Toward a moral approach to stakeholder management: insights from the inclusion of marginalized stakeholders in the operations of social enterprises

Integrating marginalized stakeholders in operations and supply chains

Several studies have documented the integration of marginalized stakeholders in sustainable SCM as producers and suppliers of raw materials (Hall and Matos, 2010), enablers of reverse logistics activities (Brix-Asala et al., 2016) or disabled workers in manufacturing facilities (Narayanan and Terris, 2020). Firms often engage in indirect inclusion, which refers to reliance on local partners for engaging with marginalized stakeholders (Rosca et al., 2019). Collectively, these studies recognize the need to integrate marginalized stakeholders as an element of social responsibility and highlight potential firm performance implications in line with an instrumental approach to stakeholder management. Most studies do not address trade-offs emerging from integrating marginalized stakeholders, except Brix-Asala et al. (2016), who found that integrating low-income consumers in reverse logistics activities can lead to environmental versus social sustainability trade-offs. However, there is a temporal dimension to these trade-offs where improving the wages of marginalized workers can enhance their income, but in the long-term destabilize the waste management system locally (Brix-Asala et al., 2016).

The inclusion of marginalized stakeholders in sustainable SCM has been brought to the forefront by the growing prominence of social enterprises. Addressing the needs of marginalized stakeholders is often an essential feature of a social enterprise because they are key to fulfilling its social mission and generating the revenue needed to survive (Ebrahim et al., 2014; Santos et al., 2015). Litrico and Besharov (2019) describe this as the “locus of integration,” which is examined by asking whom a social enterprise serves and employs and what it sells. Marginalized stakeholders can also participate in these supply chains as suppliers, distributors or employees (Pullman et al., 2018). Yet, working with marginalized stakeholders who are typically socially or economically marginalized, and thereby more vulnerable, can present challenges for social enterprises (Rosca and Taylor, 2022). These challenges can amplify the already intense institutional tensions social enterprises face stemming from their goal to combine social and commercial objectives: Longoni et al. (2019) examined how a work integration social enterprise (WISE) managed institutional tensions within its supply chain relationships while Taylor and Rosca (2022) investigate the role and functions of supply chain social capital to mitigate trade-offs between viability and impact. By voluntarily centering marginalized stakeholders in their operations, social enterprises provide fertile ground for advancing a moral approach to stakeholder theory in sustainable SCM scholarship.

Case selection

An exploratory multiple case study was performed to contrast the operational trade-offs resulting from integrating marginalized stakeholders in different roles and the approaches adopted by the social enterprises to manage them, considering conflicting stakeholder needs. First, the sampling frame was shaped by a desire to collect in-person data and was compiled around particular geographic centers in North America where multiple prospective cases were located. Given the presence of multiple large metropolitan areas within North America, such criteria were reasonable and allowed a sample frame large enough to apply other criteria in selecting the cases. Organizations were excluded if they did not self-identify as a social enterprise, have a social mission focused on marginalized stakeholders and generate revenue through product sales.

More importantly, we sampled social enterprises that engage marginalized stakeholders in different roles to enable us to identify different operational trade-offs and responses to stakeholder conflicts. The roles taken by the marginalized stakeholders include consumers (Bals and Tate, 2018), suppliers (London et al., 2010) and employees (Battilana et al., 2015). Regardless of the type of product or service provided (e.g. consumer goods, agricultural), the cases studied vary along several key characteristics enabling relevant comparisons across multiple social enterprises.

