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In the UK, the accepted Government-backed definition of social enterprise used by the UK social enterprise sector bodies such as Social Enterprise UK comes from the 2002 Department for Trade and Industry’s ‘Social Enterprise: a strategy for success’ report as:
A business with primarily social objectives whose surpluses are principally reinvested for that purpose.
Freer Spreckley first developed the term social enterprise in 1978 and later included it in a publication called Social Audit – A Management Tool for Co-operative Working published in 1981 by Beechwood College. In the original publication, the term social enterprise was developed to describe an organisation that uses Social Audit. Freer went on to describe a social enterprise as:
An enterprise owned by those who work in it and/or reside in a given locality is governed by registered social and commercial aims and objectives and run co-operatively may be termed a social enterprise. Traditionally, ‘capital hires labour’ with the overriding emphasis on making a ‘profit’ over and above any benefit either to the business itself or the workforce. Contrasted to this is the social enterprise where ‘labour hires capital’ with the emphasis on social, environmental and financial benefit.
The three areas of social, environmental and financial benefits used for measuring social enterprise became known as the Triple Bottom Line.
Twenty years later, Freer Spreckley and Cliff Southcombe established the first specialist support organisation in the UK Social Enterprise Partnership Ltd. in March 1997.
In the British context, social enterprises include community enterprises, credit unions, trading arms of charities, employee-owned businesses, co-operatives, development trusts, housing associations, social firms, and leisure trusts.
Whereas conventional businesses distribute their profit among shareholders, in social enterprises, the surplus tends to go towards one or more social aims which the business has – for example, education for the poor, vocational training for disabled people, environmental issues or animal rights.
Social enterprises are distinct from charities (although charities are also increasingly looking at ways of maximising income from trading) and private sector companies with corporate social responsibility policies. An emerging view, however, is that social enterprise is a particular type of trading activity that sometimes gives rise to distinct organisation forms reflecting a commitment to social cause working with stakeholders from more than one sector of the economy.