Being an entrepreneur is about more than just turning a profit. An increasing number of entrepreneurs want to contribute to solving societal, social, or environmental problems through their business. Unlike most foundations committed to a cause, social enterprises are economically independent. Like any other company, they provide products or services, and have a revenue model.
What makes a social entrepreneur?
A company that develops vegan sausages. A shoemaker who hires partially disabled employees. A furniture maker who creates new pieces of furniture from old materials. What is the difference between a social enterprise and a company that conducts business in a sustainable manner?
There are several definitions of social entrepreneurship. One thing they all have in common is that social enterprises primarily, and explicitly, have a social objective and want to solve a societal problem. Another characteristic of these enterprises is that they are economically independent, make money in the marketplace, and are not (fully) dependent on grants, donations, and gifts.
Social enterprises are not 100% committed to a societal purpose, nor are they 100% focused on making a profit. In that sense, they are positioned midway between regular enterprises and charitable organisations. Charitable organisations are purely focused on making a difference, creating impact. Regular enterprises want to make money. Social enterprises want to make money, so they can make a difference and keep the business going.
Characteristics of a social enterprise
1. Societal mission
What is your mission? How do you plan to achieve it? The social enterprise records its societal mission statement in the articles of association. This way, it demonstrates what the enterprise is doing to tackle the problem, and how it achieves its goals.
2. Impact first
Making a positive impact on society, that is what it is all about. For example, nearly 50% of all social enterprises contribute to a higher level of labour participation by groups that have difficulties accessing the labour market. Also, over half of all social enterprises share their knowledge with other companies. Research conducted by Social Enterprise has revealed this. There are more areas where social entrepreneurs make a difference: circular and sustainable production, social cohesion, care improvement, and the energy transition.
The Impact Path is a tool that enables you to measure your company’s impact on the market. Measuring your impact tells you if you are on the right track, and it helps to convince potential investors of your social value.
3. No profit maximisation
A social enterprise does not have profit maximisation as its chief aim. The company can make a profit, insofar as it helps to make the mission viable. A social enterprise can also pay out a dividend. The boundaries for making a profit and rewarding management are predefined. That way, it is clear how making a profit contributes to achieving the societal goal.
4. Constant dialogue
Social entrepreneurs constantly discuss their company activities with their most relevant stakeholders. For example employees, customers, and local residents. They involve them in important decisions.
5. Total transparency
Social enterprises gain their stakeholders’ trust by being transparent. Transparent about how they manage the business, achieve their mission, and deal with the supply chain. Social enterprises are also often willing to share their knowledge with other companies and the government.
Which legal structure is suitable?
How can you show your customers, partners, and financiers that you are a social entrepreneur? At the moment, there is no legal ‘stamp’. The Ministry of Economic Affairs and Climate Policy is working on a legal provision that would enable social enterprises to choose ‘social private limited company’, or BVm, as their legal structure. With the legal structure BVm, social enterprises would be instantly recognisable and would find it easier to gain recognition. As yet, it is unclear when this legal provision will come into effect. It depends, among other things, on the cabinet formation.
In practice, most social enterprises choose to work as a bv, or as a foundation that is also either a business or the owner of a bv. Social enterprises can also become a member of the Code Social Enterprises.
Articles of association
The private limited company (or bv) and the foundation are entities with legal personality. Legal structures with legal personality have to deposit articles of association when they register with the Dutch Business Register at the Netherlands Chamber of Commerce KVK. “That makes them suitable legal structures for social entrepreneurs,” KVK company advisor Laura van Klink explains. “You can record your mission in the articles of association.”
You can also choose your legal structure based on your financing. “You usually have to be a foundation to be able to apply for government funding. If you want banks to finance your company, you stand a better chance if you have a private limited company,” says Laura van Klink.
Differences between bv and foundation
Which legal structure you choose impacts your company.
In a bv, the shareholders have ultimate control. Not all profits will have to go towards your mission. Make sure you can demonstrate clearly how your mission benefits from the profit you make.
