Key terms

The process of identifying, assessing, and prioritising potential risks, followed by planning and implementing strategies to manage or mitigate their impact. This involves developing contingency plans, allocating resources, and monitoring ongoing risks.

A document that plays a key role in risk management, helping track issues and address problems as they arise.

The process of increasing the reach and impact of a social enterprise, which may involve expanding geographically, serving more beneficiaries, developing new products or services, or influencing policy and legislation.

The right of First Nations peoples to make decisions about their own lives, communities, and futures across social, cultural, political, and economic domains. It is a foundational principle underpinning all First Nations-led work and aligns with frameworks such as United Nations declarations on Indigenous rights.

The period a Director/Trustee serves on a board, typically three years with a maximum of nine years.

A tool for mapping the skills and expertise to identify strengths and gaps. Can be used for staff, executive, and governing groups.

The process of measuring, analysing, and reporting an organisation's social, environmental, and economic performance to stakeholders.

An independent evaluation of an organisation's social, environmental, and ethical performance, based on feedback from stakeholders and assessment against recognized standards.

Financial resources available to support the startup, growth, and sustainability of social enterprises, including grants, donations, impact investments, loans, and earned income from various sources. The type of funding that any given social enterprise will be able to access will depend on its legal structure.

The Social Enterprise National Strategy (SENS) is a team effort to grow social enterprise in Australia.

SENS aims to set a clear national direction for the sector. It brings together a common vision and shared priorities. This helps people and organisations work together for lasting change. No one organisation owns it; it reflects the needs and goals of the wider social enterprise community.

The strategy shows where teamwork is key. This includes raising visibility, improving support systems, and strengthening the role of social enterprise in tackling social, economic, and environmental issues.

SENS aligns the sector. It gives social enterprises, intermediaries, funders, policymakers, and advocates a shared reference point for the sector's direction and what is needed to move ahead.

A social enterprise is a business that puts people and planet first. They trade like any other business, but exist specifically to make the world a better place. Social enterprises can adopt a range of legal structures, identities, and play multiple roles, across different domains, in the ecosystem.

The overarching field of social enterprise, including social enterprise themselves and the range of other actors who engage and interact with them.

An individual who develops and implements innovative solutions to social, cultural, or environmental problems, using entrepreneurial principles and business strategies to create sustainable, positive change.

A way of investing money to create positive social or environmental impact, sometimes with the expectation of also generating a financial return. This can include investments in social enterprises, non-profits, or projects that aim to address social or environmental challenges. Can be understood as an overarching term that includes both grants and impact investment.

Social franchising helps a social enterprise grow. It lets others copy its model in new places. It is similar to commercial franchising, where a proven business model (like a café or retail store) is licensed to others. In social franchising, the focus is not just on financial success, but on achieving social or environmental impact at scale.

In a social franchise model, the franchisor provides a proven model, brand, training, systems, and ongoing support. The local partner, or franchisee, runs their own business using this model. They also commit to shared values, quality standards, and impact goals.

In Australia’s social enterprise sector, social franchising helps successful ideas expand faster and more reliably. This includes reaching rural and regional communities. It allows impact to expand without relying only on centralised control or large amounts of capital. For social enterprises in employment, education, health, or community services, social franchising can improve quality. It keeps the model safe and helps it stay sustainable, while also focusing on its purpose.

The positive and negative effects an organisation's actions have on people, communities, and the environment, considering both short-term and long-term changes. Used interchangeably with ‘impact’.

The process of analysing, monitoring, and managing the intended and unintended social consequences of an organisation's activities or interventions.

A financial tool that enables private investors to fund social impact projects, with the potential to earn a return if the project achieves its targeted outcomes. If the project succeeds in delivering the desired social or environmental results, the government and/or other actors ‘purchase’ the outcome, which enables investors to be repaid with interest. If the project falls short of its goals, investors may lose some or all of their investment. Social impact bonds are a type of ‘payments for outcomes’.

Social impact bonds (SIBs) are a way of funding social programmes using private investment. They link financial returns to the achievement of measurable social outcomes.

