Social enterprise

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A social enterprise is an organization that applies commercial strategies to maximize improvements in human and environmental well-being, rather than maximising profits for external shareholders. Social enterprises can be structured as a for-profit or non-profit, and may take the form of a co-operative, mutual organization, a social business, or a charity organization.[1]

Many commercial enterprises would consider themselves to have social objectives, but commitment to these objectives is motivated by the perception that such commitment will ultimately make the enterprise more financially valuable. Social enterprises differ in that, inversely, they do not aim to offer any benefit to their investors, except where they believe that doing so will ultimately further their capacity to realize their social and environmental goals.

The term has a mixed and contested heritage due to its philanthropic roots in the US, and cooperative roots in the UK, EU and Asia.[2] In the US, the term is associated with 'doing charity by doing trade', rather than 'doing charity while doing trade'. In other countries, there is a much stronger emphasis on community organising, democratic control of capital and mutual principles, rather than philanthropy.[3] In recent years, there has been a rise in the concept of social purpose businesses which pursue social responsibility directly, or raise funds for charitable projects.[4]

Many entrepreneurs, whilst running a profit focused enterprise that they own, will make charitable gestures through the enterprise, expecting to make a loss in the process. However, social enterprises are differentiated through transparent evidence that their social aims are primary, and that profits are secondary.

Contents

History and philosophy

The idea of social enterprise has a long history around the world, though under different names and with different tendencies.[5] Whilst many social enterprises will today accept finance and other forms of support from the state, they are essentially enterprises that seek independence from both the state and private capital through strategies that create a social economy.

Early use of the terms 'social enterprise' and 'social entrepreneurship' can be traced to Beechwood College near Leeds, England (from 1978) where educators helped worker co-operatives develop social auditing, and at ASHOKA - a US Foundation - during the 1980s where Bill Drayton established a programme to support the development of social entrepreneurship.[6] Another formative influence was the Italian worker co-operatives who lobbied to secure legislation for 'social co-operatives' in which members with mental or other health disabilities could work while fully recovering. The first academic paper to propose worker co-operatives involved in health and rehabilitation work as a form social enterprise was published in 1993.[7] The scale and integration of co-operative development in the 'red belt' of Italy (some 7,000 worker, and 8,000 social co-operatives) inspired the formation of the EMES network of social economy researchers who subsequently spread the language to the UK and the rest of Europe through influential English language publications.[8]

In the US, the work of ASHOKA was picked up at Harvard, Stanford and Princeton University, and each made contributions to the development of the field of social entrepreneurship through project initiatives and publications.[9][10][11]

Social enterprises are often regarded - erroneously - as non-profit organisations. Social enterprise is characterized by open membership and goals widely considered to be in the community or public interest. By comparison, Non-profit status may include organizations with private membership. A useful perspective, created by social enterprise consultants across four continents after a review by Social Enterprise Europe, highlights three factors which frame the business philosophy of a social enterprise:[12]

1) The extent to which it engages in ethical review of the goods and services it produces, and its production processes;

2) The extent to which it defines its social purpose(s), and evidences its social impact;

3) The extent to which it democratises ownership, management and governance by passing control of its human, social and financial capital to its primary stakeholders (producers, employees, customers, service users).

Their international definition states that:

'"Not for Profit is a misleading criterion. It is good practice for social enterprises to provide incentives to workers, and social and community investors through dividends. Distribution of profits or payments to individuals should not compromise the enterprises' value statement or social objectives"'.[13]

The field of social enterprise studies has not yet developed firm philosophical foundations, but its advocates and academic community are much more engaged with critical pedagogies (e.g. Paulo Freire) and critical traditions in research (e.g. critical theory / institutional theory / Marxism) in comparison to private sector business education.[14][15] Teaching related to the social economy draws explicitly from the works of Robert Owen, Proudhon and Karl Marx with works by Bourdieu and Putnam informing the debate over social capital and its relationship to the competitive advantage of mutuals. This intellectual foundation, however, does not extend as strongly into the field of social entrepreneurship where there is more influence from writings on liberalism and entrepreneurship by Joseph Schumpeter, in conjunction with the emerging fields of social innovation, actor network theory and complexity theory to explain its processes.

Social enterprise (unlike private enterprise) is not taught exclusively in a business school context, as it is increasingly connected to the health sector and public service delivery.

The first international journal was established in 2005 by Social Enterprise London (with support from the London Development Association). The Social Enterprise Journal has been followed by the Journal of Social Entrepreneurship, and coverage of the issues pertaining to the social economy and social enterprise are also covered by the Journal of Co-operative Studies and the Annals of Co-operative and Public Economics. The European Social Enterprise Research network (EMES), and the Co-operative Research Unit (CRU) at the Open University have also published research into social enterprise. The Skoll World Forum, organised jointly by Oxford and Duke Universities brings together researchers and practitioners from across the globe.

The Social Enterprise Mark was launched in the UK in 2010, as the international certification authority for social enterprise. A steering group made up of social enterprise leaders and supporters agreed that a Mark was important for the sector and together agreed its design, purpose and criteria. It was informed by the Social Enterprise Mark already piloted by Rise, the regional social enterprise network in the South West of England. The criteria were tested and approved for the social enterprise movement, by the social enterprise movement. The Social Enterprise Mark aims to establish social enterprise as the business of choice for everyone, using the Mark as a guarantee when a business is trading for people and planet.

