Social Enterprise Misconceptions We Need to Debunk

While relatively new, social entrepreneurship has been steadily growing and is seen by some as an efficient solution for many of society’s increasingly complex problems.

Social enterprises are companies that focus on the positive social, cultural, and environmental impact of their business. It’s a new way of creating change, and it’s catching on. Customers and investors alike are increasingly putting their money behind causes they believe in. In fact, the latest Deloitte Global Human Capital Trend found that 56% of businesses see their companies pivoting to becoming social enterprises in the next three years.

Meanwhile, despite the social enterprise revolution spreading fast in every industry, there remains confusion on what it exactly is. Here are some misconceptions that we all have to put to rest in 2020:

It’s just rehashed CSR

Doing good while pocketing a profit? Sounds familiar, doesn’t it? Many are still conflating social enterprise with another concept called corporate social responsibility (CSR). In a nutshell, positive impact is a major indicator of success for a social enterprise while CSR is an add-on for most companies.

While mainstream companies – even those with CSR – shy away from critical social needs when profits and impact don’t align, social enterprises are built exactly to complement both their impact and the company’s bottom line. In fact, in our post ‘Social Enterprise: Putting People First we explained how we enjoy almost 100% repayment success as a microloan business model despite reinvesting a huge portion of profit into empowering employees and stakeholders.

It’s unsustainable

Most think that while social enterprises may do good, it’s unsustainable and can stunt growth in the economy. But this cannot be further from the truth.

Wall Street Journal reports that 77% of high net worth millennials are planning to invest in companies and funds that foster social, cultural, and environmental impact. That’s not all. Studies have shown that social enterprises have the same, if fewer chances of failing, than their business-as-usual counterparts – especially since they are equipped with leaders who are organized and attuned to the market. An overview of organizational leadership by Maryville University points out how it enables individuals to practice evidence-based and ethical decision-making, as well as employ strategic communication and practice critical thinking. These become crucial when revisiting marketing plans, conducting thorough meetings with potential partners, and generally setting up the social enterprise for success and sustainability. In other words, social enterprises aren't just filled with individuals who want to do good, they're headed by organizational leaders who have the skills to run and expand the business.

It’s only for non-profits

As mentioned above, social entrepreneurship in itself is a business model. It ranges from startups that focus on bridging social gaps such as income inequality, race, gender, and/or immigration status to tech companies that follow in the footsteps of big players like Facebook and Google. In general, social enterprises put back up to 50% of their profits to their chosen cause.

Entrepreneur reports that even non-profits are creating their own social enterprises as a way of achieving sustainability. Nonprofits are emulating and combining the innovation and pressure of the market to scale their impact.


It’s just a fad

Social enterprise is the future of doing business and charity, as many experts will tell you today. In a way, social enterprise is the separation of profit maximization from social impact, and that’s what most people respond to today. Case in point, Stanford University lecturer Kathleen Kelly Janus found in her research on social enterprise that 55% of millennials consider a company's advocacies as a factor when looking for a job.

This new perspective in empowering consumers, employees, and investors by supporting their causes also creates a positive impact on the economy.

Article written by Jillian Stewart

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