Social enterprise

A social enterprise uses the tools of business — entrepreneurship, innovation, market approaches, discipline — to solve a social or environmental problem.

The workbook gives three shared characteristics:

1. Social purpose — created to generate social impact by addressing a social issue.
2. Enterprise approach — uses business principles and the strategic discipline of a for-profit business.
3. Social ownership — a focus on public good and stewardship, though not necessarily reflected in the legal structure.

The core belief is that profitability and social impact are not mutually exclusive but mutually reinforcing. The workbook names SELCO Solar, Basix, Barefoot College, Arvind Eye Hospital and Pratham as pioneering Indian social enterprises.

For the Social Stock Exchange, the everyday meaning is not enough. SEBI's ICDR Regulations define exactly who counts. A social enterprise is either a Not for Profit Organisation or a For Profit Social Enterprise, and either one must establish primacy of social intent before it is identified as a social enterprise at all.

Two routes into the definition (ICDR, Chapter X-A):

Eligibility under Regulation 292E, which applies to both:

• engage in at least one of the 18 listed activities, such as eradicating hunger, promoting healthcare, education, gender equality, environmental sustainability, financial inclusion or bridging the digital divide;
• target underserved or less privileged population segments, or regions recording lower performance in central or state development priorities;
• for an FPSE only, at least 67% of activities qualifying, measured by revenue, expenditure or customer base over the preceding 3-year average.

Who can never qualify: corporate foundations, political or religious organisations or activities, professional or trade associations, and infrastructure and housing companies except affordable housing.

Non-profit vs social enterprise. Chapter 1 draws a sharp line. Non-profits rely on donations and grants. Social enterprises generate their own revenue for financial sustainability, and plough all profits back into the cause.

Illustrative organisations.

Roshni Solar is the interesting case. It makes a profit and pays dividends, which a Section 8 company could not. It is still a social enterprise because more than two-thirds of its business serves the target population. Had that share been ₹11 crore out of ₹18 crore (61.1%), it would be an ordinary company, however socially minded its founders.

Chapter 1 (10%) introduces social enterprises, their characteristics and the ICDR eligibility criteria. Chapter 3 (6%) turns those criteria into the SSE onboarding test, and Chapter 9 sets out what a social enterprise must disclose once registered or listed. Chapter 1's sample questions include a fill-in on what a social enterprise must establish — primacy of social intent. Expect questions on the excluded categories, the 67% test being FPSE-only, and the difference between a non-profit and a social enterprise.

• A Section 8 company is an NPO, not an FPSE. The ICDR definition of FPSE expressly excludes it, even though it is a company.
• The 67% test applies only to FPSEs. An NPO proves primacy through its activities and its target population alone.
• Corporate foundations are excluded — a common wrong answer because they do social work.
• Affordable housing is the exception, not housing in general.
• The workbook words the housing exclusion two ways. Chapter 1 says "infrastructure and housing companies, except affordable housing". Chapter 3 (3.1.1(e)) says "infrastructure and housing finance Companies, except affordable housing". Recognise either.
• "Social enterprises cannot make profits" — wrong. They make profits and reinvest them; the Chapter 1 contrast with non-profits is about the source of funding.
• Social enterprises can access social venture capital funds, not only grants and donations. Chapter 1 says this of both for-profit and non-profit social enterprises.