In 2012 [1] Social Enterprise UK launched the 'Not In Our Name' campaign when it learned that Salesforce.com, a global software and CRM company, had begun using the term 'social enterprise' to describe its products and had applied for 'social enterprise' trademarks in the EU, America, Australia and Jamaica. The campaign is supported by similar organisations in America (the Social Enterprise Alliance), Canada, South Africa and Australia. An open letter was sent to the CEO and Chairman of Salesforce.com Inc., signed by people and organisations from across the world, including Professor Muhammad Yunus, founder of the Grameen Bank and Nobel Peace Prize Laureate, and Richard Wilkinson and Kate Pickett, co-authors of The Spirit Level, which asked that Salesforce.com Inc stop using the term ‘social enterprise’.

In Australia

The forms social enterprises can take and the industries they operate in are so many and various that it has always been a challenge to define, find and count social enterprises. In 2009 Social Traders partnered with the Australian Centre for Philanthropy and Nonprofit Studies (ACPNS) at Queensland University of Technology to define social enterprise and, for the first time in Australia, to identify and map the social enterprise sector: its scope, its variety of forms, its reasons for trading, its financial dimensions, and the individuals and communities social enterprises aim to benefit.

This Finding Australia’s Social Enterprise Sector project produced its final report in June 2010. The project was led by Associate Professor Jo Barraket, Australia’s leading social enterprise academic.

One of the key features of this Australian research is its intention to define social enterprise in a way that was informed by and made sense to those working in or with social enterprises.

The research design therefore included workshops to explore and test what social enterprise managers, researchers, and relevant policy makers meant by the term ‘social enterprise’. This was the resulting definition:

Social enterprises are organisations that:

  1. Are led by an economic, social, cultural, or environmental mission consistent with a public or community benefit;
  2. Trade to fulfil their mission;
  3. Derive a substantial portion of their income from trade; and
  4. Reinvest the majority of their profit/surplus in the fulfilment of their mission.

In North America

The United States

The Social Enterprise Alliance (SEA) of the United States defines a “social enterprise” as “an organization or venture that advances its primary social or environmental mission using business methods.”[16]

In the U.S, two distinct characteristics differentiate social enterprises from other types of businesses, nonprofits, and government agencies:

  1. Social enterprises directly address social needs through their products and services or through the numbers of disadvantaged people they employ. This distinguishes them from “socially responsible businesses,” which create positive social change indirectly through the practice of corporate social responsibility (e.g., creating and implementing a philanthropic foundation; paying equitable wages to their employees; using environmentally friendly raw materials; providing volunteers to help with community projects).
  2. Social enterprises use earned revenue strategies to pursue a double or triple bottom line, either alone (as a social sector business, in either the private or the nonprofit sector) or as a significant part of a nonprofit’s mixed revenue stream that also includes charitable contributions and public sector subsidies. This distinguishes them from traditional nonprofits, which rely primarily on philanthropic and government support.

In the United States, “social enterprise” is also distinct from “social entrepreneurship”, which broadly encompasses such diverse players as B Corp companies, socially responsible investors, “for-benefit” ventures, Fourth Sector organizations, CSR efforts by major corporations, “social innovators” and others. All these types of entities grapple with social needs in a variety of ways, but unless they directly address social needs through their products or services or the numbers of disadvantaged people they employ, they do not qualify as social enterprises.

Canada

The Social Enterprise Council of Canada (SECC) of Canada defines a “social enterprise” as "businesses owned by nonprofit organizations, that is directly involved in the production and/or selling of goods and services for the blended purpose of generating income and achieving social, cultural, and/or environmental aims. Social enterprises are one more tool for non-profits to use to meet their mission to contribute to healthy communities.”[17]

Canadian social enterprise characteristics vary by region and province in the ways they differentiate social enterprises from other types of businesses, not-for-profits, co-operatives and government agencies:

  1. Social enterprises may directly address social needs through their products and services, the number of people they employ or the use of their financial surplus. This can distinguish them from “socially responsible for-profit businesses,” which create positive social change indirectly through the practice of corporate social responsibility (e.g., creating and implementing a charitable foundation; paying fair wages to their employees; using environmentally friendly raw materials; providing volunteers to help with community projects).
  2. Social enterprises may use earned revenue strategies to pursue a double or triple bottom line, either alone (as a social economy business, in either the private or the not-for-profit sector) or as a significant part of a not-for-profit corporation’s mixed income stream that may include charitable contributions and public sector assistance. This distinguishes them from some traditional not-for-profit corporations, which may rely in whole or part on charitable and government support.

Significant regional differences in legislation, financing, support agencies and corporate structures can be seen across Canada as a result of different historical development paths in the social economy. Common regional characteristics can be seen in British Columbia, the Prairies, Ontario, Quebec and Atlantic Canada.

In Asia

Middle East

There is no separate legal entity for social enterprises in the Middle East. Most social enterprises register as companies or non-profit organizations. There isn't a proper definition of social enterprises by the Governments of the Middle Eastern countries.

