Social Enterprise vs Philanthropy vs Charity — What’s the Difference?
Social enterprise is making business work for everyone — not just the wealthiest business moguls and investors.
Social enterprise is a movement founded on the idea that anyone can be an entrepreneur or a shareholder, and that building businesses that help the under-resourced will result in a healthier, more equitable economy.
In the sense that it works from the bottom up, social enterprise may seem very much like a traditional non-profit or philanthropic foundation. But what is the difference between social enterprise, philanthropy and charity?
Charity vs Philanthropy
In a 2006 interview with Philanthropy Magazine, President and CEO, Council on Foundations President and CEO Steve Gunderson made the differentiation between charity and philanthropy: “Charity refers to the direct relief of suffering and social problems. Philanthropy systematically seeks out root causes of these issues and endeavors to find a solution.”
He continued:
“Charity tends to be a short-term, emotional, immediate response, focused primarily on rescue and relief, whereas philanthropy is much more long-term, more strategic, focused on rebuilding. One of my colleagues says there is charity, which is good, and then there is problem-solving charity, which is called philanthropy.”
To tweak a well-known proverb, charity is giving a man a fish, whereas philanthropy is teaching a man to fish and handing him a fishing rod.
Charity is short term, philanthropy is long term.
Charity treats the symptoms, philanthropy addresses the root cause.
Charity is reactive, philanthropy is strategic and proactive.
Neither is more important than the other. Think of charity as the emergency room and philanthropy as a rehabilitation center. Whether it’s poverty alleviation, community development, disaster relief, or a host of other causes, what charity and philanthropy share is a commitment to mission-driven action.
Charity and philanthropy also share a dependence on consistent external funding. Whether it’s grants, foundations or donations, both philanthropy and charity are by their nature resource-depleting and do not generate revenue.
That’s where the social enterprise comes in.
Social Enterprise
In his 2006 Nobel lecture, economist and professor Muhammed Yunus described his vision for a new world of business: an evolution of capitalism that included all members of society, not just those who can afford to participate. The difference between traditional philanthropy and what he called “social business” is that a social enterprise generates its own revenue.
“Unlike the non-profit sector where one needs to collect donations to keep activities going,” he explained, “a social business will be self-sustaining and create surplus for expansion since it is a non-loss enterprise.”
Social enterprise is a unique business concept that seeks to grow sustainably without consistent outside investment.
Social enterprise resembles philanthropy in that it is long term, strategic and deliberate. However, where philanthropic organizations are dependent on continuous streams of charitable funding coming in, a sustainable profit model is at the heart of the social enterprise.
In this way, social enterprise is uniquely poised to create a well-spring of opportunity and resources to develop communities, build sustainable businesses and fulfill real social needs.
