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Social Entrepreneur

Social Entrepreneur

Definition

Social Entrepreneurs carry out the work by launching and growing Social Enterprises. Focusing on the creation of social capital versus profit, these entrepreneurs use business principles to address social issues. They create social value with their work by identifying social problems and taking opportunities to improve them with new and innovative solutions.

Characteristics

Social entrepreneurs are motivated by their desire to see a change in the world they live in. They see problems within social, economic, and environmental settings and refuse to stand by and see nothing be changed. They must constantly develop new and innovative solutions to problems in a constantly evolving society and are driven with the aim of creating social value versus financial profit.

Components of Social Entrepreneurship

1. Social Entrepreneurs identify a social need that lacks the means, whether financially or politically, to progress without direct external aid.

2. A proposition must be formulated that will address the issue at hand that will creatively tackle the social challenge.

3. The enterprise be created and established with the direct purpose and vision that they will ensure an improved social setting for society.

Skoll Foundation

Skoll Foundation

About

Created in 1999, the mission of the Skoll Foundation is “to drive large scale change by investing in, connecting and celebrating social entrepreneurs and the innovators who help them solve the world’s most pressing problems. Social entrepreneurs are society’s change agents, creators of innovations that disrupt the status quo and transform our world for the better. By identifying the people and programs already bringing positive change around the world, we empower them to extend their reach, deepen their impact and fundamentally improve society.”

History

Over the past 12 years,the Skoll Foundation has become a leading foundations in the field of social entrepreneurship. They have awarded over $315 million, with investments in 91 social entrepreneurs and 74 organizations on five continents around the world. They In fund a $20 million+ portfolio of program-related and mission-aligned investments.

Learn more

Learn more at their homepage[1]

L1 Visa

L1 Visa

Definition

Formally known as a Low Profit Limited Liability Company, L3Cs are legal forms of business corporations that blend non-profit and for-profit investment efforts with a socially beneficial structure. With reduced regulations granted from the IRS, an L3C is classified organization that sets to attain social goals first, with profit second. Similar to the structure of a typical LLC, as to obtain membership flexibility and organization, the L3C modifies itself by amending and simplifying legislative processes.

PRI

Program Related Investments (PRI) are very common with L3Cs. PRI capital comes in the form of equity, depoists, or debt and is given from an organization to a L3C that does social work in the same philanthropic realm as theirs. They are similar to grants in the sense that they are ways of creating inexpensive capital toward social issues – however they are still investments that are to be repaid, although at a much more modest rate than regular enterprise investments.

PRIs range in size from as little as $1,000 to several million dollars. Generally, the amount of the PRI depends on the need and capacity of the recipient as well as the scope and size of the foundation, and its tolerance for risk.

Inclusive Business

Inclusive Business

Definition

An Inclusive Business is a business model that strives to benefit the community by directly including low-income populations into their business cycles, whether as producers or consumers of the good or service. It is a strategy that aids a large and often forgotten section of the community through social initiatives while still fostering business growth and for-profit policies. A main driving force behind Inclusive Business models is to create sustainable means of support for the society without the use of welfare.

Areas of Incorporation

1. Employment: directly employing low-income people within the company

2. Product: targeting the company’s product or service directly to low-income communities

3. Supply chain: utilizing smaller and more local suppliers versus other big corporations

Impact Investors

Impact Investors

Definition

Impact investing refers to investments that are made with the pre-meditated notion that their investments will not only achieve financial returns, but social ones as well. This type of investing deals primarily with Social Enterprise because the investment decisions integrate the component of social responsibility. With this high emphasis on social responsibility, impact investors have lower financial return obligations and expectations in comparison to commercial enterprise investors. Impact Investing can range from the traditional venture and equity investments, to grants and program-related investments.

Goals

According to The Huffington Post[1], Impact investing has 4 primary goals:

1. Make an impact in solving a pressing problem of our time,

2. Generate compelling returns for investors,

3. Generate growth for economies, and

4. Generate prosperity for developed and developing nations

Flexible-Purpose Corporation

Flexible-Purpose Corporation

Definition

A Flexible-Purpose Corporation is a type of socially conscious enterprise that allows for extreme flexibility in their structure and processes. These corporations specify a “special purpose”, either with a social cause or charitable activity, in addition to their pursuit of seeking profit. While most business corporations focus mostly on maximizing shareholder value, the goal of Flexible-Purpose Corps is to have a structured legal organization where profit is pursued alongside social aims. Unlike an L3C, company profit is still an expressed purpose of a Flexible-Purpose, with neither profit nor social issue outweighing the other.