However social enterprises in the Middle East are active and innovating in a variety of sectors and industries. A majority of the existing social enterprises are engaged in human capital development. Many are nurturing a cadre of leaders with the experiences and skills needed to enhance the region’s global competitiveness while also achieving social goals. Trends in the region point to an increasingly important role and potential for such activities and for social entrepreneurship in general. These include the growing interest among youth in achieving social impact and growth in volunteerism among youth.[18]

According to The Schwab Foundation there are 35 top social entrepreneurs in the Middle East[19]

South Korea

In South Korea the Social Enterprise Promotion Act was approved in December 2006 and was put into effect in July 2007.

The article 2 defines social enterprises as "an organization which is engaged in business activities of producing and selling goods and services while pursuing a social purpose of enhancing the quality of local residents' life by means of providing social services and creating jobs for the disadvantaged, as an enterprise certified according to the requirements prescribed in Article 7", the disadvantaged as "people who have difficulty in purchasing social services necessary to themselves for a market price, the detailed criteria thereof shall be determined by the Presidential Decree" and social services as "service in education, health, social welfare, environment and culture and other service proportionate to this, whose area is prescribed by the Presidential Decree".

The Ministry of Labor is obliged to "establish the Basic Plan for Social Enterprises Support" every five years (Article 5) and not only enterprises but also cooperatives and non-profits can be recognised as social enterprises, which are eligible for tax reduction and/or financial supports from the Korean / provincial governments or city councils, and 680 entities have been recognised as social enterprises as of October 2012. Korea Social Enterprise Promotion Agency was established to promote social enterprises.

Hong Kong

There is no separate legal entity for social enterprises in Hong Kong. They are normally registered as companies or non-profit organisations. The Hong Kong Government defines social enterprises as businesses that achieve specific social objectives and its profits will be principally reinvested in the business for the social objectives that it pursues, rather than distribution to its shareholders.[20] In recent years, venture philanthropy organizations, such as Social Ventures Hong Kong, have been set up to invest in viable social enterprises with a significant social impact.

India

In India, a social enterprise may be a non-profit Non-governmental organization (NGO), often registered as a Society under Indian Societies Registration Act, 1860, a Trust registered under various Indian State Trust Acts or a Section 25 Company registered under Indian Companies Act, 1956. India has around 1-2 million NGOs, including number of religious organizations, religious trust, like Temples, Mosque and Gurudwara associations etc., who are not deemed as social enterprises.

A social enterprise in India is primarily NGOs, who raise funds through some services (often fund raising events and community activities) and occasionally products. Despite this, in India the term, Social Enterprise is not widely used, instead terms like NGOs and NPOs (Non-profit organizations) are used, where these kind of organizations are legally allowed to raise fund for non-business activities. Child Rights and You and Youth United, are such examples of social enterprise, who raise funds through their services, fund raising activities (organizing events, donations, and grants) or sometimes products, to further their social and environmental goals.

However, there are social businesses with an aim for making profit, although the primary aim is to alleviate poverty through a sustainable business model. An example is Pipal Tree Ventures Private Limited, which trains rural youth in various construction and infrastructure related skills and has found a way for rural youth to get out of poverty. The company also provides placements to the trained manpower to various infrastructure industries in India, thereby creating an end-to-end sustainable business model.

In the agriculture sector, International Development Enterprises has helped pull millions of small farmers out of poverty in India [2] Paul Polak [3], details the story in his book, "Out of Poverty"

Another area of social enterprise in India and the developing world is bottom of the pyramid (BOP) Bottom of the pyramid businesses which was identified and analyzed by CK Prahahalad C. K. Prahalad in "Fortune at the Base of the Pyramid" This seminal work has been a springboard for a robust area of both innovation and academic research.

Malaysia

The Malaysian Social Enterprise Alliance (SEA) defines social enterprises as "organizations created to address social problems that use business models to sustain themselves financially. Social enterprises seek to create not only financial returns but also social returns to their beneficiaries." [4] The Alliance regards social enterprises as businesses with a social focus, distinct from non-profit organisations. [5]

In Europe

The best established European research network in the field, EMES, works with a more articulated definition - a Weberian 'ideal type' rather than a prescriptive definition - which relies on nine fuzzy criteria:

Economic criteria:

1. continuous activity of the production and/or sale of goods and services (rather than predominantly advisory or grant-giving functions).

2. a high level of autonomy: social enterprises are created voluntarily by groups of citizens and are managed by them, and not directly or indirectly by public authorities or private companies, even if they may benefit from grants and donations. Their members have the right to participate ('voice') and to leave the organisation ('exit').

3. a significant economic risk: the financial viability of social enterprises depends on the efforts of their members, who have the responsibility of ensuring adequate financial resources, unlike most public institutions.

4. social enterprises' activities require a minimum number of paid workers, although, like traditional non-profit organisations, social enterprises may combine financial and non-financial resources, voluntary and paid work.

Social criteria:

5. an explicit aim of community benefit: one of the principal aims of social enterprises is to serve the community or a specific group of people. To the same end, they also promote a sense of social responsibility at local level.

6. citizen initiative: social enterprises are the result of collective dynamics involving people belonging to a community or to a group that shares a certain need or aim. They must maintain this dimension in one form or another.

