Australia Develops Research Based Definition of Social Enterprise

For those of you who continually search for less confusing or constraining definitions of social enterprise, I wanted to direct you to www.socialtraders.com.  This organization launched a seminal research project called FASES.

The FASES research is a unique collaboration between Social Traders and the Australian Centre for Philanthropy and Nonprofit Studies (ACPNS) at Queensland University of Technology. Social Traders is an independent not-for-profit organisation, seed-funded by government and a private philanthropic foundation.

The “FASES” project primary goal was to define social enterprise and then also catalogue all social enterprises operating in Australia based on this definition.

The definition they crafted  is one of the best I have seen as it does not rely simply on the organizational legal framework (profit, not for profit, etc) for definition but instead focuses on whether or not the work done by the organization involves a social mission as its primary reason for existing.  In their approach, the organizational model used, a business model, co-op, or not for profit  or otherwise, is a tertiary consideration. And their logic for orienting their approach to defining social enterprise in this way makes sense.

Essentially they argue that the mission, and how well it is executed and measured is what matters most. Of course by broadening the definition to be more inclusive, the social enterprise sector now looks much larger than it otherwise would have.  And this is a good strategy on their part if they hope to influence policy and flow of capital.

Their social enterprise  definition is quoted below.

“A research-based definition of social enterprise

Definitions of social enterprises and estimates of their numbers in countries overseas have tended to be determined somewhat arbitrarily – for example, using available information based on legal structures. One of the key features of this Australian research is its intention to define social enterprise in a way that was informed by and made sense to those working in or with social enterprises.

The research design therefore included workshops to explore and test what social enterprise managers, researchers, and relevant policy makers meant by the term ‘social enterprise’. This was the resulting definition:

Social enterprises are organisations that:

a. Are led by an economic, social, cultural, or environmental mission consistent with a public or community benefit;

b. Trade to fulfil their mission¹;

c. Derive a substantial portion of their income from trade²; and

d. Reinvest the majority of their profit/surplus in the fulfilment of their mission.

1. Where trade is defined as the organised exchange of goods and services, including:

• monetary, non-monetary and alternative currency transactions, where these are sustained activities of an enterprise; contractual sales to governments, where there has been an open tender process ; and
• trade within member-based organisations, where membership is open and voluntary or where membership serves a traditionally marginalised social group.

2. Operationalised as 50% or more for ventures that are more than five years from start-up, 25% or more for ventures that are three to five years from start-up, and demonstrable intention to trade for ventures that are less than two years from start-up.

For more information on this research project, visit www.socialtraders.com.  They also developed an interesting typology based on their defintion which you can download here:

Social Enterprise Typology Social Traders