Despite the name, a social impact bond is not a traditional bond. It is a contract between government, private investors, and a service provider. Here is how it works: a government agency identifies a social problem it wants to address, such as reducing reoffending, improving school attendance, or preventing homelessness. Private investors put up the upfront capital to fund a programme designed to tackle that problem. A social enterprise or non-profit organisation delivers the programme. An independent evaluator then measures whether agreed outcomes have been achieved. If the outcomes are met, the government repays investors their capital plus a financial return. If the outcomes are not met, investors may lose some or all of their money. This structure is sometimes called a pay-for-outcomes or pay-for-success model.

In Australia, social impact bonds have been used across a range of areas. New South Wales was an early leader, trialling SIBs in out-of-home care, with the Newpin programme delivered by UnitingCare and the Benevolent Society's family preservation programme among the first examples. Victoria, Queensland, and South Australia have also run SIB programmes. For social enterprises, SIBs can provide access to patient capital, that is, funding that does not need to be repaid quickly, to deliver programmes that address deep or entrenched disadvantage. They can also help demonstrate the financial value of social interventions in a language that government and investors understand.

There are real complexities to be aware of. Designing a SIB requires significant upfront work to agree on what outcomes will be measured, how they will be evaluated, and over what time frame. This can be costly and time-consuming, and may favour larger, more established organisations over smaller or emerging social enterprises. There is also a risk that focusing on measurable outcomes can inadvertently narrow a programme's approach, leading organisations to work with people who are easiest to help rather than those with the greatest need, a problem sometimes called 'creaming'. Social impact bonds are also not suited to every social problem. They work best where outcomes are clearly definable, measurable within a reasonable time frame, and where the cost savings to government are large enough to justify the return to investors.

Often used interchangeably with ‘impact investment’. Sometimes used to specifically denote impact investments made to address ‘social’ challenges rather than environmental ones.

The development and implementation of new ideas, strategies, or solutions that aim to address social, cultural, or environmental challenges more effectively than existing approaches. Social innovations often involve collaboration between various sectors, such as non-profits, businesses, government agencies, and communities, to create sustainable and scalable solutions that improve people's lives and promote positive change.

Social investment is money put into organisations or programmes with the expectation of both a financial return and a positive social or environmental outcome. It sits between traditional charity giving, where money is donated with no expectation of return, and conventional investing, where financial profit is the only goal.

In practice, social investment can take many forms. It includes loans, where an organisation borrows money and repays it over time, often at below-market interest rates. It includes equity investment, where an investor takes a share of ownership in a social enterprise. It also includes more complex instruments such as social impact bonds, where repayment depends on whether agreed social outcomes are achieved, and convertible notes, where a loan can convert into equity under certain conditions. The investor might be an individual, a foundation, a community development finance institution, a superannuation fund, or a government body. What distinguishes social investment from mainstream finance is the deliberate intention to generate social or environmental value alongside any financial return.

In Australia, the social investment market is still developing but growing. Impact Investing Australia is the national peak body for the sector and works to build connections between capital and purpose-driven organisations. The federal government has supported the market through initiatives such as the Social Enterprise Development Initiative (SEDI) and earlier programmes like the Sector Readiness Fund. State governments, particularly in New South Wales and Victoria, have also been active, using social investment structures to fund programmes in child protection, homelessness, and employment. Philanthropic foundations such as the Paul Ramsay Foundation and the Minderoo Foundation have begun deploying capital through loans and equity as well as grants, recognising that grants alone cannot meet the scale of need.

For social enterprises, social investment can offer access to patient capital, that is, funding that does not need to be repaid quickly and that tolerates a lower or slower return in exchange for impact. This can be particularly valuable for organisations that have grown beyond what grants can support but are not yet attractive to mainstream commercial lenders. However, taking on investment is not without risk. Repayable finance creates obligations that grants do not. If revenue falls short, loan repayments can put serious pressure on an organisation. It is also important to ensure that the terms of any investment are genuinely aligned with the organisation's mission, and that the pursuit of financial returns does not gradually crowd out social purpose. For First Nations social enterprises in particular, it is important that investment structures respect community ownership, self-determination, and the primacy of cultural values over financial metrics.

Social procurement is when governments, businesses, or other organisations use their buying power to achieve not only the best value for money, but also positive social, environmental, and community outcomes. In plain terms: - It’s about choosing suppliers and contractors not just because they can deliver a product or service at the right quality and price, but because they also create broader benefits. - These benefits might include providing jobs or training for people who are disadvantaged in the labour market (such as long-term unemployed, people with disability, or First Nations peoples), supporting local small businesses, using environmentally sustainable practices, or reinvesting profits into community programs. - For example, if a council needs catering for an event, they might hire a social enterprise café that employs young people who are at risk of homelessness. The catering still needs to meet price and quality standards, but the purchase also creates social value by helping those young people gain skills and employment. It’s essentially buying with impact, making purchasing decisions that deliver the required goods or services and contribute to wider positive change.