7. decision making not based on capital ownership: this generally means the principle of 'one member, one vote', or at least a voting power not based on capital shares. Although capital owners in social enterprises play an important role, decision-making rights are shared with other stakeholders.

8. participatory character, involving those affected by the activity: the users of social enterprises' services are represented and participate in their structures. In many cases one of the objectives is to strengthen democracy at local level through economic activity.

9. limited distribution of profit: social enterprises include organisations that totally prohibit profit distribution as well as organisations such as co-operatives, which may distribute their profit only to a limited degree, thus avoiding profit maximising behaviour.

Ongoing research work characterises social enterprises as often having multiple objectives, multiple stakeholders and multiple sources of funding. However their objectives tend to fall into three categories:

Despite, and sometimes in contradiction to, such academic work, the term social enterprise is being picked up and used in different ways in various European countries:

Czech Republic

In the Czech Republic a working party stemming from the development partnerships in the EQUAL programme agreed on the following distinctions (April 2008):

Social economy

It is a complex of autonomous private activities realized by different types of organizations that have the aim to serve their members or local community first of all by doing business. The social economy is oriented on solving issues of unemployment, social coherence and local development. It is created and developed on the base of concept of triple bottom line – economic, social and environmental benefits. Social economy enables citizens to get involved actively in the regional development. Making profit/surplus is desirable, however is not a primary goal. Contingent profit is used in preference for development of activities of organization and for the needs of local community. Internal relations in the social enterprises are headed to the maximum involvement of members/employees in decision-making and self-management while external relations strengthen social capital. Legal form of social economy entities is not decisive – what is crucial is observing public benefit aims as listed in the articles. Subjects of the social economy are social enterprises and organizations supporting their work in the areas of education, consulting and financing.

Social entrepreneurship

Social entrepreneurship develops independent business activities and is active on the market in order to solve issues of employment, social coherence and local development. Its activities support solidarity, social inclusion and growth of social capital mainly on local level with the maximum respect of sustainable development.

Social enterprise

Social enterprise means "a subject of social entrepreneurship", i.e. legal entity or its part or a natural person which fulfils principles of the social enterprise; social enterprise must have appropriate trade license.
The above mentioned definitions stem from the four basic principles which should be followed by all social enterprises. Standards with a commentary were settled for each principle. These standards were settled as the minimum so that they should be observed by all legal entities and all types of social enterprises. Specific types of enterprises, that are undergoing pilot verification within CIP EQUAL projects and that are already functioning in the Czech Republic, are social firms employing seriously disadvantaged target groups, and municipal social cooperatives as a suitable form of entrepreneurship with the view of development of local communities and microregions.
The legal form a social enterprise takes is not important, however they must be subject of private law. According to the existing legal system, they can function in a form of cooperatives, civic associations, public benefit associations, church legal entities, Ltd., stock companies and sole traders. Budgetary organizations and municipalities should not be social enterprises as they are not autonomous - they are parts of public administration.
Social entrepreneurship is defined very broadly. Beside employment of the people disadvantaged at the labour market it also includes organizations providing public benefit services in the area of social inclusion and local development including environmental activities, individuals from the disadvantaged groups active in business and also complementary activities of NGOs destined to reinvest profit into the main public benefit activity of an organization. Social entrepreneurship defined in such a wide way should not be directly bound to legal benefits and financial support because the concept of social entrepreneurship might be then threatened by misuse and disintegration. Conditions of eventual legal and financial support should be discussed by experts.

Finland

In Finland a law was passed in 2004 that defines a social enterprise as being any sort of enterprise that is entered on the relevant register and at least 30% of whose employees are disabled or long-term unemployed. As of March 2007, 91 such enterprises had been registered, the largest with 50 employees. In the UK the more specific term "social firm" is used to distinguish such "integration enterprises";

Italy

Italy passed a law in 2005 on impresa sociali, to which the government has given form and definition by Legislative Decree, 24 March 2006, no. 155 Under Italian law a social enterprise is a private entity that provides social utility goods and services, acting for the common interest and not for profit. The first general aspect that has to be highlighted is that a social enterprise is neither a new legal form, nor a new type of organization, but a legal category in which all eligible organizations may be included, regardless of their internal organizational structure. Therefore, the eligible organizations could in theory be cooperatives (i.e. employee-, producer-, or customer-owned firms), investor-owned firms (i.e. business corporations), or traditional nonprofit organizations (i.e. associations and foundations). This is the so-called principle of “neutrality of the legal forms” adopted by the Italian law. Hence, social enterprise is like a legal “brand” that all eligible organizations can obtain and use in the marketplace. The requirements are: - being a private organization; - performing an entrepreneurial activity of production of social utility goods and services (The Law prescribes that this must be the main activity, that is, it has to account for at least 70% of the total income of the organization); - acting for the common interest and not for profit. In order to be defined as a social enterprise, an organization needs to simultaneously possess all these attributes.

