With little fanfare the Federal government has taken a major step forward this week in supporting the social enterprise sector – providing clarity on a definition and supporting the development of a national directory.

The directory defines social enterprise as “an enterprise that seeks to achieve social, cultural or environmental aims through the sale of goods and services. The social enterprise can be for-profit or not-for-profit but the majority of net profits must be directed to a social objective with limited distribution to shareholders and owners.”

http://www.ic.gc.ca/eic/site/ccc_bt-rec_ec.nsf/eng/h_00016.html

The Ministry of Innovation, Science, and Economic Development’s definition is clearly signalling that from their perspective a social enterprise has to blend a community impact and insure the majority of profits are also reinvested in community. Rather than looking at a corporate structure, they have opted for a performance based model, which allows several different corporate forms to be included – if the purpose and the structure both align with and meet this definition.

What it doesn’t allow is a company that has a good CSR program or donates a percentage of profits to charity to claim social enterprise ‘status’. Just being a ‘good’ company or a valued corporate citizen, or using social washing in marketing, doesn’t make you a social enterprise. But, if your purpose is to create social value and your structure commits the majority of your profits to a community development goal, you do have the opportunity to register on this directory.

The directory will be a valuable tool for social enterprises to identify with a defined model, allow purchasers to know how to find social enterprise suppliers, and raise awareness on the website of the strength and value of the sector. The definition includes social impact, like employment for persons with barriers; it includes cultural impact, like so many of our local arts and theatre groups; and environmental impact, like community owned alternative energy.

There is no monitoring body or gatekeepers, so we will all have to be diligent to insure social enterprises that meet the criteria are posted and asking others that are not meeting the definition to use other directories, like CSR lists, Fair Trade and B Corps certification websites.

Without a doubt the social enterprise definition debate will continue. Some people will think this definition too broad, others will think it too narrow… but that is all right in my mind – because this step definitely contributes to the real discussion — social enterprise is a means to build a social value market place that contributes to creating healthy communities.