A framework for measuring and communicating the social, environmental, and economic value created by an organisation or project, relative to the resources invested.

The quantifiable impact of an organisation's activities on the well-being of individuals, communities, and society as a whole, often expressed in monetary terms or other standardised measures.

The individuals employed by an organisation to carry out its day-to-day operations and activities.

Any individual or group with an interest in or influence over an organisation, such as customers, employees, investors, suppliers, or communities.

The process of actively involving individuals, groups, or organisations that have an interest in or are affected by a project, initiative, or business. This involves communicating with stakeholders to understand their needs, concerns, and expectations, and working with them to address these issues.

The individuals, groups, or organisations that have an interest in or are affected by the activities and decisions of a social enterprise. These can include employees, customers, investors, suppliers, partners, local communities, and government agencies.

Bodies that establish and maintain certification schemes and benchmarks for social enterprise performance and impact. Standards may be related to specific areas of impact (e.g. animal welfare), specific products (e.g. Fair Trade), or whole of organisation (e.g. People and Planet First).

State and Territory-level government bodies that oversee regional social enterprise policies, development strategies, and regulations.

An outline of an organisation's long-term goals and the actions needed to achieve them, covering areas such as resources, milestones, and performance measures.

A high-level articulation of what an organisation intends to do, why, and how it will do it. It outlines the key steps, resources, and decisions needed to reach the desired goals, while also considering how to manage risks and potential challenges along the way.

A way of working that focuses on existing knowledge, capability, and resilience within individuals and communities. Rather than defining people by deficits, this approach builds from what is already strong and working, which is particularly important in First Nations contexts.

An organisation that aims to increase the participation of Indigenous businesses in the supply chains of Australian companies and government agencies. It certifies Indigenous businesses and maintains a directory of Indigenous suppliers.

Refers to something that can be maintained or continued over the long term without depleting resources, harming the environment, or compromising the ability of future generations to meet their needs. It often relates to practices that balance environmental, social, and economic factors.

The Sustainable Development Goals, commonly known as the SDGs, are a set of 17 global goals adopted by all United Nations member countries in 2015. They provide a shared framework for addressing the world's most pressing social, economic, and environmental challenges by the year 2030.

The 17 goals cover a wide range of interconnected issues. They include ending poverty and hunger, ensuring quality education, achieving gender equality, providing clean water and affordable energy, promoting decent work and economic growth, reducing inequality, taking action on climate change, and building peaceful and inclusive societies. Each goal has specific targets, and there are 169 targets in total across the full framework. The SDGs apply to every country, including Australia, and are designed to guide decisions made by governments, businesses, and communities. The full list of goals is available at sdgs.un.org/goals.

For the Australian social enterprise sector, the SDGs provide a common language for describing social and environmental impact. Many social enterprises align their work to one or more of the SDGs as a way of connecting their local activities to global priorities. A jobs-focused social enterprise might reference SDG 8, which is about decent work and economic growth. An enterprise working in affordable housing might connect its work to SDG 11, which focuses on sustainable cities and communities. An organisation delivering services for people experiencing poverty might align with SDG 1 and SDG 10, which address poverty and reduced inequalities. Using the SDGs as a reference point can also help social enterprises communicate their impact to funders, investors, and government partners who are familiar with the framework. Some impact measurement tools and reporting frameworks in Australia explicitly ask organisations to map their activities to relevant SDGs.

It is worth keeping in mind that the SDGs are a high-level global framework, not a measurement system in themselves. Saying that an organisation contributes to a particular goal does not automatically demonstrate how much impact it is having or how directly its work connects to that goal. There is a risk of SDG-washing, where organisations claim alignment with the goals for reputational purposes without being able to back that up with evidence. The SDGs are most useful when they complement, rather than substitute for, rigorous impact measurement and honest reporting. For First Nations communities in Australia, several SDGs are particularly relevant, including those relating to poverty, health, education, and reduced inequalities, though it is important that progress against these goals is measured and led by communities themselves, in ways that reflect their own priorities and self-determination.