In an effort to develop social enterprises and measure social impact, the Italian governmental work placement agency - Italia Lavoro - has developed a method to calculate the social efficiency of their project, from an economic point of view. For example, they measure the economic value to the society of providing a job to a disabled person. Since 1997, Italia Lavoro provides work placements to people with mental, social, physical or health disadvantages. To this aim, they help people who have fallen out of the general work system to reintegrate society through the creation of small and medium non-profit enterprises.[21]

Also intended to generate more social enterprises is the non-profit cooperative Make a Change. Make a Change provides financial, operational and management support to social start-ups. In 2010 they organized the first edition of a contest to elect the "Social entrepreneur of the year", as well as another contest entitled "The World's Most Beautiful Job". This year winner of the former was the social cooperative "Cauto", which manages the whole trash life-cycle in the Province of Brescia. Cauto's workforce has 1/3 disabled and disadvantaged individuals.

Winner of the "World's Most Beautiful Job" prize was the project "Tavern of the Good and Bad" by the group Domus de luna from Cagliari. The tavern employs mums and children recently graduated from rehabilitation programs. The prize consisted of a grant of 30.000 euro and 12 months of professional consulting and support. The prize-giving ceremony was included in the program of the Global Entrepreneurship Week.[22]

United Kingdom

In the UK the accepted Government-backed definition of social enterprise used by the UK social enterprise sector bodies such as Social Enterprise UK comes from the 2002 Department for Trade and Industry's 'Social Enterprise: a strategy for success' report as:[23]

A business with primarily social objectives whose surpluses are principally reinvested for that purpose.

The original use of the term social enterprise was first developed by Freer Spreckley in 1978, and later included in a publication called Social Audit – A Management Tool for Co-operative Working published in 1981 by Beechwood College. In the original publication the term social enterprise was developed to describe an organisation that uses Social Audit. Freer went on to describe a social enterprise as:[24]

An enterprise that is owned by those who work in it and/or reside in a given locality, is governed by registered social as well as commercial aims and objectives and run co-operatively may be termed a social enterprise. Traditionally, 'capital hires labour' with the overriding emphasis on making a 'profit' over and above any benefit either to the business itself or the workforce. Contrasted to this is the social enterprise where 'labour hires capital' with the emphasis on social, environmental and financial benefit.

Later on the three areas of social, environmental and financial benefits used for measuring social enterprise became known as the Triple Bottom Line.

Twenty years later Freer Spreckley and Cliff Southcombe established the first[25] specialist support organisation in the UK Social Enterprise Partnership Ltd. in March 1997.

In the British context, social enterprises include community enterprises, credit unions, trading arms of charities, employee-owned businesses, co-operatives, development trusts, housing associations, social firms, and leisure trusts.

Whereas conventional businesses distribute their profit among shareholders, in social enterprises the surplus tends to go towards one or more social aims which the business has – for example education for the poor, vocational training for disabled people, environmental issues or for animal rights.

Social enterprises are distinct from charities (although charities are also increasingly looking at ways of maximising income from trading), and from private sector companies with policies on corporate social responsibility. An emerging view, however, is that social enterprise is a particular type of trading activity that sometimes gives rise to distinct organisation forms reflecting a commitment to social cause working with stakeholders from more than one sector of the economy.

The first agency in the UK - Social Enterprise London (SEL) - was established in 1998[26] after collaboration between co-operative businesses (Poptel, Computercraft Ltd, Calverts Press, Artzone), a number of co-operative development agencies (CDAs), and infrastructure bodies supporting co-operative enterprise development (Co-operative Training London, Co-operative Party, London ICOM, Co-operatives UK). SEL's first chief executive, Jonathan Bland, brought experience from Valencia where a business support infrastructure for co-operative enterprise was established using learning from the Mondragon region of Spain.[27] SEL did more than provide support to emerging businesses. It created a community of interest by working with the London Development Agency (LDA) to establish both an undergraduate degree in social enterprise at the University of East London (led by Jon Griffith) and a Social Enterprise Journal (now managed by Liverpool John Moores University and published by Emerald Publishing). Allison Ogden-Newton took over from Jonathan Bland as Chief Executive of Social Enterprise London in 2004. Under her leadership the organisation built a network of over 2,000 social enterprises and social entrepreneurs, directly brokered over 500 social enterprise jobs under the DWP's Future Jobs Fund and delivers consultancy and business support across the world in countries including Vietnam, Korea and Croatia.

The national membership and campaigning body for the social enterprise movement in Britain is Social Enterprise UK (SEUK) (previously the Social Enterprise Coalition) [6] and this liaises with similar groups in each region of England, as well as in Northern Ireland, Scotland & Wales. SEUK's chief executive, Peter Holbrook, joined in January 2010 from the award winning social enterprise, Sunlight Development Trust, based in Gillingham, Kent. Claire Dove is the Chair of SEUK and runs the social enterprise Blackburne House in Liverpool.

In 2002, The National Council for Voluntary Organisations (NCVO) established the Sustainable Funding Project. Using funds from FutureBuilders, Centrica and Charity Bank, this project promoted the concept of sustainability through trading to voluntary groups and charities.[28] From 2005 onwards, NCVO began using the term social enterprise to refer to voluntary sector trading activities.