Based on these criteria, a sampling frame of 69 organizations was compiled, all geographically proximate to the first author and at least two other relevant social enterprises. To ensure theoretically useful variation between cases (Seawright and Gerring, 2008) and enable physical interviews, cases were contacted sequentially, following a geographic cluster approach (e.g. all social enterprises in Toronto, then all in Ottawa). Invitations were sent in two waves. The second wave targeted social enterprises with marginalized stakeholders in roles that were underrepresented within the first wave. Cases were selected such that two or more chosen cases were alike in one or more dimensions of their model but differed in another dimension. For example, several pairs of cases were selected wherein marginalized stakeholders' roles were the same, but the legal structures differed. Across both waves, 21 organizations were contacted, of which ten agreed to participate (see Table 1), well within the accepted range of four to ten cases for a multiple case study (Eisenhardt, 1989). Our final sample is balanced regarding the different roles marginalized stakeholders play in the supply chains and across industries, comprising agricultural technologies, food and beverage and consumer goods. A summary of each organization's mission, the products it produces and its age and size are summarized in Table 1.

The organizations selected were small, with one to five paid staff, except for two cases: Growing 2 (15) and Clothing (35). Nine of the ten included cases were founded in Canada and their sizes are representative of the Canadian social enterprise population (Elson et al., 2016). It is worth noting that some organizations also rely on volunteers or other forms of informal labor, as is common in social enterprises (Roumpi et al., 2020). Except for one case (Incubator), all interviews were conducted with a manager overseeing the supply chain. For Incubator, an interview was conducted with a knowledgeable co-founder, though he was not responsible for the supply chain's daily management. Where possible, interviews were conducted with more than one internal participant to support the validity of the data. In several cases (i.e. Shea, Jam, Jewelry 2), this was impossible as Shea has only one paid employee, Jam has only one paid employee directly involved in programming and Jewelry 2 only has one employee in Canada. In other instances, (i.e. Honey and Incubator), the focal organization has two employees, but capacity limitations prevented both employees from participating.

Besides Clothing, whose organizational policy prevented referral to external stakeholders, interviews included external stakeholders such as customers, suppliers and funders to triangulate data. While efforts were made to create a balanced sample, the size of these organizations and their relatively modest operational scale made it very difficult to find multiple external partners for each case who could provide meaningful insights. For many included organizations, relationships with conventional suppliers and retailers were quite arms-length. For example, Jam purchased their packaging materials in bulk from Costco. Growing 1 purchased many materials used to build their products from online marketplaces like Alibaba and large retailers like Home Depot. Across all ten cases, 33 external stakeholders were invited to participate, of whom 14 did.

Data collection

All interviews were conducted between October 2019 and August 2020 and lasted, on average, about 50 min (see Table 1). The semi-structured interviews employed a consistent protocol focused on broad themes related to supply chain structure, relationships, social impact and financial viability (see Appendix). By focusing on these general themes, this interview protocol allowed empirical insights regarding operational trade-offs to emerge without presupposing what these trade-offs would entail. Several questions focused on the history of the organization and the participant's previous employment and educational history to support interpretation and data analysis. Three SCM scholars reviewed this interview protocol before its deployment in the field.

All interviews were recorded and transcribed verbatim, and the interviewees were invited to review the transcript to support the reliability of the data. Information not captured in the interview transcript, such as observations during facility visits and informal discussions, was written in an analytic memo upon completing the interview to develop further insights (Saldaña, 2013). All data was compiled in a centralized database for each case. To enhance construct validity, secondary data from the focal organization or external partner's websites or sources like news articles and blog posts were also collected and integrated into the database to support triangulation.

Data analysis

As the study was exploratory in nature, the first cycle of coding was undertaken using a structural approach (Saldaña, 2013), wherein blocks of text were coded indicating their alignment with broad topics of interest as outlined in the interview protocol (i.e. supply chain trade-offs, financial trade-offs, social trade-offs, responses to the trade-offs). Next, each structural code was investigated in depth using open coding to identify the core theme in each piece of text. Additional rounds of coding were conducted as needed for codes with a relatively large number of instances to ensure the code was sufficiently specific. During the first coding round, the different operational trade-offs emerged as significant topics of interest for all social enterprises. In the next step, we closely examined the responses adopted by each social enterprise to address the mentioned trade-offs in light of conflicting stakeholder needs. This led us to develop descriptions for each case regarding its major operational trade-offs and the responses adopted.