In a foundation, all profits go to the mission. The directors are in charge of what happens.
Do you need help finding the legal structure best suited to your situation? Read the overview of legal structures on Business.gov.nl.
Personnel with barriers to the labour market
Nearly half of all social enterprises aims to hire employees with a vulnerability – with a barrier to the labour market. For instance, Sea Ranger Service is a company that trains vulnerable employees to perform offshore work at sea. And The Colour Kitchen trains young people with a barrier to the labour market to be catering professionals.
If you want to hire staff with a barrier to the labour market, you can get support from the government in finding suitable candidates. There are also several subsidies and schemes to help you. For instance, there is a subsidy to hire a job coach for your employee, or you can make use of the trial placement scheme. If you hire employees who are over 56, or who have an occupational disability, you can apply for labour costs compensation (LKV in Dutch). And if you hire someone who has a young disabled person benefit (Wajong), you can apply for wage dispensation.
Social enterprise is steadily garnering support: from dedicated networks to funds. Nationally, networks like the Impact Hub, the City Deal Impact Ondernemen (in Dutch), Social Enterprise NL (in Dutch), and the Social Impact Factory (in Dutch) support social entrepreneurs. Regionally, many networks also actively promote connecting social entrepreneurs with each other and with local stakeholders.
An increasing number of investors are interested in societal return on investment. Funds like Stichting DOEN, Start Foundation, Rabobank Foundation, and the Anton Jurgens Fonds offer several types of financing: from donations to loans. Social entrepreneurs looking for growth capital can apply for investment funds such as Social Impact Ventures and ABN AMRO Social Impact Fund. Some banks, for instance the Triodos Bank, offer dedicated financing for social enterprise.
Show you care
You don’t have to be a social entrepreneur to do right by humans, the environment, and the planet. A growing number of businesses take their corporate social responsibility serious and want to contribute to a better world. Or they choose for more sustainable business operations.
The Prestatieladder Sociaal Ondernemen (in Dutch) certificate helps to make your commitment to more socially responsible business operations immediately visible to the outside world.
Social enterprise in practice: the Sea Ranger Service
Wietse van der Werf is the driving force behind the Sea Ranger Service, the first maritime ranger service in the world. Sailing on an innovative circular sailboat, the Sea Ranger Service supervises protected maritime areas, carries out research, and salvages historical shipwrecks. The crew consists of young people with a barrier to the labour market, who are trained by navy veterans as ‘rangers at sea’. This social enterprise has a double impact, both social and environmental. In 2018, Van der Werf signed a Green Deal.
Protecting nature and creating jobs“We started in two major ports, Rotterdam and Den Helder,” says Van der Werf. “Unemployment is highest there. The government was our launching customer. We now have 5 governmental customers, and we are looking for commercial customers.” They also plan on expanding abroad: “The concept will also work in foreign harbours. We have worked out a franchise model with our partners PWC, Ikea, Rabobank, and Randstad.”
Van der Werf has noticed the widespread appeal of the initiative. “Our partners care about sustainability. They want to collaborate in enterprising initiatives that strive for sustainability. It’s all part of the mission: we create jobs and revenue models by protecting nature.”
Which legal structure has the Sea Ranger Service chosen, and why? “Sea Ranger Service is a foundation that owns 3 private limited companies (bvs). That is a deliberate choice. The foundation is important to the social mission, and for doing business with the government. It invites a critical eye on our activities, and also creates goodwill. The limited companies truly run as businesses. That is important for investors. The 2 legal structures complement each other well. In the Netherlands, a non-profit can own a business. Abroad, that is usually impossible.”
The governance model, the division between the supervisory board and the execution, took some devising. Van der Werf had to give up his personal control of the enterprise. How does he feel about that? “I call it founders syndrome. Entrepreneurs who cannot let go, and hamper their organisation’s growth. Letting go means the development can continue. I can spar with the supervisory board. The project is not just mine, it belongs to us all. That makes for broad support across the organisation.”