Understanding Social Enterprises 101

Audrey Jones ⠀|⠀

Are you tired of being misled by companies through greenwashing and other lousy attempts to advertise products as ethically produced? If so, then you should check out social enterprises. They are not just a buzzword; they’re businesses making legitimate change.

This article aims to highlight the importance and characteristics of social enterprises using information reported from the Austrian Social Enterprise Monitor 2023/2024: Status Quo and Potentials of Social Enterprises in Austria

Let’s debunk the myth right away: social enterprises differ from nonprofit organizations primarily in their financial models and goals. While nonprofits often rely heavily on donations and grants, social enterprises create sustainable revenue through the sale of goods and services, which is then reinvested into the business. In fact, 94.3% of them reinvest most of their profits to advance their social missions, according to the ASEM. In addition, social entrepreneurship uses creative business strategies to tackle social issues. 

Talking now about their economic growth and significance

It’s easy to ramble on and on about the societal benefits of social enterprises, but in a world where people are driven by facts and economic opportunity, this enterprises should appeal to them too. Recent studies from the Schwab Foundation and World Economic Forum show that about 10 million social enterprises worldwide create a value of up to 2 trillion USD and over 200 million jobs and 15% to 40% of all newly founded global enterprises can be categorized as social enterprises, making the industry significant in the world economy. 

In Austria, social entrepreneurship is especially significant, where 53.3% and 47.0% of all startups in the ASEM and Global Entrepreneurship Monitor state that they prioritize their societal impact over profit. This gets reflected in various ways. For example, 43.8% of businesses employ people with disabilities and 38.1% from ethnic minorities that have complications when accessing the labour market. What’s even more, 90.2% of these businesses involve employees in the decision making. Overall and in Austria, social businesses have employed 60,000 to 159,000 people, making it 34,000 to 93,000 full time equivalents. 

Are they the real thing?

If you are wary of misleading advertisements about production methods, you can’t go wrong with buying from Austrian social enterprises. They actually implement these sustainable practices within their business model. In fact 51.6% use circular economy practices, 46.4% emphasize ecological sustainability in their supply chains, and 84.5% measure their impact, allocating an average of 8.5% of budgets for this purpose.

You may wonder how you can be certain you are buying from a business that actually implements their inclusive and sustainable practices they swear by. As of 2023, the “Verified Social Enterprise” label provides recognition to enterprises in Austria that meet criteria for social and environmental impact. Although the label was recently established by the Austria Wirtschaftsservice (AWS), 12.1% of social enterprises in Austria have already received it, showcasing their commitment to offering consumers transparency.

Recognition through policy and funding

There’s a reason why this enterprises have received global recognition from international institutions such as the UN, OECD, European Parliament, and European Commission. These institutions have adopted policy to support social enterprises within their member countries due their numerous benefits. Public funding agencies like AWS and the Austrian Research Promotion Agency (FFG), as well as various organizations and local governments, are increasingly getting involved in supporting social enterprises. This support is also apparent in a rise of impact investors and private organizations catered towards social entrepreneurship, such as Impact Hub Vienna. 

Despite increased recognition of social enterprises by international institutions and sources of funding, 69.0%  of businesses within the Monitor’s survey data perceive political support and 57.7% of ecosystem support as weak and support alternate ways of financing. Statistics show that there is a need for increased political and financial support for them.

Why should you care?

Supporting social enterprises is as easy as buying your next jacket from one (See Zerum, anyone?). Every choice we make as consumers has an influence on the world around us, so it’s important that we make the right choices when buying from them. Next time you are in need of a good or service, check out the Social Enterprise Network Austria (SENA) to see if there is a social enterprise alternative to what you would traditionally consume, in order to help reshape the future.

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