These corporations issue annual reports to the public that explain their purpose and objectives; they are detailed with their expenses, their measuring metrics, and whether or not they met their objectives or not.

Currently, California is the only state to have passed Flexible-Purpose legislation.

Corporate Social Responsibility

Corporate Social Responsibility

Definition

Corporate Social Responsibility (CRS) is a non-binding ideology that suggests that organizations and businesses have an ethical obligation to make decisions that act towards the benefit of society and its’ members. CRS strategies trade-off between progress in business development and the general welfare of society. It is a concept that states organizations should naturally make just and ethical decisions either actively, with direct social programs, or passively, by refusing to engage in socially immoral actions.

Criticisms

One large criticism of CRS is that it contradicts with the basic economic principles of business; some business decisions may be beneficial for the business yet harmful to the environment. Some examples include factories with high carbon emissions – these companies have been under social scrutiny for harming the environment yet it was cost companies thousands to millions of dollars to create new technologies to lower emission rates. Other issues include companies that utilize “sweat-shops” in foreign countries – the cheap cost of labor is an obvious benefit towards a companies expenses, yet the social cost is one that may put the company with a bad reputation.

Benefit vs B Corporation

Benefit vs B Corporation

With the new era of Social Enterprise upon us, we are seeing more and more companies blend their business structures between for-profit financial efforts and philanthropic social returns. This rise in social awareness and communal benefits has led to rise of Benefit Corporations and B-Corporations across the nation. Often confused, these two types of enterprises contain many similarities yet key differences that are outlined below.

1. Benefit Corporations are corporate structures. They are legal state entities that are similar to those of S-Corps, C-Corps, or LLCs. Not all states have passed Benefit Corporation legislation; as of 11/14/11, only 6 states have legally recognized them.

2. B-Corporations are regular enterprises that have received “B-Corp” certification. By filling out an Impact Assessment, meeting established requirements, and passing an advisory board review, a non-profit organization by the name of B-Lab distributes “B-Corporation Certificates.” B-Lab then requires the company to alter their bylaws and structure to that of similar legal Benefit Corporations. There are currently a little under 500 recognized B-Corps across all 50 states.

3. A company may be both a Benefit Corporation and B-Corporation. This may only be done in states that allow Benefit Corporation entities and if the company in question has met B-Lab certification requirements.

4. B-Corporation certificates are mostly applied for in states that currently do not have legal Benefit Corporation structures.

5. Although Benefit Corporations must produce and publish annual Benefit Reports, it is not required that a third party assess or audit their performance and verify their procedures. In comparison, B-Corporations must first pass B-Lab’s B-Impact Assessment with a minimum score and are then liable to be randomly reviewed on-site every two years to make sure standards are being met.

In general, both Benefit Corporations and B-Corporations have the same objective: to further their social aims through a for-profit driven business. They are both held accountable for their decisions in regards to their customers, shareholders, and the environment as well as for their transparency in their publically published reports on social and environmental performance.

Definition of a B Corporation

A B-Corporation is hybrid business model between profit and non-profit enterprises that focus on social issues and benefits. These companies are structured as for-profit businesses although they seek the tax benefits of non-profit businesses. An organization by the name of B-Lab can provide the third-party certification that declares a company at B-Corporation status. The certification is voluntary and recognizes that the company’s profit and purpose will generate benefits for the society.

Definition of a Benefit Corporation

A Benefit Corporation is a legal corporate structure (similar to LLCs or C and S Corporations) that generates benefits for its shareholders, as well as society as a whole. Benefit Corporation legislation has been passed in multiple states and has varying legalities and nuances across the board; however, the root of the enterprise remains the same: that companies focus on public benefit. As of 11/15/11, only 6 states legally recognize Benefit Corporations.

Benefit Corporation

Benefit Corporation

Definition

A Benefit Corporation is a legal corporate structure (similar to LLCs or C and S Corporations) that generates benefits for its shareholders, as well as society as a whole. Benefit Corporation legislation has been passed in multiple states and has varying legalities and nuances across the board; however, the root of the enterprise remains the same: that companies focus on public benefit. As of 11/15/11, only 6 states legally recognize Benefit Corporations.

