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Charity and social enterprise

Similarities, differences, common traits

If you recently started digging into the topic of social innovation, you might have come across people repeatedly mentioning different types of socially-oriented organizations. Most likely, you have heard them talking about “charities” and “social enterprises“. If you didn’t quite get the difference between the two terms, then this article is right for you!

Charity vs social enterprise: similarities

Before analyzing the main differences between charities and social enterprises, let’s take a moment to discuss what the two have in common. As a matter of fact, both types of organizations exist for the same exact reason: tackling social problems. Because of that, their main goal consists in bringing positive change to the world. What we call a “social impact mission“.

In order to fulfill such philanthropic mission, both charities and social enterprises must operate efficiently and effectively. However, social enterprises use radically different logics, approaches and practices to achieve it.

charity vs social enterprise, social business design

Charity vs social enterprise: differences

As said, social enterprises are often confused with charities. Here, we try to discuss the main differences between the two concepts.

To begin with, traditional charities are not financially independent, as they heavily rely on fundraising activities. This means that without external donations (either coming from individuals or corporations), such organizations are basically unable to survive. Conversely, social enterprises may still rely on donor funds to some extent, but part of their programs/activities seek self-sustainability. By embracing such entrepreneurial attitude, social enterprises end up selling products, services or other kinds of interventions in the market and generate stable revenues.

Another relevant distinction relates to “profits” (what’s left after all expenses are paid). Charities are always not-for-profit entities, meaning that leftover money – if there is any – must be reinvested in the core activities of the organization. Instead, social enterprises are free to choose between not-for-profit and for-profit structures. As you might guess, such decision strictly relates to the business models they choose to adopt.

charity vs social enterprise, social business design

Finally, charities and social enterprises strongly differ in terms of interventions’ impact and effects. According to Social Impact Award a charitable organization delivers interventions that usually need constant repetition and reiteration, frequently leading to dependency and short-term effects. On the other hand, social entrepreneurship aims to create more innovative, self-sustaining solutions, able to lead to lasting, long-term changes. By doing so, social entrepreneurs experiment new ways to bring social dimension into economics and create beneficially exchanges with broader society.

Can a charity be a social enterprise?

At this point, the question might come natural. “Can a charity also be a social enterprise?

Today, more and more charities are adapting to rapidly changing landscapes. This includes finding new ways to maximize income from different sources. As a consequence, some charities embraced entrepreneurial mindsets and approaches and started to sell products/services in order to achieve financial sustainability.

Now, legislations radically change from country to country. Therefore different restrictions might apply on how charitable organizations can generate income from running business activities. Yet, as Social Enterprise UK claims “(..) if a charity raises most (or a substantial part) of its income by trading, it’s probably a social enterprise already“. So, you got your answer.

Conclusion

As discussed, both charities and social enterprises tackle complex social problems, even though they theoretically differ for several reasons.

Truth to be told, there is a growing number of charitable organizations moving closer to the field of social entrepreneurship. In fact, social enterprises are frequently more innovative and effective then traditional charities in creating long-lasting solutions with scarse economic resources. Because of that, many charitable organizations decided to stop being solely dependent on grants/donations and began generating revenue streams by selling products and services.

At Social Business Design, we are collecting stories of the most successful social enterprises and social businesses that are generating positive impact while remaining financially viable. So, if you are interested to find out more about such organizations, don’t forget to explore our library!


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