What is a Social Enterprise?

Social enterprises are businesses which trade for a social or environmental purpose. They demonstrate a better way to do business, one that prioritises benefit to people and planet and uses the majority of any profit to further their mission.

“Social enterprises contribute to reducing economic inequality, improving social justice and to environmental sustainability” SEUK

Like any other business, social enterprises seek to make a profit and succeed commercially. Where they differ is in how they operate, who they employ, how they use their profits and where they work:

  • They earn a significant amount of their income through trading.
  • They have a social purpose which is written into their governing document.
  • Their surpluses are used to support their social purpose.
  • They frequently have an ‘asset lock’ which means that the assets can’t be distributed for private gain.
  • They are often owned by the community they are set up to support.
  • They frequently provide employment for people who could not work in the mainstream labour market.

Social enterprises create jobs, pay taxes and contribute to their local economies but they also seek to create social and public benefit, providing added social value for communities, including some of the most vulnerable groups.

There is estimated to be 131,000 social enterprises across the country, representing almost one in 42 of all UK businesses and employing around 2.3 million people. They are turning over around £78 billion and re-investing £1 billion in profit into their vital missions.

Social Enterprise UK

define social enterprises as businesses that must:

  • have a clear social or environmental mission set out in its governing documents and be controlled in the interest of that mission
  • be independent of state or government control, and earn more than half of its income through trading
  • re-invest or donate at least half of its profits or surpluses towards their mission
  • be transparent in the way they operate and the impact they have

Legal Structures

There is no specific legal definition of a social enterprise. They come in a wide variety of legal forms such as:

  • Community Interest Companies (CICs)
  • Companies Limited by Guarantee (GLG)
  • Companies Limited by Shares (CLS)
  • Co-operatives

Choosing the right legal structure for your business is important. SEUK has produced a guide to starting a social enterprise which includes a section on choosing the right legal structure for you.

About-Membership

Want to read more? Social Enterprise UK have more detail on the sector thanks to their State of Social Enterprise Report which is the most comprehensive research undertaken into the state of the sector.

The ‘Mission Critical’ report shows a growing sector that is not only profitable and productive but truly pioneering. Looking in depth at what it means to be a social enterprise today, overall the report shows a movement creating huge impact despite complex challenges.