Charity vs Social Enterprise
When considering organizations that work for the welfare of the poor and underprivileged, one might typically think of charities. However, there are also organizations operating like businesses and making profits that are then used for social causes. These are known as social enterprises and are distinct from both charities and other businesses. This article will discuss the differences between a charity and a social enterprise by examining their features and functions.
It can be difficult to distinguish between a social enterprise and a normal business, as both work to make profits. However, a social enterprise aims to maximize the value of money for its customers, and the difference lies in how the profits are used. Social or environmental purposes are central to all activities of a social enterprise, and all the profits made are reinvested to further their mission of creating a positive change in society.
A charity, on the other hand, is formed solely to carry out welfare programs and relies on donations to fulfill its mission. It does not engage in business activities as such to make any profits.
- The major difference between a charity and a social enterprise lies in the manner in which they are established and governed. Charities are accountable to the Charity Commission, while social enterprises submit annual returns to Companies House or the CIC Regulator, depending on their registration.
- While charities do not make profits, more than 50% of the profits generated through business activities of social enterprises are reinvested into achieving their declared social mission.
- Another difference is the way charities and social enterprises generate money to fund their activities. Charities often face funding shortages and rely on grants and donations, while social enterprises generate funds for social causes through legal trading activities.