How nonprofits solve social enterprises’ three big problems: Money, trust, and information

Social enterprise business ventures are all the rage. Entrepreneurs and consumers (not to mention scholars, policymakers, donors, and other stakeholders) see in them a solution to vexing social problems.

By Curtis Child, Nonprofit Quarterly

People see social enterprises bringing a promise of salvation from the organizational baggage that weighs down more traditional approaches to tackling the ills that plague society. Disciplined by market forces, these businesses are creative, nimble, and ever responsive to consumer demands. Even better, they possess that most coveted quality: sustainability, or freedom from the obligation to chase grant money and charitable contributions – not to mention an ability to succeed (or the opportunity to fail) on their own merits. Released from bureaucratic encumbrances and the burden of begging for money, the market-based social enterprise is poised to offer an altogether different approach from the traditional strategies (read: nonprofit and governmental ones) that have so far failed to deliver us from our most pressing social problems.

Well, sort of.

That story – familiar as it has become – is deeply problematic. While the high praise of social enterprise (defined here as businesses that actively pursue both revenue-generating and socially beneficial goals) may often be deserved, it is often framed in contrast to well-intentioned but old-fashioned and ineffective philanthropy. It is this contrast that is off target: the dismissal of the work of the nonprofit sector as antiquated at best and inept at worst. In fact, scratching below the surface of social enterprise businesses reveals that they depend significantly on the nonprofit sector for their effectiveness and survival.

Over a three-year period, I studied intensively two social enterprise industries: fair trade and socially responsible investing. What I found is something I did not go searching for: a scaffolding based in civil society that allowed the businesses in these industries to flourish. Specifically, I came to understand how for-profit social enterprise ventures rely fundamentally on elements of civil society for (1) providing credit and other financial support, (2) broadcasting their trustworthiness, and/or (3) generating difficult-to-access information. All of these are resources often overlooked in our collective celebration of the social enterprise business.

Read the full story at NonProfit Quarterly.
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