In 2002, the British government launched a unified Social Enterprise Strategy,[29] and established a Social Enterprise Unit (SEnU) to co-ordinate its implementation in England and Wales, primarily to consult on a new type of company to support social enterprise development. After a consultation (see CIC below), policy development was increasingly influenced by organisations in the conventional "non-profit" sector rather than those with their origins in employee-ownership and co-operative sectors. The 2003 DTI report on the consultation shows the disproportion influence of charitable trusts and umbrella organisations in the voluntary sector, and evidence now exists that the voice of progressive employee-owned organisations were marginalised in the course of producing the report.[30][31]

The Social Enterprise Unit was initially established within the Department of Trade and Industry (DTI), and in 2006 became part of the newly created Office of the Third Sector, under the wing of the Cabinet Office.

Following broad consultation, SEnU adopted a broader definition which is independent of any legal model. This latitudinarian definition could include not only companies limited by guarantee, and industrial and provident societies but also companies limited by shares, unincorporated associations, partnerships and sole traders.

A survey conducted for the SEnU in 2004 found that there were 15,000 social enterprises in the UK (counting only those that are incorporated as companies limited by guarantee or industrial and provident societies). This is 1.2% of all enterprises in the UK. They employ 450,000 people, of whom two-thirds are full-time, plus a further 300,000 volunteers. Their combined annual turnover is £18 billion, and the median turnover is £285,000. Of this, 84% is from trading. In 2006, the government revised this estimate upwards to 55,000, based on a survey of a sample of owners of businesses with employees, which found that 5% of them define themselves as social enterprises.[32] The most up to date estimates suggest that there are approximately 68,000 social enterprises in the UK, contributing £24 billion to the UK economy (BIS, 2011). [Online], London: Department for Business, Innovation and Skills http://www.bis.gov.uk/assets/biscore/enterprise/docs/b/12-566-business-support-for-social-enterprises-longitudinal.pdf

These estimates, however, are questioned by Dr Rory Ridley-Duff and Mike Bull who draw attention to work by the EU Commission to define and study the European social economy[33] Using the EU definition of social economy, the annual contribution of social enterpises to the UK econony is four times larger at £98 billion[34] because it includes the contribution of all co-operatives, mutuals and associations that produce goods or services to improve human well-being.

Every two years, Social Enterprise UK carries out and publishes the findings of the state of social enterprise survey, the largest piece of research looking at the UK's social enterprise sector. The most recent report, Fightback Britain [7], details the findings of the 2011 survey.

In April 2012 the Prime Minister, David Cameron launched Big Society Capital, the world's first social investment wholesaler. Capitalised with a total of £600 million, it will distribute funds to intermediaries that will lend money to social enterprises, charities and community groups.

Certification In February 2010 the Social Enterprise Mark was launched. Like Fairtrade, the Social Enterprise Mark aims to increase the visibility of socially motivated businesses. More than this, the Social Enterprise Mark represents the growing commercial identity of social enterprises and a deliberate attempt to carve out a recognisable niche for such organisations in the business community. Qualification for the Mark requires that a business conform to set criteria, e.g. companies must earn at least 50% of their income from trade and spend at least 50% of their profits on socially beneficial purposes.[35] The Mark has been received with mixed responses in some corners with practitioner suggestions that the qualifying criteria are not strict enough [36] or are too strict for employee-owned social enterprises, worker co-operatives and innovative share companies.[37][38]

Scotland

In Scotland, social enterprise is a devolved function and is part of the remit of the Scottish Government.[39] Activities are co-ordinated by the Scottish Social Enterprise Coalition, and intellectual leadership is provided by the Social Enterprise Institute at Heriot-Watt University (Edinburgh), established under the directorship of Declan Jones. Senscot based in Edinburgh supports social entrepreneurs through a variety of activities including a weekly email bulletin by co-founder Lawrence Demarco.[40] The Social Enterprise Academy "deliver leadership, enterprise, and social impact programmes" throughout Scotland[41] and further support is provided by Development Trusts Association Scotland and Co-operative Development Scotland.[42][43]

Examples

Some well known social enterprises in the UK include John Lewis, Welsh Water, Cafédirect, The Eden Project, Divine Chocolate (Kuapa Kokoo), The Big Issue, the Co-operative Group, HCT Group, Duchy Originals, and the London Symphony Orchestra.

Three common characteristics of social enterprises as defined by Social Enterprise London are:

  1. Enterprise orientation: They are directly involved in producing goods or providing services to a market. They seek to be viable trading organisations, with an operating surplus.
  2. Social Aims: They have explicit social aims such as job creation, training or the provision of local services. They have ethical values including a commitment to local capacity building, and they are accountable to their members and the wider community for their social environmental and economic impact.
  3. Social ownership: They are autonomous organisations with governance and ownership structures based on participation by stakeholder groups (users or clients, local community groups etc.) or by trustees. Profits are distributed as profit sharing to stakeholders or used for the benefit of the community.

The UK has also developed a new legal form called the community interest company (CIC). CICs are a new type of limited company designed specifically for those wishing to operate for the benefit of the community rather than for the benefit of the owners of the company. This means that a CIC cannot be formed or used solely for the personal gain of a particular person, or group of people. Legislation caps the level of dividends payable at 35% of profits and returns to individuals are capped at 4% above the bank base rate.

CICs can be limited by shares, or by guarantee, and will have a statutory "asset lock" to prevent the assets and profits being distributed, except as permitted by legislation. This ensures the assets and profits are retained within the CIC for community purposes, or transferred to another asset-locked organisation, such as another CIC or charity.

