Social enterprise models are poised to play a critical role in public-private efforts to continue our national recovery from severe economic downturn and address the myriad challenges presented by poverty, unemployment, and income inequality. Although the national unemployment rate is near a six-year low, close to 10 million Americans remain unemployed. REDF estimates that there are hundreds of social enterprises across the country that employ up to two hundred thousand people, many in transitional jobs that connect marginalized individuals to the labor force. While impressive, given the country’s economic and social landscape, these figures clearly demonstrate the need for scale.
During REDF’s first Social Enterprise Leadership Convening in May, aside from affirming that the field is buoyed by a tremendous group of intelligent and dynamic individuals and organizations, the gathering underscored the field’s notable diversity, not only in terms of sector and industry, but also in terms of where groups position their fulcrum on the “mission vs. margin” seesaw. In the weeks since, I’ve been thinking about the diversity issue, and what related challenges—or perhaps opportunities—exist within the context of scaling the field.
While the need for scaling seems evident, how scaling the field of social enterprise might look is less clear. Is the field prepared for a collective effort to pursue such growth? In many ways, I think the answer is yes, but I posit that the field needs a more widely accepted and understood definition—one that promotes both a stronger shared identify and a clearer resonance among stakeholders—in order to better galvanize efforts to scale.
The Social Enterprise Alliance (SEA), the nation’s largest membership group of social enterprise ventures, has shifted its baseline definition of social enterprises from “organizations that are pursuing a social or environmental mission using business methods” to “businesses whose primary purpose is the common good.” Because such businesses can take the form of a nonprofit with an enterprise component or a for-profit with a social mission, or some hybrid of the two, we are faced with the challenge of devising a field-wide scaling strategy that acknowledges and accommodates this cross-sector cohabitation.
To be sure, REDF has taken critical steps to explore the various definitions and potential legal and organizational structures of social enterprises. One might argue that the nonprofit-for-profit distinction is merely an issue of tax status and legal classification—and that a social enterprise is a social enterprise. But the field often seems to view itself from either of the two vantage points, rather than through a more inclusive lens. Columbia University provides a prime case study. Might students in the Social Enterprise Program at Columbia Business School define the field differently than students in the Columbia School of Social Work’s Social Enterprise Administration program? I suspect that they would.
When we think about ways to advocate for new financial resources and policies that can spur expansion in the social enterprise field, we must consider how new scaling mechanisms can accommodate cross-sector inclusion. On the government funding side, this may be less of an issue, as public agencies award grants and contracts to nonprofits and for-profits alike for a variety of purposes. With that said, certain agencies (e.g., U.S. Small Business Administration, etc.) might have to broaden their policy purview in order to extend support to both sectors.
As for other means of capitalization, if we assume that government alone cannot fully scale the sector, and given that enterprise models seek market-based sustainability, potential sources include traditional lending, foundation grants, PRIs, and high net-worth investors—funding streams to which nonprofits and for-profits might experience uneven access.
And if we are able to create new, large-scale public-private funding opportunities to scale social enterprise activity, how might we determine eligibility for such funding? Should there be requirements that enterprise models also include a supportive service element to promote a greater social return? Nonprofits like The Doe Fund, Center for Employment Opportunities (CEO), and others that engage in social enterprise activities also tend to incorporate substantial social service components (e.g., case management, job training and placement, life skills, etc.) that make financial sustainability—in the absence of subsidization—more challenging. Are for-profit social enterprises also expected to offer such services?
I do acknowledge that the challenges outlined above might also reflect opportunities for field advancement. Surely, nonprofits and for-profits in the social enterprise space can mutually engage in collaboration and shared learning, but we need to pave a way for growth that leverages the talents and capacities in both sectors. This is no small feat, but the field appears ready to take on these challenges.
–David B. Howard, Ph.D., joined The Doe Fund in 2010 and provides leadership and strategic direction for all activities related to service delivery enhancement, evaluation and organizational learning, replication and growth planning, government grants and contracts, and policy research. With more than 12 years of practice, policy, and research experience, Dr. Howard has authored several reports and book chapters on issues affecting the nonprofit and philanthropic sector, has taught graduate-level coursework on program planning, design, and evaluation, and has presented his research at national and international conferences. Dr. Howard completed his Ph.D. at the UCLA Luskin School of Public Affairs, where he also earned a Master’s Degree in Social Welfare.
–This is part of REDF’s Accelerating Social Enterprise Growth blog series