FEDERAL RESERVE BANK OF SAN FRANCISCO
Exploring the Continuum oSocial and Financial Returns:
When Does a Nonproft Become a Social Enterprise?
Kathy O. Brozek
oodwill Industries and the YMCA have something in common: by most deni-tions they each would be considered a “social enterprise,” a relatively new andincreasingly popular term in the United States. Yet both these nonprot organi-zations have a history dating back more than 100 years. For Goodwill Industrieso San Francisco, which serves three counties in the San Francisco Bay Area, a whopping 89percent o its $28 million revenue or scal year ending June 2008 came rom its businessenterprises, not rom government grants or oundations. By any standard, this is an enviablenonprot revenue stream. Goodwill provides training, lie coaching and jobs or those whopossess a track record considered too risky or the private and public sector employment.
In 2005, 54 percent o all U.S.- based nonprot revenue, excluding that rom hospitalsand universities, was generated rom the ees or goods and services. (Fees include govern-ment payments or services, but are not grants).
Yet even though ees account or more thanone-hal o the sector’s total revenue, nonprots with social enterprise models like GoodwillIndustries are not pervasive. Rather, the ee income o most nonprots is not integral to itsoperational model and supplements other, more substantial, unding sources.The dierences between a nonprot with earned income and a social enterprise nonprotare core to this discussion and go beyond semantics and nuance. I posit that these distinc-tions lie in organizational structure, unding sources, ormation, employees, ounders, execu-tion o tactics, and other parameters. I am not advocating one model over the other, butinstead will ocus on the challenges, opportunities, and trends acing nonprots and thecircumstances in which each model is a better t. With insight, stakeholders can create thesustainable and innovative nonprot organizations that this resource-strapped sector sodesperately needs.
In general, all nonproft and or-proft organizations all along a continuum rom social tofnancial returns. Eecting social change by combining in one organization social and fnancialreturns, also reerred to as blended value, is a key component o the evolving social capitalmarket.
Figure 1 captures the essence, and the inherent ambiguity, o the social enterprise model.
Goodwill Industries of San Francisco, San Mateo and Marin Counties 2007-2008 Annual Report (990 tax return)(San Francisco: Goodwill Industries, 2008).