Profit or Mission? The Dilemma of Social Enterprises

Social enterprises are growing in number. The factors that contribute to this trend include the increasing complexity of societal problems, which governments are inadequate to address, nonprofits are unable to sustainably address, and forprofits are disinclined to address.

A social enterprise is considered a hybrid organization because it has a dual mission — to earn profits and to address a social issue. As such, it fills the gap that governments, nonprofits, and for-profits leave.

According to Bob Doherty (The York Management School), Helen Haugh (University of Cambridge), and Fergus Lyon (Middlesex University in London), a social enterprise combines the organizational characteristics of a traditional, for-profit business and of a nonprofit organization to pursue this dual mission. Ideally, social enterprises would be able to pursue both missions in a balanced way. However, the pursuit of two bottom lines — those of profit and of the social mission — often dictates contradictory courses of actions. Fiona Wilson (University of New Hampshire) and James Post (Boston University) posit that while social enterprises are organized as for-profit entities, they often prioritize the social mission and end up sacrificing profits.

In their 2017 master’s thesis on “Marketing in For-profit Social Ventures,” Ana-Maria Ignat and Martin Leon of Lund University state that the tension between the pursuit of profits and the pursuit of mission bleeds into how social enterprises market their products. Their study of six Swedish social enterprises operating in the fashion industry revealed that the degree of tension that an enterprise experiences depends partly on whether the social entrepreneur prioritizes the social mission or the profit, and on where in the value chain the social enterprise operates.

A curious finding was that some of the social enterprises that cater to the high-end market were careful not to overemphasize the social mission when communicating to their clients. As such, one of the practical implications identified by the study is to prioritize the communication of the quality of the product itself over the “doing good”