What is social enterprise?
social enterprise solutions module
What is social enterprise?
Social enterprise is simply a business approach with a strong social goal, where profits are reinvested back into the local community. Social enterprises are driven by a desire to create social or environmental change, rather than the need to maximise profit for shareholders and owners.
This resource will explain the basics of social enterprise, including how it can work in the rural context, and the features of rural communities which help social enterprise to thrive.
Social enterprises exist for different reasons and can take different organisational forms, from a village shop or cooperative, to a community development group or housing association.
They often arise out of necessity rather than popularity, as a response to local needs, opportunities, and drivers.
We also gives case studies of social enterprises from rural communities across Europe. These have been included to:
- Show the many different reasons why social enterprises are created
- Highlight the range of social enterprise activities
- Give a variety of examples to spark ideas and generate interest
How does social enterprise work in the rural context?
Rural communities across Europe are facing similar challenges of market failure, the withdrawal of public services, and population issues (growing elderly population and the out-migration of young people).
Social enterprise has huge potential to contribute to a range of these economic, social, and environmental challenges.
Shetland Soap Company
Location: Shetland Isles, Scotland
Purpose: Provide employment for people with a learning disability or autism.
Business Activity: Produces a range of exclusive up-market handmade soap and skincare products.
Callander Youth Project Trust
Location: Callander, Scotland
Purpose: Provides training and employment for young people in the hospitality industry.
Business Activity: Runs the local youth hostel and a café in the town.
Mobile Info Café (Ökokratt OÜ)
Location: Lahemaa, Estonia
Purpose: Provides employment for local people and practical placements for nature tourism students to meet tourist and introduce the Lahemaa area.
Business Activity: Tourist information centre and café on wheels which can be moved to any location.
Made in Rosia Montana
Location: Roșia Montană, Romania
Purpose: Provides employment and additional source of income for women in Roșia Montană, allowing them and their families to obtain a higher standard of living.
Business Activity: Women produce and sell handcrafted merino wool clothing products, including socks, gloves, hat, scarf, mittens, sweaters, vest, blanket, scarves, and yoga socks, for women, men and kids.
Social enterprise works well in the rural context because it allows people to harness local skills and knowledge to create unique solutions which are truly effective for their community.
Below, we give a few examples of rural social enterprises, showing their location, what their social/environmental purpose is, and the business activities they undertake to help achieve their goals.
South-Estonian Food Network (Lõuna-Eesti Toiduvõrgustik)
Location: South Estonia
Purpose: To provide locally produced, fresh and high quality agri-food products, and to bring together small-scale producers for more effective, collective marketing.
Business Activity: Collecting produce from local producers and delivering to bigger cities in Estonia. Clients are mostly restaurants and cafes. They have a very well-developed E-shop, found here: www.let.ee
Jura Community Shop
Location: Isle of Jura, Scotland
Purpose: To manage and run a sustainable community owned shop for the island.
Business Activity: Provision of range of food products, newspapers, and household essentials as well as local post office service.
Comana Crafts Village (Satul meșteșugurilor – Asociația Moara de hârtie)
Location: Comana, Romania
Purpose: Provides employment for people in the countryside and sustains projects with a positive impact on environment.
Business Activity: Community craft shop, including carpentry workshops, pottery, weaving and embroidery, traditional milling, blacksmith’s workshop, fruit and vegetable traditional processing.
Why does social enterprise thrive in rural communities?
Social enterprise is a way for communities or groups of people to come together and take action, to create uniquely-tailored and locally-responsive solutions to problems or opportunities.
Social enterprise thrives in rural environments due to its ability to tap into the inbuilt features of rural communities and harness local knowledge, networks of trust and social responsibility.
This doesn’t mean that it is easy. Social enterprise should not be seen as a way to generate big profits or to address shortfalls in funding.
Whilst in time profits can be generated, it is important to recognise that this will require resources in terms of time and commitment to deliver impact and profit. Like most businesses, social enterprises can take years before they start to generate profits.
- Greater levels of trust, mutual dependency and strong social networks are characteristics of rural communities which create a fertile environment for social enterprise.
- Research shows that people who live in geographically-isolated communities are naturally more entrepreneurial and resilient, as there is an awareness that outside help is far away, and can be difficult to access.
- This inbuilt entrepreneurialism is sometimes referred to as an ‘islander mentality’, which is characterised as a willingness to problem solve and take responsibility for local problems.
Social enterprise as a response to market failure, needs and opportunities
Social enterprise is often a response to drivers including the withdrawal of public services, market failure, or the identification of a local need or opportunity.
The traditional market approach can be less relevant in rural and remote communities, where there are additional costs associated with logistics, travel, and isolated geography, which all make running a business more challenging.
These additional costs act as barriers to service provision and market growth, as they create less incentive for private entrepreneurs to operate services in areas where profit margins are low, and markets are small.
Social enterprise can be a way for communities to come together and ensure that essential services are sustained. This reduces vulnerability and improves the sustainability of communities.
Social enterprises do still need to generate profit, just like a traditional business, but have a focus on deepening local impact rather than the growth and scale model of traditional business.
Social enterprises which provide a service (such as a petrol filling station) or manage an asset (such as a local woodland) often do not make a large profit, but exist for the benefit of the community. This can draw a significant social and emotional responses from local people, who recognise the low profitability and high social value of these functions.
This creates high levels of community buy-in and collective responsibility to support enterprises providing services which are essential to the sustainability and liveability of rural places, such as a village shop. We give an example of this in the Appin Community Co-operative Case Study.
Appin Community Co-operative
(Written in English)
The village shop plays a vital role in sustaining the community and acting as the social heart of many remote rural communities. Appin is a small community in north-west Scotland.
This short case study gives a brief history of the shop, and of their work in the present day.
Finland Community Guide
(Written in English)
A short guide of good practice to assist rural communities and village associations to take forward social enterprise activity. This guide helps you to understand the rural context, explaining how to get started and identify your motivation and mission.
It explains how to map out the needs and hopes of local people, touches on market analysis, and the business planning process for community-based social enterprise.
Also gives a useful insight into collective leadership and how to distribute responsibilities equally among your group.