A CIC cannot be formed to support political activities and a company that is a charity cannot be a CIC, unless it gives up its charitable status. However, a charity may apply to register a CIC as a subsidiary company.

Social firms

Another example of a type of social enterprise is the social firm, a business set up specifically to create employment for people otherwise severely disadvantaged in the labour market.

Advantages of social enterprise

Rodney Schwartz of ClearlySo listed a number of advantages of the social enterprise as a business:[44]

Schwartz described social entrepreneurs as extraordinarily innovative, deploying models that seem to derive results out of thin air.[44]

In Africa

Ghana

The registered non-profit Trashy Bags was launched in 2007 in order to increase public awareness of Ghana's solid plastic waste problem and clean up sachets from the streets of Accra. This company buys waste from collectors. After washing and drying the sachets, it sews them into fashionable bags and other products which are then sold in Accra and exported to eight other countries around the world. The Trashy Bags Company has collected 20 million plastic sachets since its founding, and employs 60 machinists.

Kenya

In Kenya many NGOs, use business models to improve lives of people mainly in rural Kenya. An example of this is KOMAZA a social enterprise that plants trees with small holder farmers and uses economies of scale to enable them to access high value markets for processed trees. Another example of this is RISE Kenya [8] that runs projects to mitigate climate change in the semi arid Eastern Province of Kenya. They also run weaving projects whereby women who would traditionally engage in weaving make products that are marketed in the capital city Nairobi and in overseas markets of Europe and America.

Other development oriented social enterprises in Kenya include the One Acre Fund [9], Nuru International [10] and Alive & Kicking, which has produced over 200,000 sports balls from its stitching centre in Nairobi.[45] Kenya's social enterprises include M-Pesa, which facilitated economic transactions via mobile phone.

Social enterprise in Kenya has grown to include spaces with IT infrastructure such as internet connectivity and computer hardware. Two of these, the iHub and NaiLab, are centers for technological enterprise, with ventures such as Tandaa in coopperation with the ICT Board of Kenya and Akirachix. [11]

Zambia

As in much of Africa, social enterprises in Zambia are often focused on the creation of sustainable employment. Alive & Kicking established a stitching centre in Lusaka in 2007, which employs 50 stitchers and produces 2,000 sports balls a month.[46] Zambikes produces a range of bicycles from their Lusaka factory, including ones made from bamboo and 'Zambulances', and provide three levels of mechanic training.[47]

Awards

There are several awards that recognize and reward social enterprises.

The Social Enterprise Awards is the UK's national award for social enterprise, recognising both individuals and organisations in the social enterprise movement. These are run by [12] Social Enterprise UK (SEUK) in partnership with social enterprise organisations in Wales, Scotland and Northern Ireland. The Social Enterprise Awards evolved out of the Enterprising Solutions Awards, which were run by SEUK in collaboration with the Office of the Third Sector in the Cabinet Office and the Community Banking branch of the RBS Group.

The Edge Upstarts Awards are run annually by the New Statesman in the UK.

The Asia Social Innovation Award is the first Asia-wide annual competition that asks for simple ideas that can solve social issues common in Asian cities, such as an ageing population, poverty and environmental sustainability.

The Hong Kong Social Enterprise Challenge is the first and the only inter-collegiate social ventures business competition in Hong Kong.

Fast Company has a yearly ranking of top 15 to 25 noteworthy social enterprises called the Social Capitalist Awards which highlights noteworthy organizations in social innovation (2004 to 2010).

There are several business schools which offer social entrepreneurship business plants.

In addition, several organizations offer fellowships like Ashoka [13], Acumen Fund [14], and Echoing Green [15] all three of which are quite competitive. Still other organizations offer accelerator and mentorship programs like the Unreasonable Institute [16].