After coding and analysis were completed, within-group and cross-case analyses were conducted (Miles and Huberman, 1994). The within-group analysis focused on comparing the social enterprises within three groups given the role of marginalized stakeholders in their supply chain: consumers, suppliers and employees. Pattern-matching techniques were employed within each group to identify similarities or differences in the operational trade-offs they experienced due to the adopted social enterprise model. Subsequently, a cross-case analysis was conducted where we compared and contrasted the three groups regarding their main operational trade-offs, responses and contingencies explaining them.

The findings are structured in two main parts. First, we show how serving marginalized stakeholders can result in major operational trade-offs for social enterprises. Second, we examine the responses adopted by different social enterprises (i.e. internalization vs. externalization), the contingencies which explain the variation in responses and how these responses reflect acceptance or avoidance of the trade-offs. The subsequent sections highlight the trade-offs, operational responses and organizational contingencies enabling various responses based on the marginalized stakeholders' role in the supply chain: customers, suppliers or employees.

Operational response

Two responses to the identified affordability trade-off emerged among the organizations studied: externalization via financial intermediation (Growing 2, Incubator, Clothing) and internalization via vertical supply chain integration (Growing 1) (see Table 3).

Externalization via financial intermediation means that organizations build a financial relationship with some intermediary (e.g. donors, governments, distributors) whose involvement in the supply chain diminishes the affordability trade-off that arises from serving marginalized customers. In each example, no stakeholder bears a disproportionate cost and instead, balanced solutions were created that served all stakeholders' needs. Thus, externalizing the costs to financial intermediaries allowed these organizations to avoid the trade-offs associated with serving marginalized stakeholders rather than adopting a response requiring certain suppliers to compromise on their desired outcomes (i.e. trade-off acceptance). We observed different forms of externalization, as explained below.

In two such cases, the organizations seek out external parties to fund products on behalf of marginalized customers. In Clothing's model, these external parties are donors who elect to purchase a fixed number of Clothing's products that they can then personally distribute to people in need in their communities or have distributed on their behalf. Through this practice, the organization benefits from the philanthropy goals of donors in its community, the donors can achieve their mission and the product is readily accessible to the end customers without these customers bearing any of the financial costs.

While Growing 2 sells directly to most of its customers, it has also developed a new consulting service for its most financially constrained customers. Through this service, Growing 2 prepares potential customers to apply for large grants from governments and charitable foundations to be able to purchase their products. Growing 2 monetizes this new offering by taking additional payment from successful grants for this work in addition to payment for the product itself. Through this model, Growing 2 has developed an additional revenue stream that will increase the accessibility of its product to customers. Furthermore, it allows them to build a strong pipeline of potential grant applicants and recipients for funding opportunities offered through governments or large foundations, helping these organizations achieve their own social missions.

Incubator instead relies on pay-as-you-go systems adopted by their distributors. In this model, customers gradually pay for their product using profits they earn from its use (i.e. through savings on food costs if eggs are consumed by the customer or through additional income if chicks incubated using their device are sold). By selling to distributors rather than direct-to-consumer, Incubator avoids the cash flow trade-offs that may otherwise arise from a delayed payment model. Further, the pay-as-you-go model diminishes the financial burden of the product, making it affordable in light of the financial returns created for marginalized customers. Finally, this model also allows distributors to financially benefit from their role connecting Incubator to the end customers.

Second, a contrasting example emerging from the data was Growing 1, which instead internalized the costs associated with serving marginalized customers. They opted to vertically integrate a portion of their supply chain to save money, producing the growing domes in-house via a licensing agreement with their former supplier. Rather than absorbing the savings as a profit-maximizing organization might, a substantial portion of these savings were used to reduce the product cost (see Table 4). However, Growing 1 remains constrained partly by the high-engagement nature of their process, while the other social enterprises externalizing the costs were able to scale more rapidly.

