PEF primarily supports partnerships and programs that build, promote and scale up social enterprises. Find out how you can start a promising partnership with PEF.
What is a social enterprise?
A social enterprise is an organization or venture that achieves its primary social or environmental mission using business methods. The social needs addressed by social enterprises and the business models they use are as diverse as human ingenuity. Social enterprises build a more just, sustainable world by applying market-based strategies to today’s social problems.
How are social enterprises different from other types of businesses?
Two distinct characteristics differentiate social enterprises from other types of businesses, non-profits and government agencies:
Social enterprises directly address social needs through their products and services or through the numbers of disadvantaged people they employ. This distinguishes them from “socially responsible businesses,” which create positive social change indirectly through the practice of corporate social responsibility (e.g., creating and implementing a philanthropic foundation; paying equitable wages to their employees; using environmentally friendly raw materials; providing volunteers to help with community projects). They are powerful vehicles for job creation, economic growth, and increased opportunity for people facing barriers including those in low-to-moderate families and communities.
Social enterprises use earned revenue strategies to pursue a double or triple bottom line, either alone (as a social sector business, in either the private or the non-profit sector) or as a significant part of a non-profit sector’s mixed revenue stream that also includes charitable contributions and public sector subsidies. This distinguishes them from traditional non-profits, which rely primarily on philanthropic and government support.
Are all social enterprises non-profits?
The social enterprise movement includes both non-profits that use business models to pursue their mission and for-profits whose primary purposes are social. Social mission is primary and fundamental; the organizational form depends on what will best advance the social mission.
Where do “social entrepreneurs” fit in?
Social entrepreneurs are individuals who pursue opportunities to create pattern-breaking change in inequitable systems, whether through social enterprises or other means. “Social enterprise” is different from “social entrepreneurship”, which broadly encompasses such diverse players as B Corp companies, socially responsible investors, “for-benefit” ventures, Fourth Sector organizations, CSR efforts by major corporations, “social innovators”, and others. All these types of entities grapple with social needs in a variety of ways. But unless they directly address social needs through their products or services or the numbers of disadvantaged people they employ, they do not qualify as social enterprises.
What about corporate social responsibility?
Many companies whose primary purpose is to create value for ownership are also committed to adopting a wide range of socially and environmentally responsible practices in their operations. Because their social missions are not primary, they are not considered social enterprises.
What kinds of business models do social enterprises use?
Social enterprises use an endless array of business models for the common good. Samples include: retail, service, and manufacturing businesses that help people overcome employment barriers; contracted providers of social and human services; fee-based consulting and research services; community development and financing operations; and even technology enterprises. Chances are you already do business with social enterprises without even knowing it.
Why do people launch social enterprises?
Many non-profit organizations see social enterprise as a way to reduce their dependence on charitable donations and grants while others view the business itself as the vehicle for social change. Whether structured as non-profits or for-profits, social enterprises are simply launched by social entrepreneurs who want to improve the common good and solve a social problem in a new, more lasting, and effective way than traditional approaches. They are conceived and operated by visionary entrepreneurs who recognize potential where others may not see it and who apply discipline, pragmatism, courage, and creativity to pursue their solution in spite of all obstacles, toward a world that is more abundant, secure, and inclusive for all.
What type of partnerships and programs does PEF support?
PEF primarily supports partnerships and programs that build, promote and scale up social enterprises.
PEF believes that successful SE programs and partnerships must be:
Value chain-driven: to focus on the barriers and potentials of growth of the enterprise
Business-oriented: to highlight partnerships between the private and public sectors and adoption of and compliance with standards such as fair trade, operating above break-even, certification of good governance or industry best practices.
Market-based: to ensure that products (food, non-food) and services (business development services, etc.) are responding to a real demand or market gap or adequately meeting the needs of consumers.
Development-focused: to ensure that the program will create social impact among rural households and communities as expressed in the PEF strategic plan. PEF, for example, will set up a “Climate Change Fund” to offer financing and business development services to programs related to climate-smart agriculture and renewable energy
Who are qualified partners?
PEF continues to support non-profit civil society organizations such as cooperatives, people’s organizations, non-government organizations, faith-based groups, and academic and private sector foundations. In pursuit of its new strategic direction, PEF will also actively develop and support partnerships with “for-profit social entrepreneurs.”
As in the previous years, PEF still strongly encourages its prospective partners to involve or secure the participation of relevant government agencies, local government units, and community-based traditional or sociocultural decision making units in the implementation of their projects.
What forms of development partnerships are available?
The scope of partnerships will be expanded. Financial and business development services will be the key thrust in the development of and investment for social enterprises. Thus, PEF may provide management and business development services to an SE partner.
In view of its focus on social enterprises, PEF will also expand its modes of financial assistance to include fund management, guarantee agreement, joint ventures and equity partnerships. In the previous years, interest-bearing loans and grants were the main form of development financing assistance provided.
PEF also supports small projects that are in line with the Foundation’s institutional development thrusts. This may include small grant support for research and development, capability-building, development fora, technical assistance, and relief operations.
In financial partnerships, a 20 percent counterpart (cash, labor, materials, intellectual property valuations, research investments) on the total project cost will be negotiated with the prospective partner. The need for security for financial loans will be handled on a project-to-project basis.
How will partnership and program proposals be developed?
The Foundation will take an active role in the development of proposals especially those related to SE. Proponents may submit a Letter of Intent containing a summary of the proposed enterprise, organizational capacity and structure, and how the enterprise will benefit target poor households.
Promising letters will then be jointly developed by PEF with business or SE experts to be selected by PEF and the prospective partner. The full SE Project Proposal must be approved by the board or decision-making unit of the prospective partner before it is finally submitted for the consideration of PEF.
PEF will adopt a “double due diligence” (3D) approach in the assessment of proposals. The business practices and/or performance, financial assumptions, governance, organizational structure and development track record of the prospective partner will be part of the project assessment criteria.
Where will proposals be submitted?
For the copy of your letter of intent, please send an email to firstname.lastname@example.org. The guidelines of the new social enterprise programs are still under development. Please visit the PEF website for regular updates and additional information.