Why Do We Believe in the Power of Social Enterprise?

The free market is one of the most powerful forces driving not only business growth, but also social change. When there is a demand in the community for a solution to a social or environmental challenge, a social entrepreneur can leverage a business model to meet that demand in an innovative, sustainable way. This is why we believe in the power of social enterprise to make our community stronger.

So … what is a social enterprise?

A social enterprise is an organization that leverages a business model and market need to solve a social or environmental problem. Social enterprises can be organized as a commercial business or a nonprofit — what defines them is their impact. For-profit does not mean profit-driven, and nonprofit does not mean non-revenue. Many companies are adopting the double-bottom-line structure of social enterprise, meaning these companies focus on both a financial return and a social impact.

Why does leveraging the marketplace drive lasting impact?

When a sustainable business model is used for the public good, it has the potential to create long-lasting, impactful change. Entrepreneurs have been building businesses that solve customers’ problems for centuries, and the concept of social enterprise gives entrepreneurs the opportunity to focus their problem-solving skills on the problems that often seem the most intractable in our communities.

Who is doing this well?

Necco is a great example of an organization that leverages entrepreneurial principles to do critical social impact work in the community. Necco provides a variety of youth and family services including foster care, adoption, detention alternatives, independent living opportunities, and behavioral health services. Since 1996, NECCO has built over 25,000 families and facilitated the adoption of more than 5,000 children in Ohio, Kentucky, West Virginia, and Georgia — while also reducing cost to taxpayers through a sustainable, scalable business model.

For Beau Necco, CEO and Founder, profit and social impact are equally weighted success metrics. Necco explains this by saying, “When we say double bottom line we measure two things, one is how much trauma did we reduce and also what are our retained earnings — because we need enough earnings to go back in to R&D, in order to keep learning, in order to reduce trauma.” Necco combines proven business principles and practices with the spirit of innovation to disrupt the foster care industry so profoundly that the nation’s child welfare system is forced to permanently change.

Necco is the first child welfare company to have its data independently verified by the University of Chicago’s Chapin Hall, one of the most respected child welfare research institutes in the world. Chapin Hall’s research showed that 87% of the children in NECCO foster care experience one move or less, and NECCO foster care clients stay in care for 35 days fewer than the national average. NECCO has never solicited grant funding or donations — instead, they have been able to generate profit, scale, and create a lasting impact in our community through their innovative business model.

Most of Necco’s competitors are nonprofit organizations. In contrast, Necco is for-profit, removing the distraction of fundraising from impact and results. Necco has access to capital, and has leveraged that capital to invest in research, development, advocacy, professionally-managed systems and data-driven processes to ensure company efficiency and effectiveness.

Should social enterprises be for-profit or nonprofit?

Bottom line: you do not have to be a nonprofit to do good. The most important types of impact require sustainable resources, and these resources can be generated by leveraging the needs of the marketplace. These are generated through lean business models, rather than focusing on fundraising through grants and donations. A business model enables the social entrepreneur to focus on scaling their impact.