Organizational contingencies

The ability of these organizations to successfully externalize the costs associated with operational trade-offs can be explained at least in part by their growth orientations. Two of the three externalizing organizations (Growing 2, Incubator) are social enterprises that have adopted a growth-oriented perspective from inception, while Clothing has evolved to adopt a more commercial, sales-oriented approach to financial intermediation over time. The director of a social enterprise incubator that supported both Growing 1 and Incubator identified Incubator's adoption of a growth-oriented, for-profit model as counter-intuitive relative to the instincts of many social enterprises. This growth orientation encouraged Incubator to seek a readily scalable payment model that creates favorable outcomes for multiple stakeholders across the supply chain. Connecting with existing pay-as-you-go solar distributors rather than assuming the product must be distributed at no cost to customers created opportunities for profitable partnerships across multiple organizations. Meanwhile, the growth ambitions of Growing 2 and Clothing were enacted by hiring staff from for-profit businesses to help them adapt commercial marketing and operations management practices in an impact-oriented setting. This professionalization in hiring to support growth was seen as particularly noteworthy by the VP of Operations and Finance at Clothing, whose hiring coincided with a more significant turn in the organization toward a sales-based approach to seeking sponsors to serve as financial intermediaries to purchase coats on behalf of marginalized customers (see Table 4).

Operational response

Several organizations serving marginalized suppliers (Jewelry 1, Jewelry 2, Shea) introduced financial slack to manage the reliability trade-offs associated with their supplier relationships (see Table 3). Jewelry 1 and Jewelry 2 internalized costs to address marginalized supplier unreliability by restricting a portion of their financial resources to absorb it. Jewelry 1 did so by always retaining at least a year's worth of resources to pay its Ugandan field staff. As these staff members are the only paid employees in the organization, this practice provides substantial financial security. It delineates clear parameters around which they can make purchasing decisions and withstand the cost of purchasing non-conforming inventory.

Likewise, Jewelry 2 judiciously uses its resources to financially support its suppliers and alleviate logistical difficulties, like a lack of transportation for individual producers. While these decisions are currently made on an ad hoc basis, the long-term vision of the founder is to generate a pool of resources exclusively earmarked for dealing with these supplier reliability issues as they arise. In doing so, they will avoid accidentally internalizing too many impact-related costs at the expense of their financial viability. Thus, both Jewelry 1 and Jewelry 2 accept the opportunity costs of retaining funds to manage supplier unreliability, which could otherwise be used to help the organization grow.

Shea has adopted a different approach to generate financial slack to support supplier needs. Rather than solely using existing operating funds to address reliability trade-offs, Shea's CEO envisions establishing a microfinance fund that will then be used to fund these supplier needs, with the initial seed funding to come from the proceeds generated by a charcoal-making machine she is fundraising for on the supplier community's behalf. In addition to removing the financial responsibility for reliability-assuring investments like the car purchase previously described, this newly generated pool of resources can also support the long-term empowerment of marginalized suppliers. It may even rectify potential reliability concerns before they arise.

Organizational contingencies

An important contingency that enabled trade-off avoidance noted by these organizations was prioritizing relationships with like-minded businesses rather than individual customers. Honey fully externalized their costs by shifting their focus away from individual consumers to instead target other ethically minded businesses that could financially or reputationally benefit from the unique attributes of its product. In one surprising story, one such customer fully internalized a reliability trade-off within Honey's supply chain in which the necessary cash was unavailable to secure an order.

We had, for instance, a brewery that we would work with. We ran out of financing, and we had problems, and they said we need the product, we need it by this date (…) and they sent us this PO. And we said okay, we will maybe try to, and three days later there was a deposit in our bank. They paid 100% of it up in advance. “Deliver it to us in three months”.

