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The views expressed are those of the author and do not necessarily reflect the views of ASPA as an organization.
By Stephen R. Rolandi
January 27, 2025
“Life’s most persistent and urgent question is “What are you doing for others?” – Dr. Martin Luther King, Jr. (1929-1968)
“Social entrepreneurs are not content just to give a fish or teach how to fish. They will not rest until they have revolutionized the fishing industry.” – William Drayton (1943 – ) Founder and Chair of Ashoka: Innovators for the Public
We learn in courses in economics and business administration that there are three main sectors of the American economy—private enterprise/private sector; government/public sector; and the not-for-profit/independent sector.
In recent years, a new sector has come upon the scene in the United States and elsewhere around the globe—social enterprise organizations. Given my long-standing interest and positions held in the not-for-profit sector as well as linkages between the fields of public administration and private enterprise, I thought this would be a good topic for my monthly column. And with MPA students planning on graduating and job-hunting later this year, the social enterprise sector may be of interest to them as well.
We can define social enterprise organizations (SEOs) as entities that apply business strategies to maximize improvements in the financial, social and environmental well-being of society. Such organizations have business, environmental and social goals. Their social goals are made part of their objectives, which distinguishes them from other organizations and companies. The primary mission of a social enterprise organization is to promote, advocate, encourage and bring about social change. As such, SEOs can be more sustainable than many non-profit organizations who usually rely on grants, donations or government policies alone.
There is no precise legal definition of SEOs, as they range from a for-profit business enterprise that engages in corporate social responsibility (CSR) or cause marketing and even not-for-profit organizations that utilize business models that sell products at market rates. Many SEPs are classified as “B” corporations for tax purposes, which means that the entity is required to pursue both a profit and a positive impact on society and the environment.
There are three main types of SEOs:
SEOs are not to be confused with public benefit corporations (for example, the Port Authority of New York and New Jersey, Metropolitan Transportation Authority and the City University of New York systems in New York). As Dana Brakman Reiser, Centennial Professor of Law at Brooklyn Law School, the rise of SEOs has required the development of legal tools in the areas of governance taxation and dissolution that permit them to raise the funds (capital) necessary to flourish. Approximately 30 states have some form of legal rules regulating SEOs.
History
The idea of social enterprise as a separate concept first developed in the late 1970s in the United Kingdom as an alternative commercial organizational model to private sector companies, co-operatives and public enterprise. The concept had two paradigm shifts:
Additionally, there were established three principles (referred to as the “triple bottom line”) for social enterprise:
Earlier, in the United States in 1972, William Drayton, formerly manager at McKinsey and Company, and EPA Assistant Administrator during the Carter Administration (and a 1995 recipient of ASPA/NAPA’s National Public Service Award) coined the phrase “social entrepreneur.” He believed that social entrepreneurs are needed to develop innovative solutions to society’s most pressing problems.
SEOs in the United States account for about 5 percent of US Gross Domestic Product, according to a 2024 study conducted by the Tax Foundation (the comparable percentage for non-profits is about 12 percent of US GDP). Today, similar SEOs can be found in Canada, Australia, the European Commission/European Union, Latin America, East Asia and parts of Africa.
Some prominent SEOs include the following (many are in the environmental advocacy/climate change/category): Girl Scouts of the USA; Patagonia; Bob’s Red Mill; Haven Coffee (London, UK), etc. A number of universities, such as the University of Michigan, University of Pennsylvania and others, offer course modules for those interested in becoming social entreprenurs.
Current Issues
When SEOs first emerged, much of the scholarly literature focused on defining the main characteristics and definitions of social enterprise. Currently, there is more literature and research on these type of organizations. With this plethora of literature have emerged several issues:
In my view, SEOs show much promise, particularly in the area of environmental advocacy, as they have shown that they can work with government, non-profits and interested for-profit organizations. The next few years will be an interesting and exciting time to be working in this area.
For further reading:
Author: Stephen R. Rolandi retired in 2015 after serving with the State and City of New York. He holds BA and MPA degrees from New York University, and studied law at Brooklyn Law School. He teaches public finance and management as an Adjunct Professor of Public Administration at John Jay College of Criminal Justice (CUNY) and Pace University. Professor Rolandi was recently re-elected Trustee of NECoPA; President-emeritus/Senior Advisor for ASPA’s New York Metropolitan Chapter and past Senior National Council Representative. He has served on many association boards, and is a frequent guest commentator on public affairs and political issues affecting the nation and New York State. You can reach him at: [email protected] or [email protected] or 914.441.3399 or 212.237.8000.
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