

    However, hearing about the Ikea sustainability initiative

    gives me a positive view on the corporate world. The talk with MarieAnne Barner

    from Ikea, on the issue of Child Labor in India highlighted the fact that

    corporations can be extremely effective, and powerful, when they are determined

    to take on the challenge of sustainability. Several tools are effective in

    determining what issues are most crucial for companies to target. The materiality

    assessment is a good way to understand the stakeholders engagement / interest

    in the impact generated, and whether they are in line with the company’s

    overall objectives. Overall, understanding the supply chains, and using the

    shared-value approach to conduct business is a growing trend in business.

    Learning about all these concepts in class has given me a good basis for

    analyzing what is currently happening the world of CSR, and how it might be

    changing in the near future.