– Co-Founder, Honey

Similarly, Jewelry 2 noted that its wholesalers, selected partly based on their sustainability focus, tended to be quite amenable to necessary changes in volume discounts. This prevents Jewelry 2 from bearing the entire financial burden of its value-sharing model with marginalized suppliers.

I would say wholesale is always great because there’s more [volume], you know. There’s more but at half the price. So yeah, but it’s nice to see some bulk. (…) I’ve started saying to some of our wholesalers, like “I can’t do 50% on the wood items. The wood items are much more expensive for us to ship and also just cost-wise” and everyone’s been understanding on that. (…) I think sometimes it’s speaking up and saying, “No, I can’t do that, and this is why” is good.

– Founder, Jewelry 2

An oft-described challenge noted by organizations that used financial slack to internalize reliability costs associated with their suppliers was the difficulty they faced securing individual customers willing to pay more for their goods in light of their embodied sustainability attributes.

I could think of four [stores] that all had that aspect, and they were marketing to sort of an ethical consumer type, and they closed one-by-one. It’s such a tough market. (…) You see in surveys people are willing to spend like a little bit more on ethical products, or people say they are, but then you don’t see that reflected in their purchasing.

– Co-Founder, Jewelry 1

Jewelry 1, Jewelry 2 and Shea all drew attention to the financial costs of their impact-generating activities and the impact on their competitiveness (see Table 4). While these organizations may have intended to externalize these costs to ethically minded consumers, they struggle to reach individual consumers willing to bear them.

So, one of the bigger challenges definitely is that we’re trying to compete in the marketplace against companies that aren’t following the same ethical business model as us. So, they’re not as concerned about their supply chain and where things are coming from, and how those people are being paid or how they’re being treated. So, you know, we have a product that may be more expensive but it’s expensive because we’re looking at a triple bottom line philosophy. (…) So, when you look at the shelf and you’ve got two somewhat similar products, some people might just go for the cost and so we have to educate and that’s a huge barrier for us.

– CEO, Shea

In contrast with the other organizations that partner with marginalized suppliers, Jewelry 1 has been intentional in maintaining as high a proportion of B2C sales as possible, with approximately 70% of their sales coming from in-person markets. However, unlike the other similar organizations, Jewelry 1 does not intend to carry on its sales operations indefinitely and is instead endeavoring to transition to a self-sustained micro-finance model requiring little to no labor inputs from their volunteer staff in Canada. This planned change in their business model decreases the salience of the operational trade-off between the effort and pay-off of securing individual customers, as it is not one that they will continue to experience long-term.

Operational response

Social enterprises employing marginalized employees introduced operational rather than financial slack to mitigate efficiency trade-offs experienced due to their integration of marginalized employees into their operations (see Table 3). These organizations design their production systems to tolerate employee absences, recognizing that the barriers that make conventional employment inaccessible for people they serve will affect their participation as employees. In doing so, they accepted trade-offs in organizational efficiency to ensure that outcomes were optimized for marginalized employees.

Two organizations, Jam and Soup, increase the tolerance of their production systems by planning their required production capacity using only predictable sources of labor and treating labor from marginalized employees as supplementary. For Jam, this practice has involved incorporating a pool of consistent volunteers into their workforce. On the other hand, Soup's production planning is based on the capacity of its Head Chef alone rather than relying on the productivity of its program participants. In both cases, marginalized employee participation supports the organizational mission without becoming necessary to achieve the organization's production targets. In contrast, marginalized employees' labor is crucial to Clothing's success, and they do not hire outside their target population of marginalized employees. Instead, using her private sector operations knowledge, the VP of Operations and Finance physically reconfigured the process layout to increase the visibility of employee absences so these gaps in capacity could be quickly managed.

