The motivations and reasons for founding social enterprises are highly diverse. From young startups with socially innovative ideas, to collective ventures, to established entrepreneurs who choose to give their businesses a new purpose by shifting away from profit maximization in favor of societal benefit – countless variations exist. However, this very diversity can sometimes make the social economy appear more fragmented and smaller than it actually is.

At its core, all social enterprises share the recognition that there are societal problems which neither the ‘traditional’ private sector nor the state can solve or at least not adequately. Social enterprises contribute to solving these problems through their economic activity, or they emerge from forms of economic self-help.

This different perspective on private-sector entrepreneurship makes the social economy the economic model of our time: it is sustainable, it identifies and leverages social resources, and it helps address pressing societal challenges. In times of ongoing crises and the limits to growth, it represents a viable and future-oriented economic model.

Not only can the actors behind social enterprises come to the decision to work for a societal purpose for very different personal reasons or ways of thinking, but diverse historical and cultural traditions with different forms and names also play a role (e.g., Social Solidarity Economy, Social Entrepreneurship). The legal forms of these enterprises can also vary widely, ranging from associations and foundations to limited liability companies (GmbH) and corporations (AG).

Concrete examples of societal enterprise purposes are extremely diverse. Social enterprises produce goods for which a purely profit-driven economy sees no viability; provide employment to people who would otherwise have no access to work; support individuals to an extent far beyond what the state provides; protect the environment and climate; bring people together; create meaning; generate opportunities and prospects; engage in self-help; and test and promote social innovations in society.

The diversity of forms and origins means that you may interact with and benefit from the social economy without even realizing it. Examples include various non-profit car-sharing models, socially and sustainably produced goods, housing projects, microfinance institutions, fair-trade businesses, renewable energy cooperatives, or the maintenance and continuation of facilities that would not be considered economically viable in a profit-driven model, such as local village shops providing essential services or community-supported agriculture (SoLaWi) initiatives.

Despite their social mission, social enterprises remain economically viable and can compete with conventional, profit-driven private companies, against which they sometimes have to assert themselves. As such, they must follow the principles of entrepreneurial action, work efficiently, and are not purely donation-based organizations or “subsidy operations.”

Efficiency and profit form the basis of entrepreneurial action, but for social enterprises, they are not an end in themselves – they serve the enterprise’s societal mission. Like any other business, a social enterprise must manage its resources carefully and operate effectively to succeed. However, success is not measured by short-term financial gains but by the enterprise’s ability to survive and fulfill its societal purpose.

Social enterprises often generate income from multiple sources: through the sale of their products and services, as well as through grants and partnerships. Surpluses need to be generated in order to enable reinvestment.

Since the term “social” in the context of the social economy derives from the English word “social” it carries a broader meaning than the traditional concept of “social welfare” and rather includes notions of “societal” and “community”. This also encompasses ecological and cultural objectives.

This can sometimes lead to misunderstandings in public perception, as people may confuse social enterprises with the state-run social sector, which provides (much more narrowly defined) social benefits, or with traditional welfare organizations, which are generally not organized as private businesses but as public-law entities working directly with public social agencies.

Social enterprises, in the sense of the social economy with its many different forms, should not be confused with this state sector or with narrowly defined social services. The social economy also includes the production of goods and the provision of services for which the state has no resources or chooses not to invest. In all cases, however, the focus is on creating societal, ecological, and/or democratic added value.

Social entrepreneurship, in itself, is not a new invention but at least as old as private-sector entrepreneurship. The combination of private business activity with a clear positive societal impact has existed for centuries, giving rise to forms such as cooperatives, foundations, and mutual insurance associations.

What is relatively new, however, is the fact that ideas for a future of private-sector activity beyond mere profit maximization have now reached the mainstream of society (keywords include limits to growth, sharing economy, UN Sustainable Development Goals, meaningful work, and purpose). Increasingly, people from diverse backgrounds are interested in linking their work – or life’s work – with meaningful impact.

Crises have shown and continue to show, that conventional private-sector models alone cannot secure the common good. Challenges such as climate change, resource scarcity, demographic shifts, and unequal wealth distribution motivate people, including entrepreneurially minded founders, to act differently.

On our website, you can already find some key figures on the social economy in Berlin summarized in bullet points. Even aside from its significant societal relevance, the social economy is not a minor economic factor. In other countries, such as France, Italy, or Spain, this type of economy is more established, more visible than in Germany, and in some cases even legally recognized.

The different forms (and sometimes hybrid models) still make comparisons and statistics on the social economy difficult. However, the European Commission estimates that around 10% of all companies in the EU have a primary purpose other than distributing profits to owners or investors, focusing instead on a social mission. These companies employ about 6% of the EU workforce – over 11 million people. According to a 2019 study by KfW Research, social enterprises now account for 9% of all young companies.

The social economy is not a separate industry or economic sector in the traditional sense. Rather, social enterprises operate freely and innovatively, and they can be active in almost any sector, linking their economic activity with social value. This diversity also means that the true significance of social enterprises – for example, for the Berlin economy – is less visible than it actually is. What matters in the social economy is what is produced or provided and how it is achieved.

Not at all. Of course, social enterprises are allowed to make a profit. What matters is that profits are not – or only partially – distributed to investors or owners, but are primarily reinvested to achieve the social goals of the enterprise.

Social enterprises appear in various forms and types. The term Social Solidarity Enterprise (SSE) refers to a collective founding and organization without private profit distribution. In contrast, the term Social Entrepreneur(ship) usually refers to an individual founding, either as a purely non-profit enterprise or with restrictions on profit distribution.