Originally posted on The Knowledge Exchange Blog: http://theknowledgeexchangeblog.com/2014/09/12/de-mystifying-social-enterprise/
by Alex Thomas
Tomorrow marks the first Social Saturday (#socialsaturday), a day to celebrate and buy from social enterprises in the UK. Social enterprises are a growing social and economic force with approximately 70,000 operating in the UK contributing £18.5 billion to the economy according to government data. However, despite this presence and impact less than 5 in 10 people know what a social enterprise is and less than one in ten has purchased from on in the last 12 months (according to a recent article by article by Brooks Newmark, Minister for Civil Society).
The issue of how to define social enterprises is not a new one and is a cause of continual debate. The government definition is that used to generate the figures above and is from the BIS Small Business Survey. The survey classifies social enterprises as those which:
- consider themselves to be a social enterprise;
- pay no more than 50 per cent of profit or surplus to owners or shareholders;
- generate no more than 75% of income from grants or donations (and therefore no less than 25% of income from trade);
- are a good fit with the following statement: ‘A business with primarily social/environmental objectives, whose surpluses are principally reinvested for that purpose in the business or community rather than mainly being paid to shareholders and owners’.
This definition is fairly consistent with that provided by Social Enterprise UK which is the national body for social enterprise who represent members to support and help grow the social enterprise movement. They suggest that social enterprises should:
- Have a clear social and/or environmental mission set out in their governing documents
- Generate the majority of their income through trade
- Reinvest the majority of their profits
- Be autonomous of state
- Be majority controlled in the interests of the social mission
- Be accountable and transparent
While these definitions are similar there are notable differences, particularly around the autonomy of social enterprises from the state. The importance of such autonomy has been raised by groups such as the National Coalition for Independent Action.
Well known UK social enterprises include the Co-operative, the Big Issue, BUPA and Cafe Direct. They cover every imaginable kind of commerce and range in size from micro-enterprises up to multinationals like the Co-operative Group. There are also many different legal organisational types including: Community Interest Communities; Industrial and Provident Societies; mutuals; limited companies; and charities with an enterprise aspect.
Such heterogeneity in legal type means that there is no regulatory body to represent social enterprises, rather they are regulated by Companies House, the Financial Services Authority and the Charity Commission. The closest definitive standard is provided by the Social Enterprise Mark which allows social enterprises to prove that they are putting people and planet alongside profit through a certification process. The mark shows customers that an enterprise is committed to reinvesting at least 50% of its profits back towards a social purpose.
It’s perhaps not too much of a surprise that people struggle to know what a social enterprise is given their varied nature but days like Social Saturday, organisations like SEUK and standards like the Social Enterprise Mark are all steps in the right direction in recognising the important work of social enterprises in the UK.