Organizational contingencies

Organizations that serve marginalized employees experienced the same organizational contingency enabling trade-off avoidance as those serving marginalized suppliers: the presence of like-minded B2B customers (see Table 4). While Jam internalized much of the cost of employee inefficiency via operational slack through its volunteer workforce, it experienced a similar benefit from selling its product at larger volumes to a local bakery. In this relationship, Jam's social mission and its environmentally sustainable initiatives (e.g. gleaning excess crops from local farmers) made it a desirable supplier. The same phenomenon was identified by Soup, whose soup was sold in a local hospital cafeteria at higher volumes which were more conducive to operating in a financially viable way. However, Jam continues to partially accept trade-offs associated with direct-to-consumer sales, as the experience of interacting with end customers is valuable for its employees, despite its inefficiencies compared to wholesale.

Retail takes a lot of time, a lot of effort, and it provides a really valuable experience. So, anytime we’re talking about efficiency or we’re boosting production, all of that is through the lens of maintaining the integrity of the participant experience. So, we’re always gonna have some level of retail, we’re always gonna do some markets, we’re always gonna do some kind of Sunday morning sales at the church or whatever to provide that experience for our folks. Not because it’s the most efficient way to sell jam or make money.

– Program Director, Jam

Finally, the benefit of this practice is also evident in Clothing's business model. While its model is unique in that the end user is also a marginalized stakeholder, its ability to “sell” its products to wealthier donors rather than the end customers supports its ability to withstand the high costs it bears to create working conditions that are suitable for its employees.

Theoretical implications for stakeholder theory in sustainable supply chain management

Previous literature on sustainable SCM has largely adopted an instrumental view of stakeholder management and has focused on understanding the influence of more powerful stakeholders with a stronger influence on firms' supply chain decisions (Matos et al., 2020; De Gooyert et al., 2017). We contribute to this literature with insights on how social enterprises engage and respond to the needs and influences of stakeholders that, traditionally, are less powerful and influential on supply chain decisions (e.g. Narayanan and Terris, 2020; Brix-Asala et al., 2016). By elaborating on a moral approach to stakeholder management, we show its empirical importance when unpacking how organizations respond to trade-offs between stakeholder interests and ensure that marginalized stakeholders are not forced to accept diminished outcomes, as often occurs (Glover, 2020). Moreover, we show how partnerships with external supply chain actors can mitigate sustainability trade-offs, thereby complementing previous research that has shown different responses to sustainability trade-offs.

Previous studies have uncovered trade-offs arising at the firm level between the different dimensions of sustainability (economic, social and environmental) (e.g. Brix-Asala et al., 2016), including trade-offs between manufacturing processes and sustainability goals (Nand et al., 2023), the mitigation of trade-offs between green supply chain practices and firm performance (Esfahbodi et al., 2023), how cost-sustainability trade-offs may affect short-term and long-term profitability (Esfahbodi et al., 2016) and how organizations can collaborate with supply chain partners to develop creative solutions to overcome trade-offs (Xiao et al., 2019). Rather than focus on trade-offs in different dimensions of organizational performance, we uncover trade-offs rooted in conflicts between different stakeholder needs while addressing social sustainability.

Situations in which organizations prioritize the needs of marginalized stakeholders at the expense of the organizations' needs illustrate the potential impact of intrinsic motivation in sustainable supply chains. Organizations with strong intrinsic motivation can take the lead to include marginalized stakeholders and have their supply chain partners follow their lead, thereby leading to a collective force to address social and ethical responsibilities (Chowdhury et al., 2023). Moreover, we show that a moral approach to stakeholder engagement does not necessarily need to be shared by all partners. Externalization can occur even when some supply chain actors have an instrumental perspective. Future research can work to unpack additional operational trade-offs and opportunities present when supply chain partners differ in their instrumental or moral orientation toward engagement with marginalized stakeholders.

