Terminology

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Economic transformation sometimes requires transformation in the language we use too. At Ākina we use a range of terms that may not be familiar to everyone – they might also mean different things to different people. Here’s some more information about what we mean when we use these terms:

 

What is Social Enterprise?

Social enterprises are purpose-driven organisations that trade to deliver positive social, cultural and environmental impact.

Social enterprises use business models as a tool to help solve social, cultural and environmental issues. They are often profit-making businesses, but they invest the majority of their profit and expenditure in positive outcomes (their impact). The impact of a social enterprise is central to their purpose; it is the reason the business exists. Social enterprises sit between charities and for-profit businesses on the business continuum – a good way to think about them is as having ‘‘the heart of a charity with the mind of a business.”

The Social Enterprise Continuum

The NESTA/Young Foundation 2011

The NESTA/Young Foundation 2011

 

Because there is no formal legal definition in New Zealand, there are differing views about what constitutes social enterprise; is it a specific business structure, or is it a way of doing business? At Ākina we find that it is useful to have a framework to use when considering social enterprise. We use the following three key elements to define social enterprise:

  • The social, cultural and/or environmental mission provides public or community benefit and is the primary purpose of the organisation;

  • The majority of income is derived from trading a product or service;

  • The majority of either expenditure or profit is spent in the fulfilment of the purpose of the organisation.

A wide range of organisations can and do deliver positive impact. Social enterprise models are some of the most powerful ways for a business to deliver impact.

 

What is Impact?

Impact is the positive social, cultural or environmental changes, or outcomes, that happen as a consequence of an action.

Impact comes in many shapes. It could involve offering employment opportunities for marginalised or differently abled people, creating more connected communities, waste reduction, efforts to support biodiversity or regenerate our environment. Impact could be delivered by social enterprises, charities, governments or any business that works to be impact-driven, in many different ways.

At Ākina, focusing on impact involves designing strategies to maximise the positive outcomes your actions could have. This might mean modelling how an action will lead to change and measuring whether change has happened or not. This could involve using data to prove that what you are doing is working, and to inform decision-making in order to maximise your impact.


 

What is Social Procurement? 

Social procurement is the intentional purchase of products and services that results in positive change.

 
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Social procurement means using procurement as a tool to generate benefits beyond the products and services required. Think about value, not price. Value for money is no longer just about price, quality and risk. It now considers broader social, cultural and environmental outcomes.

New Zealand businesses spend hundreds of billions of dollars every year, which means business-to-business (B2B) procurement offers a huge untapped opportunity for social, cultural and environmental impact. Not every business can operate like a social enterprise, but every business can look at impact, and work to find ways to maximise positive impact. Any business that buys from other businesses can tap into social procurement by buying from social enterprises, which are impact-driven rather than profit-driven.

By harnessing the combined purchasing power of corporate and government buyers, social procurement directs spend towards impact through social enterprise suppliers.

 

What is Impact Investment?

Impact investing is investing with the intention of generating a measurable and beneficial social or environmental impact alongside a financial return.

An impact investment will generally have the following characteristics:

  • The investor chooses to invest because of the social or environmental benefits created.

  • The investor also expects a profit. This profit may or may not be at the same level as tradition investment.

  • An impact investment can take many forms, including giving a loan or buying into a social enterprise.

  • The social or environmental benefit is measured so that both social and financial returns can be demonstrated to the investor.

The development of the impact investing sector in New Zealand and globally has been driven by the recognition that philanthropic and public funds are insufficient to address the scale of social and environmental problems we face today. Impact investment is attracting a variety of investors (including individuals, philanthropists, institutions and governments), and provides a broader range of financing options to solve social and environmental problems, while also yielding a financial return.

While impact investing is still a small subset of the investment sector, it covers all asset classes, different sectors and exists globally. Unlike grants, impact investments are expected to generate a financial return, while also having a positive effect environmentally and/or socially. Impact investments can be finance-first, which includes impact funds that seek to make market-rate returns while limiting investments to companies, organisations and assets that are have a positive impact on people and the planet. Impact investments can also be impact-first, such as a loan to a social enterprise at a below-market rate.

 
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The Impact Investing Network

Advocating for investment that does a power of good.

The Impact Investing Network become part of a global network in 2018, when the Impact Investing National Advisory Board joined the Global Steering Group for Impact Investing. It’s quite a mouthful, but it’s also huge leap forward for Impact Investment in New Zealand (and our friends overseas might learn a thing or two from us in Aotearoa as well!)

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