See also

References

  1. ^ Ridley-Duff, R. J. and Bull, M. (2011) Understanding Social Enterprise: Theory and Practice, London: Sage Publications.
  2. ^ Ridley-Duff, R. J. and Bull, M. (2011) Understanding Social Enterprise: Theory and Practice, London: Sage Publications, see Chapter 3.
  3. ^ Kerlin, J. (2009) Social Enterprise: A Global Comparison, University Press of New England.
  4. ^ Ridley-Duff, R. J. and Southcombe, C. (2011) The Social Enterprise Mark: a critical review of its conceptual dimensions, paper to 34th International Small Business and Entrepreneurship Conference, Sheffield. Winner of 'Best Research and Knowledge Transfer Paper in Conference'
  5. ^ Aiken, M. (2010)
  6. ^ Ridley-Duff, R. J. and Bull, M. (2011), Chapter 3.
  7. ^ Savio, M. and Rhigetti, A (1993) Co-operatives as a social enterprise, Acta Psychiatrica Scadanavica, 88(4), p. 238-42.
  8. ^ Borzaga, C. and Defourny, J. (2001) The Emergence of Social Enterprise, Routelege.
  9. ^ Social Enterprise - Harvard Business School
  10. ^ Stanford Social Innovation Review
  11. ^ Princeton Social Entrepreneurship Initiative
  12. ^ What is social enterprise? Social Enterprise Europe. This definition followed a review by 14 experienced consultants working across four continents.
  13. ^ What is social enterprise? Social Enterprise Europe.
  14. ^ Ridley-Duff, R. J. and Bull, M. (2011), Introduction
  15. ^ Nicholls, A. (2006) Social Entrepreneurship: New Models of Sustainable Social Change, Oxford: Oxford University Press.
  16. ^ "Social Enterprise Alliance". http://se-alliance.org.
  17. ^ "Social Enterprise Council of Canada". http://www.secouncil.ca/en.
  18. ^ The "Social Entrepreneurship in the Middle East" report: http://www.shababinclusion.org/files/1576_file_MEYI_Social_Entrepreneurship_final.pdf
  19. ^ Schwab / Work Economic Forum list of the Middle Easts top social entrepreneurs http://www.schwabfound.org/sf/SocialEntrepreneurs/Profiles/index.htm?sname=0&sorganization=0&sarea=152&ssector=0&stype=0
  20. ^ See definition of "social enterprise" in the Hong Kong government website: http://www.social-enterprises.gov.hk/en/introduction/whatis.html
  21. ^ "IMPRESA SOCIALE: Protocollo d’intesa tra Agenzia per le Onlus e Italia Lavoro". impresasociale.info. March 19, 2008. http://impresasociale.info/?p=79. Retrieved October 16, 2012.
  22. ^ Abirascid, Emil (November 19, 2010). "Make a change per l'imprenditoria sociale". Wired Italia. http://italianvalley.wired.it/blog/startup_business/make-a-change-per-l-imprenditoria-sociale.html. Retrieved October 16, 2012.
  23. ^ "SEEE Wiki". http://www.seeewiki.co.uk/~wiki/index.php?title=Social_Enterprise:_a_strategy_for_success.
  24. ^ Freer Spreckley (1981). "Social Audit – A Management Tool for Co-operative Working". Local Livelihoods. http://www.locallivelihoods.com/Documents/Social%20Audit%201981.pdf.
  25. ^ Information provided by companies house
  26. ^ Information provided by Companies House
  27. ^ Ridley-Duff, R. J., Bull, M. and Seanor, P. (2008) Understanding Social Enterprise: Theory and Practice, 2008 Social Entrepreneurship Research Conference, www.lbsu.ac.uk.
  28. ^ Outcome Monitoring Proposal - Sustainable Funding Project, submitted to NCVO, 20th March 2005. The proposal include a short history of the Sustainable Funding Project.
  29. ^ DTI (2002), Strategy for Social Enterprise. London: HM Treasury.
  30. ^ DTI (2003), Enterprise for Communities: Report on the public consultation and the government's intentions, HM Treasury. The appendices show quotations from contributors.
  31. ^ Ridley-Duff, R. J. (2007) "Communitarian Perspectives on Social Enterprise", Corporate Governance: An International Review, 15(2), 382-392. Footnote 10 describes a meeting at the Home Office in February 2004 involving staff from the Social Enterprise Unit. The influence of charitable trusts on the outcome of the consultation was discussed at this meeting.
  32. ^ Lincoln, A. (2006) Welcome address: DTI presentation to Third Annual UK Social Enterprise Research Conference, London South Bank University (22 June)
  33. ^ Ridley-Duff, R. J. and Bull, M. (2011) Understanding Social Enterprise: Theory and Practice, London: Sage Publication, p. 21).
  34. ^ Mutuo (2009) Mutuals Yearbook 2009, published by Kellogg College, Oxford University.
  35. ^ Social Enterprise Mark. (2010). Social enterprise; trading for people and planet [Online], London: Social Enterprise Mark Co. http://www.socialenterprisemark.org.uk/ Accessed 11 February 2010.
  36. ^ Ainsworth, D. (19 March 2010), a survey shows support for setting up rival social enterprise mark in Scotland", Third Sector [Online]. London: Third Sector. http://www.thirdsector.co.uk/go/contactus/ Accessed 26 March 2010
  37. ^ An alternative collaborative 'Social Enterprise Brand' was created under the creative commons license http://www.profitisgood.co.uk/socialenterprisebrand/
  38. ^ Ridley-Duff, R. J. and Southcombe, C. (2011) The Social Enterprise Mark: a critical review of its conceptual dimensions, paper to 34th International Small Business and Entrepreneurship Conference, Sheffield. Winner of 'Best Research and Knowledge Transfer Paper in Conference'. The paper draws attention to the case of ESP Projects Ltd which was runner up in the 2008 Yorkshire and Humber Social Enterprise Awards, and whose CEO won 2008 Social Entrepreneur of the Year. ESP Project applied for, and was denied, the Social Enterprise Mark
  39. ^ Social Enterprise in Scotland Retrieved 30 June 2007.
  40. ^ Senscot
  41. ^ Social Enterprise Academy
  42. ^ DTAS
  43. ^ CDS
  44. ^ a b Is there an alternative to the Big Society? on The Telegraph website, retrieved 2011-02-25.
  45. ^ "Alive & Kicking Kenya". http://www.aliveandkicking.org.uk/what-we-do/where-we-work/kenya/.
  46. ^ "Alive & Kicking Zambia". http://www.aliveandkicking.org.uk/what-we-do/where-we-work/zambia/.
  47. ^ "Zambikes". http://www.new.zambikes.org/.

Sources

Further reading

External links