Theoretical implications for social impact supply chains

This study unpacks major operational trade-offs in a novel form of supply chain where social enterprises are the focal organizations. Understanding the operational trade-offs, responses and outcomes for stakeholders is important because these seemingly small operational decisions can support the success and survival of social enterprises or lead them away from their social mission (Ebrahim et al., 2014). Some studies have focused on understanding tensions between social enterprises' social and commercial logics and how they can be mitigated (e.g. Meqdadi et al., 2020; Longoni et al., 2019). We advance this literature by examining operational, rather than institutional, trade-offs that arise from integrating marginalized stakeholders in different supply chain roles. By providing a more nuanced operational view of the trade-offs social enterprises face, we extend previous SCM studies that have built on insights from the broader social entrepreneurship literature primarily focused on strategic considerations (e.g. Taylor and Rosca, 2022; Bals and Tate, 2018).

Managerial contributions

The study provides several important implications for managers of social enterprises, policymakers and commercial organizations. For managers of social enterprises, our insights offer more clarity and guidance regarding the management of operational trade-offs and how they can be influenced by factors such as growth orientation, which in itself may be driven by the characteristics of the social entrepreneur (Marshall, 2011). The findings of this study can help prospective social entrepreneurs understand how decisions regarding the roles of marginalized stakeholders and responses to operational trade-offs interrelate to complicate or simplify the management of their operations and their ability to serve marginalized stakeholders effectively. For public policy, our insights on cost drivers and response mechanisms are relevant for impact investors that may require a better understanding of the financial needs of social enterprises and the support needed to overcome them.

While the focus is on social enterprises, our study may have implications beyond this context for any commercial organizations implementing similar impact-generating practices that must navigate the operational trade-offs associated with pursuing their desired impact efficiently (Van der Byl and Slawinski, 2015). Conventional organizations will differ substantially from social enterprises' experience of the trade-offs associated with pursuing social impact, partly due to the higher likelihood that the inclusion of marginalized stakeholders will derive from instrumental motivations (Rosca et al., 2019). Commercial organizations may be less likely than purpose-built social enterprises to persist in these activities if confronted with trade-offs that limit their profitability. Thus, understanding what operational trade-offs can be expected and how they may be mitigated can encourage the implementation of socially impactful activities by commercial organizations in addition to social enterprises.

Limitations

This study has several limitations that create avenues for further research. First, to ensure the feasibility of face-to-face data collection, all but one social enterprise (Incubator) included in the study was located within reasonable geographic proximity of the first author during data collection. Further, nine of the ten participating social enterprises were founded in Canada, though one has since relocated its operations to Zambia. Consequently, some of the experiences of these social enterprises may be unique to the North American context or the Canadian context more specifically. Future research is needed to understand the generalizability of these findings to social entrepreneurs operating outside North America.

Second, our sample consists of small organizations, some of them with only 1–3 employees. While this is representative of the social enterprise population, which usually consists of small enterprises (Roumpi et al., 2020), operational trade-offs can have different manifestations in larger organizations which are more often studied in supply chain and operations management research. Further research should monitor the growth trajectories chosen by different social enterprises and how operational trade-offs arise and are mitigated and the effects on long-term growth and scalability. Growth and scaling of social enterprises remain a major debate in the wider social entrepreneurship literature.

Third, Clothing is the only organization where marginalized stakeholders occupy multiple roles (i.e. both customer and employee). This model is quite common within the social enterprise sector, particularly in base of the pyramid contexts (Dembek and York, 2022). Future research should be undertaken with a larger sample of such organizations to identify unique insights regarding additional operational trade-offs or synergies that may emerge from this dual role played by marginalized stakeholders.

Finally, some of our findings may be unique to the cases in our sample. There might be other forms and manifestations of operational trade-offs that did not emerge from our data but could be relevant for other cases regarding the integration of marginalized stakeholders in the operations of social enterprises. Similarly, our respondents focused heavily on the presence of B2B instead of B2C sales channels after unsuccessful forays into B2C sales. However, B2C channels can also serve as a form of externalization when there are sufficient customers willing to pay more for a sustainable product.