Aren't we all pursuing societal goals in our businesses? Defining “societal purpose” as pursued by social enterprises

Abstract

AbstractSocial enterprises demonstrate how sustainability can be embedded into business. This often implies selecting a legal form and a business model dedicated to serving social and environmental (societal) objectives. Tailor‐made legal frameworks for social enterprises in European Union (EU) Member States require that the social enterprise include a “societal purpose” in its constitutional documents. These legal frameworks refer to “societal purpose” in a general way; the wording is similar but not identical. The EU Regulation on Social Impact Funds and the EU Procurement Directive contain provisions that relate to social enterprises and they also refer to “societal purpose,” although neither of them defines the term. Some EU countries have not (yet) adopted tailor‐made legislation. Their legislators have indicated that they struggle with demarcating the notion of “societal purpose". This article aims to support them as well as EU legislators by testing the concept of “societal purpose” in two ways. A doctrinal research was conducted in order to find a legal basis for explaining what “societal purpose” entails in the United Kingdom (UK) and the Netherlands. In the UK, the legal framework concerning the “Community Interest Company” was examined. In the Netherlands, which jurisdiction has not introduced a tailor‐made legal framework for social enterprises, the existing tax legal framework for organisations with a “public benefit purpose” was analysed in the evaluation. Second, an empirical study was conducted into the societal purpose of 400 randomly selected UK and Dutch social enterprises. The results were categorised, compared with each other, and evaluated on the basis of existing legal frameworks.