A strategic planning tool used to evaluate an organisation's strengths, weaknesses, opportunities, and threats.

The process of identifying and addressing the root causes of social or environmental problems by changing the fundamental structures, policies, and practices that contribute to these issues. This involves working collaboratively across different sectors and stakeholders to create long-lasting, sustainable improvements in communities and society as a whole.

In a systems context, where interconnected but autonomous actors are seeking ways to work with each other, governance can also be understood as the process of maintaining coherence and ensuring collective decisions are attuned to the wider, changing environment.

An approach to problem-solving that involves understanding and transforming the complex, interconnected systems that underlie social, economic, and environmental challenges. It goes beyond addressing individual issues in isolation and instead seeks to identify and change the root causes, structures, and patterns that perpetuate these problems across multiple domains and scales.

A charity registered with the ACNC and endorsed by the ATO to access tax concessions such as income tax exemption, GST concessions, and FBT rebates.

The Commons: Refers to a broad set of resources - physical, natural, social, and/or cultural - accessible to all members of a community or society. Commons are owned, sometimes collectively, sometimes individually. How they are used is determined collectively.

A hypothesis that articulates how an organisation's activities will contribute to its intended impact, by mapping the causal links between inputs, outputs, and short-term, medium-term, and long-term effects. A theory of change should also outline the assumptions that the hypothesis is based on. The term ‘theory of change’ is often used interchangeably with ‘impact model’.

A global effort to promote and support businesses that prioritise social and environmental objectives alongside financial sustainability. It encompasses a diverse range of actors who work together to create an enabling sector for social enterprises to thrive. The movement aims to transform traditional business models and economic systems to be more equitable, and sustainable, addressing pressing societal challenges. It advocates for greater recognition and resources for social enterprises as key drivers of positive social and environmental impact.

Trade means the exchange of goods or services. It sits at the heart of what makes a social enterprise. It is widely understood in Australia that social enterprises primarily trade, from the Finding Australia's Social Enterprise Sector (FASES) research, to the definition of a social enterprise under the Classification of Social Sector Initiatives and Entities (CLASSIE). When Social Enterprise Australia asked the sector what makes a social enterprise, a key theme was clear: core to what a social enterprise is, is that they primarily trade.

But what counts as trade is often misunderstood, and how it has been assessed in different contexts varies. This has created real confusion in the sector.

Trade is the exchange of goods or services. A social enterprise sells something, whether that is a product, a service, or a programme, and receives payment in return. This is different from receiving a gift or donation, where money is given freely without anything being provided in exchange.

Where it gets more complicated is with grants. Not all grants are the same. Some grants are gifts or donations. They are not trade. Others are used to purchase goods or services, and they are trade.

In Australia, GST is a useful guide:

• If GST applies, the grant is for a good or service. It is trade. 
• Gifts and donations do not attract GST. They are not trade.

There are exceptions where GST may not apply to a grant that is for goods and services, including when:

• It is for GST-free goods or services (such as most basic foods, some education courses, and some medical, health, and care products),
• It is for an input-taxed activity (such as residential rent or certain financial services),
• The organisation is not registered for GST.

Where GST does not apply, the practical question is: would GST apply if these exceptions did not exist? 

Getting this right matters. Many funding bodies, government programmes, and certification frameworks assess whether a social enterprise earns a substantial portion of its revenue from trade. How each revenue stream is classified affects whether an organisation qualifies for various opportunities. Being clear and consistent about what counts as trade helps social enterprises present an accurate picture of their business model and builds credibility with funders, partners, and government.

A framework that measures an organisation's performance and impact in three areas: social, environmental, and financial, recognising the interconnectedness of these dimensions in creating sustainable value.

An individual responsible for overseeing the management and administration of a charity or trust, ensuring that it operates effectively and ethically in pursuit of its mission.

Understorey exists to grow participation and capability in the Australian social enterprise sector. It is a digital commons: an online resource available to all, and shaped by all who choose to take part. Understorey is a place to learn and exchange about social enterprise. It’s also a place to navigate the sector. It does this to help social enterprises thrive and contribute to a better future. It is part of the Social Enterprise Development Initiative (SEDI) – an initiative of the Australian Government.

An organisation without a separate legal identity from the owner, who bears full responsibility and liability for the organisation's actions.