Verification has many benefits for social enterprises including proof of their adherence to high ethical standards and providing a competitive advantage during tender and bid submissions. Social enterprise verification is a way for businesses to demonstrate their commitment to social and environmental impact. The verification also provides a way for consumers, investors, and other stakeholders to identify and support businesses that are making a positive difference in the world. Depending on where you are located, it also provides access to funding opportunities, pro bono services and discounts, social procurement networks, and social procurement marketplaces.
It is estimated that there are more than a million social enterprises operating in the United States, however in the absence of a standard legal structure for a social enterprise, it is difficult to determine the correct number. A social enterprise can be either a nonprofit or a for-profit legal entity. Some legal structures available for social enterprises are only available in certain states but not others (for example, Benefit Corporation or L3C’s (Low-Profit Limited Liability Company). To add to the confusion, some of these legal structures are regulated differently in different states.
One of the key ways to address the issue of trust and transparency until we have a standard legal structure for social enterprises is through third-party verification. In 2022, the Social Enterprise World Forum (SEWF) launched a global verification for social enterprises that also recognizes existing, country specific and global certifications that match or exceed their own standards. Their criteria for a social enterprise to become verified are: (taken from their website)
Mission Focused - Is the primary mission of your enterprise to address a social or environmental challenge?
Surplus - Does your organization reinvest or donate the majority (at least 51%) of any surplus toward your social or environmental mission?
Ownership - Is your enterprise registered as an independent enterprise (e.g. not a public sector agency, project, or corporate subsidiary) and is it controlled in the interests of your mission?
Ethics - Is your enterprise transparent and accountable to your mission? Do you aspire to the highest ethical standards in relation to your workers, suppliers, customers, community, and the environment?
Trade Generated Income - Do you generate at least 51% of your operating income from trade, which includes directly selling products or services or filling contracts for products or services (including contracts funded by grants for specific outcomes)?
Mission Lock - Do you have provisions to maintain mission primacy through periods of transition (e.g. change in management, change in ownership, dissolution) to ensure that resources are used in line with the organization’s mission instead of being used for private gain?
This global verification aims to be a unifying game changer for the global social enterprise movement, helping organizations from all over the world to stand together and show the power of the social enterprise business model. It is also very low cost at just $85 for initial verification and $60 per year for annual review and renewal. SEWF partnered with our colleagues at social enterprise Good Market for verification applications. This means that all social enterprises also have access to a free Good Market profile page and access to a number of community and sales benefits.