Requirements

Although differing from state to state, two main requirements of founding a company with the Benefit Corporation structure are as follows:

1. Purpose – corporation will focus on creating public benefits

2. Accountability – decisions made by chief officers shall be in the best interest of their shareholders, customers, community, and environment. They will deliver transparent Benefit Reports to their shareholders and to the general public that describe and explain their social and environmental performance.

In California, taking effect January 1, 2012, Benefit Corporations are subject to third-party standards for the evaluation of their annual reports

Read about Patagonia’s pursuit of Benefit corporation status here

Be sure to contact your State’s officials for rules and regulations regarding benefit corporation status.

Confusion with B Corporation

With the new era of Social Enterprise upon us, we are seeing more and more companies blend their business structures between for-profit financial efforts and philanthropic social returns. This rise in social awareness and communal benefits has led to rise of Benefit Corporations and B-Corporations across the nation. Often confused, these two types of enterprises contain many similarities yet key differences.

A company may be both a Benefit Corporation and B-Corporation. This may only be done in states that allow Benefit Corporation entities and if the company in question has met B-Lab certification requirements.

Although Benefit Corporations must produce and publish annual Benefit Reports, it is not required that a third party assess or audit their performance and verify their procedures. In comparison, B-Corporations must first pass B-Lab’s B-Impact Assessment with a minimum score and are then liable to be randomly reviewed on-site every two years to make sure standards are being met.

In general, both Benefit Corporations and B-Corporations have the same objective: to further their social aims through a for-profit driven business. They are both held accountable for their decisions in regards to their customers, shareholders, and the environment as well as for their transparency in their publically published reports on social and environmental performance.

See Benefit vs B Corporation

B Corporation

B Corporation

Contents

Definition

A B-Corporation is hybrid business model between profit and non-profit enterprises that focus on social issues and benefits. These companies are structured as for-profit businesses although they seek the tax benefits of non-profit businesses. An organization by the name of B-Lab can provide the third-party certification that declares a company at B-Corporation status. The certification is voluntary and recognizes that the company’s profit and purpose will generate benefits for the society.

Certification

B-Lab [1], a non-profit organization, reviews and certifies submissions made by companies vying for B-Corporation status. According to their website, the three criteria to become certified are as follows:

1. Earn a minimum score of 80 (out of 200 available points) on the B Impact Assessment. This sets a benchmark for social and environmental impact for good companies. A B Lab staff member reviews each assessment and is always available for help.

2. Adopt the B Corporation Legal Framework to bake the mission of the company into its legal DNA. This allows the company’s values to thrive under new management, new investors, and new ownership.

3. Sign a Term Sheet and Declaration of Interdependence to make the certification official.

Also stated on their website, “once certified, 20% of B Corporations are randomly selected for an on-site review during every two-year term.”

Differences with Traditional Businesses

Unlike traditional enterprises, B-Corps fundamentally structure their business to be transparent in their social and environmental practices; this information is readily available to the public through the company’s B Impact Report. They are built to sustain public policies and are held to higher legal accountability standard. Currently, there are a little under 500 Certified B-Corporations across 60 various industries.

Confusion with Benefit Corporation

With the new era of Social Enterprise upon us, we are seeing more and more companies blend their business structures between for-profit financial efforts and philanthropic social returns. This rise in social awareness and communal benefits has led to rise of Benefit Corporations and B-Corporations across the nation. Often confused, these two types of enterprises contain many similarities yet key differences.

A company may be both a Benefit Corporation and B-Corporation. This may only be done in states that allow Benefit Corporation entities and if the company in question has met B-Lab certification requirements.

Although Benefit Corporations must produce and publish annual Benefit Reports, it is not required that a third party assess or audit their performance and verify their procedures. In comparison, B-Corporations must first pass B-Lab’s B-Impact Assessment with a minimum score and are then liable to be randomly reviewed on-site every two years to make sure standards are being met.

In general, both Benefit Corporations and B-Corporations have the same objective: to further their social aims through a for-profit driven business. They are both held accountable for their decisions in regards to their customers, shareholders, and the environment as well as for their transparency in their publically published reports on social and environmental performance.

See Benefit vs B Corporation