A social enterprise is a business that exists to create a positive social, environmental cultural or community impact.
It operates like any other business by selling products or services and generating income. However, a social enterprise uses that income, and the way it does business, to deliver a public benefit rather than purely to maximise private profit.
Social enterprises operate across almost every industry and a growing part of the Tasmanian and Australian economy.
What is a social enterprise?
A social enterprise is a business with a defined purpose at its heart. It earns income through trade, like any business, and directs its activities and profits toward a social or environmental goal.
Put simply, it is a business that exists to do good and is built to be financially sustainable while doing so.
There are five ideas that sit at the centre of every social enterprise.
Purpose – a clear social, environmental, cultural or community goal that is the reason the business exists.
Operations – the way the business is run prioritises people, planet and purpose in day‑to‑day decisions and practices.
Trade – the business earns most of its income by selling goods or services, not by relying on grants or donations.
Reinvestment – the majority of profits are put back toward the purpose rather than distributed to owners or shareholders.
Structure – the business has governance or legal structures in place that lock in its purpose and ensure long‑term impact.
If all five elements are present and built into how the business is run, you are looking at a social enterprise.
Like other businesses, social enterprises sell products or services, generate revenue, employ people and aim to operate sustainably. The difference is that a clear purpose guides how the business operates and the impact it sets out to create.
In a traditional business, financial return is usually the main reason the business exists. In a social enterprise, purpose and impact are central – the business succeeds when it is both financially viable and delivering on its mission.
Here is what a social enterprise is not.
It is not a charity. A charity is mostly funded by donations and grants; a social enterprise earns most of its income through trade and stands on its own commercially.
It is not a business that simply donates some money to good causes. Sponsoring a local team or giving to charity is generous, but the social purpose is not the reason the business exists.
It is not a single legal structure. A social enterprise can be a company, a co-operative, an incorporated association or another structure – it is the purpose, how it operates, its focus on trading, how profits are used and how these are protected over time that make it a social enterprise.
Social enterprises can take many forms and operate across many industries. Some create jobs for people facing barriers to work; others focus on environmental sustainability, community development, health, education, arts and culture, or strengthening the local economy.
Across Australia and internationally, social enterprises are increasingly defined using the People and Planet First (PPF) framework, which sets out five globally recognised standards. These standards are used to verify whether a business genuinely operates as a social enterprise.
A verified social enterprise:
has a clear, stated social or environmental purpose
puts people, planet and purpose alongside financial sustainability
earns the majority of its income through trade, not grants or donations
reinvests most of its profits toward its purpose
locks that purpose into its structure and governance, so it cannot easily be set aside.
Verification provides independent assurance that a business meets these standards. This helps build trust with customers, funders and partners, and is increasingly important for accessing opportunities such as social procurement.
In Australia, independent verification is typically provided through:
People and Planet First (PPF) – the global verification system
Social Traders certification – Australia’s established certification body.
Both approaches assess businesses against closely aligned standards
While verification is not mandatory, it is becoming more important as governments and large organisations increasingly look for verified social enterprises when buying goods and services.
There is no single model. Social enterprises create impact in different ways depending on their purpose, industry and business model. Common approaches include:
employment-based models – creating jobs and training for people who face barriers to work
purpose-driven products and services – delivering goods or services that directly improve social or environmental outcomes
profit-for-purpose models – running a business and reinvesting profits into a defined cause
community and place-based models – supporting local economies, community ownership, or access to services
environmental and circular economy models – reducing waste, regenerating natural systems, or improving sustainability through how the business operates.
Many social enterprises combine more than one of these approaches. This flexibility is part of what makes the model so effective – it lets businesses respond to real-world challenges in practical ways.
A social enterprise is not a single legal structure or business type. It is an approach that can work through many different structures, using commercial activity to create positive social, environmental, cultural or community outcomes.
Choosing this model can provide a way to:
build a financially sustainable business
address social or environmental challenges through everyday operations
create employment, products or services that deliver genuine community benefit
build trust and loyalty with customers, partners and stakeholders
access social procurement opportunities, where governments and large organisations choose to buy from social enterprises
attract staff, volunteers and partners who want their work to mean something.
It is also worth understanding the trade-offs. Balancing purpose and profit can make decisions more complex, growth can be slower where profits are reinvested rather than distributed, and being clear about your impact takes ongoing effort. For most founders these are worthwhile trade-offs, however, it helps to go in with awareness of the trade-offs.
Social enterprise is not about stepping away from good business practice. It applies the same disciplines, including sound finances, good governance, and a real market in a way that creates broader value.
There is no single “social enterprise” legal structure in Australia. Instead, you choose a structure that fits your purpose, then build your social mission into it. The structure you pick affects your tax, your governance, how you can raise money, and how profits can be used. It is one of the most important early decisions.
Here are some common structure options.
Company limited by shares (Pty Ltd) – flexible and familiar to investors; profit can be distributed, so purpose is usually protected through the constitution.
Company limited by guarantee – often used by not-for-profits; no shareholders, suited to a strong public-benefit purpose.
Incorporated association – a lower-cost option that works well for community-based and locally focused organisations.
Co-operative – owned and run by its members; a good fit where shared ownership is part of the purpose.
A defining feature of a social enterprise is that it earns most of its income through trade. This includes selling products or services rather than relying on donations or grants. A realistic plan for how the business will pay its own way is essential.
Most social enterprises draw on a mix of income.
Trading income – the core of the model, and what sets a social enterprise apart from a charity.
Grants and donations – useful for getting started or funding specific projects, but not intended to be relied on long term, as social enterprises are expected to generate the majority of their income through trade.
Investment and loans – including impact investment, where investors accept both a financial and a social return.
Under-capitalisation is one of the most common challenges social enterprises face. This is when there simply not enough money to get established and grow. It is worth planning your finances carefully from the start.
Starting a social enterprise involves many of the same steps as starting any other business type. The key difference is that you define your purpose early, because it shapes everything that follows. The steps below are a useful sequence to work through.
Define your purpose. Be specific about the social or environmental change you want to create, and who benefits.
Test the need and the market. Check there is both a genuine need for your impact and real customers who will pay for your product or service.
Develop your product or service. Build something people value and will return to.
Build a viable business model. Work out how you will earn income, cover your costs and remain financially sustainable.
Choose your legal structure. Pick a structure that suits your goals and lock in your purpose (see above – get advice early).
Embed purpose into operations. Make sure your mission guides your day-to-day decisions, not just your marketing.
Plan how you will measure impact. Decide early how you will track and show the difference you make. This matters for customers, funders and certification.
As the business grows, your purpose should keep guiding decisions, including those around your operations, your business model, and how profits and resources are used to create impact.
Programs such as The Shift Lab help people work through how a business model and impact fit together in practice. There is also real value in talking to other social enterprises, who are usually happy to share what they have learned.
Connect with the social enterprise community
There is a strong and growing social enterprise community across Tasmania and Australia. You do not need to work it out alone – connecting with others is often the fastest way to learn. To take the next step, you can:
Explore becoming a verified social enterprise by connecting with organisations such as Social Traders, and SECTAS (which can support you in aligning with the People and Planet First framework)
Attend events, programs and workshops to learn from others who have done it
Connecting with this community is often the fastest way to move from understanding social enterprise to actually putting it into practice.
