Supporting social enterprises

• What's a social enterprise?
• Are their products more expensive?
• How much does each social enterprise donate?
• Can I just buy the cheapest product then donate to charity?
• Which social enterprises should I support?
• Watch out for 'social wash'

The verdict

We found many social enterprise products aren't more expensive than mainstream products, but some companies are cashing in on the 'halo effect' of social enterprises to boost sales while donating very little profit to charity. It's best to find a social enterprise that aligns with your values and do some research before you commit to supporting them.

What's a social enterprise?

Part business, part charity, social enterprises are companies that have philanthropy built into their business models. As businesses they exist to make a profit, but a proportion of their profit (usually at least 50%) goes to make a positive difference in the world, rather than to line shareholders' pockets.

Because making change is part of their core business, they're a different beast than corporate social responsibility, corporate donation or cause-related marketing.

But they're also different to charities. Where charities' primary income is donations and bequests, social enterprises make most of their money from trade – selling products or services – so they operate more like businesses than charities.

"The social, economic and environmental impacts of social enterprises on local economies are being increasingly recognised, so the model is showing traditional businesses how social impact and profit can go hand in hand," says Dr Ruth Knight from the Australian Centre for Philanthropy and Nonprofit Studies at QUT.

Why social enterprise?

Many young entrepreneurs don't see profit and purpose as mutually exclusive – they believe they can turn a profit while doing good for the world. Philanthropy, sustainable sourcing and ethical business practices are no longer the remit of just touchy-feely organisations – even multinationals like Coca-Cola have a social and environmental conscience (or at least profess to).

"This business model really seems to attract millennials, who want to be entrepreneurs but also want to create social or environmental change," says Dr Knight.

"Rather than seeing their ethical practice as something they do separately through volunteering and civic engagement, they're more and more interested in integrating their career and doing good," says Professor Jo Barraket from the Centre for Social Impact Swinburne.

The consumer landscape is also changing, with people increasingly becoming interested in what happens to their consumer dollar – does it help or harm our society and environment?

Bang for your buck

We looked at four brands that all donate some profit to good causes: Who Gives A Crap, Thankyou, Cotton On Foundation and Community Co. While they're very different, they all produce and sell fast-moving consumer goods and can be found across the country.

Social enterprise product	Unit price	Traditional product	Unit price
Thankyou Lemon Myrtle & Goats Milk handwash (500mL): $7.50	$1.50/100mL	Dove coconut and jasmine handwash (500mL): $7.50	$1.50/100mL
Thankyou Little Dreamer nappies – newborn up to 5kg (108 pack): $28	$0.26/each	Huggies Ultimate nappies newborn (108 pack): $30	$0.28/each
Who Gives A Crap 100% recycled 3 ply toilet paper (24 double-length rolls): $30	$0.31/100 sheets	Sorbent 2 ply extra thick toilet paper (24 pack): $12.60	$0.29/100 sheets
Who Gives A Crap forest friendly 2 ply paper towels (6 pack): $18	$2.50/100 sheets	Viva paper towel double length (4 pack): $10.30	$2.15/100 sheets
Community Co antibacterial lime handwash (250mL): $1.99	$0.80/100mL	Palmolive antibacterial liquid hand wash lime (250mL): $3.14	$1.26/100mL
Community Co pomegranate foaming hand wash (250mL): $2.39	$0.96/100mL	Dettol rose & cherry foam hand wash (250mL): $2.50	$1.00/100mL
Community Co rolled oats (750g): $3.30	$0.44/100g	Uncle Tobys traditional rolled oats (1kg): $5.00	$0.50/100g
Cotton On Foundation 100% Difference Mints (25g): $3.00	$12.00/100g	Eclipse watermelon mints (34g): $1.80	$7.65/100g
Cotton On Foundation water (600 mL): $2.00	$0.33/100mL	Mount Franklin spring water (600mL): $2.10	$0.35/100mL

Most of the social enterprise products we looked at were either the same price or only slightly more expensive than comparable products, and many were even cheaper. This means that if you can afford them, you can make your dollar do more for the world by switching to these brands.

How much is donated?

Before you make the switch, look past the marketing hype and find out just how much goes to the good cause:

Do bigger donations mean greater impact? 

Not necessarily. The value each social enterprise delivers is difficult to quantify. A social enterprise that donates 50% of its profits can be just as impactful as one that donates 100%. It all comes down to the change they make with the money they give.

"The only time comparing money is useful is where organisations are tackling exactly the same issue, in the same way, in the same timeframe, in the same location, with the same cohort and in the same contact – ie, not very often." says Davies.

Can I just buy the cheapest item and then donate to charity?

It's not quite that simple. Social enterprises tend to emphasise ethical and sustainable sourcing and business practices as well as their charitable giving.

"You can't compare the two," says Sarah Davies, CEO of Philanthropy Australia. "Buying something you want or need is about a benefit to you as a consumer. Giving money, time or support to a charity is about helping someone else and being part of creating positive change for the community more broadly. They are not a trade-off."

"A good example is when you buy chocolate," says Dr Knight. "If you spend your money on a cheap, commercially-made product you are simply helping a corporate's bottom line. But if you buy chocolate from Hey Tiger, not only are you buying great chocolate but you are helping to reduce child trafficking and child labour in West Africa."

How do I know which social enterprises to support?

"Just because a business is a social enterprise doesn't mean it's a great social enterprise, and it's important for consumers to be purposeful and informed about the choices that they make," says Barraket.

"My advice is to look at whether the social enterprise is featured in the Baptist Care Ethical Fashion report, in the Good On You app, or if they are members of a social enterprise association such as Social Traders," adds Dr Knight.

Your personal values play a big part in deciding whether a particular social enterprise is worthwhile. "My version of biggest impact might not be the same as yours," says Barraket.

Choose social enterprises whose values align with yours. If clean water and sanitation are important to you, social enterprises like Who Gives A Crap or Thankyou might be your cup of tea. If you think education is vital to changing children's lives, then Cotton On Foundation might be the way to go.

Transparency is good – it's helpful to be able to see where your money ends up, which is why Thankyou's Impact Tracker has been so successful. But not every social enterprise is big enough to afford things like this.

"There's a cost to measuring and communicating your social value, and that can be one cost too many in small organisations and in industries where there's very lean profit margins," says Barraket.

Playing the long game

Change doesn't happen overnight. "The fact that [social enterprises] can't demonstrate an immediate, positive social impact doesn't mean they're not having one – it just might mean that what they're doing is complicated," says Barraket.

"Find a social enterprise that aligns with your values and your interests and then as a consumer it's a case of making judgements about whether you're going to give an organisation the benefit of the doubt when it's at a particular stage of development."

Transparency and 'social wash'

It can be difficult to find out exactly what social enterprises do with the money from sales. If they aren't nonprofits or owned by charities, they don't have to release financial reports – so you pretty much have to take them at their word.

Even nonprofits can be pretty opaque. There's little consistency in how charities report on their administration costs, so even if you do trawl the internet to find a charity's financial records, you may well still be none the wiser about where the money goes.

The closest thing we have in Australia to regulation is B Corp certification. To be certified as a B Corp, enterprises have to pass a detailed assessment of their finances and practices. However, this is entirely voluntary and still doesn't tell you how much of the purchase price reaches the cause you think you're supporting.

And watch out for 'social wash'. Similar to greenwashing, it's when businesses falsely brand themselves as social enterprises or cash in on marketing themselves as genuine change makers, like Community Co. The only way to avoid it is to do your homework.

"If there's no publicly available information (websites, guides, ratings, etc) then play it safe and buy from someone you can check out and trust," says Davies.