Social Enterprise – a different approach to business? Dr Roger Evans Evanter OÜ Pärnu, Estonia / Troon, Scotland evanter.ou@gmail.com © EVANTER OŰ

Defining Social Enterprise The meaning of the term social enterprise as used by organisations promoting social enterprise: networks & companies government agencies © EVANTER OŰ

What is social enterprise? Social enterprises are businesses driven by a social or environmental purpose. The UK government defines and describes social enterprise as follows: "A social enterprise is a business with primarily social objectives whose surpluses are reinvested for that purpose in the business or in the community, rather than being driven by the need to deliver profit to shareholders and owners." © EVANTER OŰ

Social enterprises are extremely varied All have commercial earned income and social objectives, but the form is adaptable, with different types of social enterprises developing in response to different sets of circumstances. They can be distinguished by their: purpose and social objectives; ownership; management structures and cultures; activities; and membership, democratic processes or accountability. © EVANTER OŰ

Social Enterprise – the alternative bottom line Traditional Business – one bottom line Social Enterprise – up to 4 bottom lines Social: improving the quality of life, access to services, and so on for communities Environmental: minimising the enterprise’s own negative impacts, making improvements Economic: increasing employment rates, income levels, business start-ups, etc Financial: generating income and profits to be invested in the other bottom lines © EVANTER OŰ

Social Enterprise – alternative definitions 1 – Social Enterprises have social and/or environmental objectives. As one of its defining characteristics, a social enterprise must be able to demonstrate its social mission. 2 - Social Enterprises are trading businesses aspiring to financial independence. This second defining characteristic is demonstrated by an enterprise earning 50% or more of its income from trading. 3 – Social Enterprises such as CICs have an ‘asset lock’ on both trading surplus and residual assets. Whether or not it’s a charity, a social enterprise re-invests all its distributable profit for the purpose of its social mission. © EVANTER OŰ

Social Enterprise – alternative definitions 4 – A Social Enterprise cannot be the subsidiary of a public sector body. Whilst a social enterprise can be the trading subsidiary of a charity, it must be constitutionally independent from the governance of any public body. 5 – Social Enterprises are driven by values – both in their mission and business practices. Social enterprises operate in competitive - often fierce – markets but there is an expectation that their dealings will be ethical and that they will offer their people satisfactory wages, terms and conditions. © EVANTER OŰ

Types of social enterprise Legal structure is often viewed as helping to define a SE, but this is complicated by international variations in Legal formats, Frameworks, Terminology Financial responsibilities and duties, which makes international comparisons and comparative research difficult. It is also argued that purpose rather than structure defines a SE and in practice the choice legal structure can be somewhat arbitrary. © EVANTER OŰ

Types of social enterprise In the UK the new ‘community interest company’ (CIC) is for enterprises that want to use their profits and assets for social benefit, There are a number of specific legal structures that are most commonly associated with Social Enterprises including: a Charity (that trades), Trust, Community Interest Company (CIC), Company Limited by Guarantee, Company Limited by Shares, Industrial and Provident Society Community Benefit Society, Unincorporated Association. © EVANTER OŰ

Types of social enterprise The definitions and legal structures applied to SEs may seem to be an ‘academic’ question without practical value. Research into the issue suggests that SEs’ reasons for picking a particular structure are influenced by factors including: perceived tax advantages, access to grant funding, enabling cross-subsidy between trading divisions, retaining management autonomy and risk management. © EVANTER OŰ

Types of social enterprise Types of SE according to activity 1. Social Firms 2. Co-operatives 3. Development trusts 4. Intermediate labour market companies 5. Community business 6. Credit unions 7. Charities trading branch/subsidiary © EVANTER OŰ

Types of social enterprise © EVANTER OŰ

Types of social enterprise © EVANTER OŰ

Types of social enterprise © EVANTER OŰ

The social economy © EVANTER OŰ

The social economy © EVANTER OŰ

The social economy © EVANTER OŰ

The social economy © EVANTER OŰ The term social economy or Third Sector was adopted from the French economie sociale, and describes the sector of the national economy occupied by associations, trade unions, co-operatives, mutual societies and other forms of not-for-profit organisation as distinct from the public and private sectors.   In France and most other European countries there is no equivalent to UK charity law but charities also contribute hugely to this sector of the economy. The social economy is composed of: social enterprises Charities voluntary organisations community groups other not-for-profit organisations. © EVANTER OŰ

The social economy © EVANTER OŰ The term social economy or Third Sector was adopted from the French economie sociale, and describes the sector of the national economy occupied by associations, trade unions, co-operatives, mutual societies and other forms of not-for-profit organisation as distinct from the public and private sectors.   In France and most other European countries there is no equivalent to UK charity law but charities also contribute hugely to this sector of the economy. The social economy is composed of: social enterprises Charities voluntary organisations community groups other not-for-profit organisations. © EVANTER OŰ

The social economy Although each type of organisation has a distinct identity, it can overlap with the other types. For instance: the majority of voluntary organisations, so called because of their use of volunteer workforces, are registered charities. Many community groups are charities and also use volunteers. Some social enterprises are community-based, use volunteers and are registered charities. © EVANTER OŰ

The social economy: economic principles The social economy includes three distinct and sometimes conflicting economic principles: Altruism: self-help: Trade: © EVANTER OŰ

How do Social Enterprises differ from Commercial Enterprises? A Social Enterprise through the nature of its origins has a specific understanding of local society and local economy The Social Enterprise Sector has a vital role to play in helping grow a local economy. It can help in delivering excellent public and local services and supporting stronger communities © EVANTER OŰ

How do Social Enterprises differ from Commercial Enterprises? The Social Enterprise Sector usually has a triple or quadruple bottom line: Social Benefits Economic Benefits Environmental Benefits Financial Benefits © EVANTER OŰ

Challenges to starting a social enterprise SE’s have the same obstacles as commercial enterprises they also involve balancing the needs of the community with the commercial imperative of earning sufficient income to: pay for operating costs and generation of surpluses for reinvesting in community activities. © EVANTER OŰ

Social enterprise development issues: Development issues re social enterprise: How do SEs manage stakeholder expectations re social and financial outcomes What entrepreneurial skills and competences are needed to manage and grow SEs How can we manage and measure social impacts of SEs in Estonia What function should Universities have in supporting and growing the SE sector What economic conditions are needed to sustain the growth of the SE sector © EVANTER OŰ

Enterprise education issues- schools Development issues re enterprise (and SE) in schools: Economics, business and enterprise education is about equipping children and young people with the knowledge, skills and understanding to help them make sense of the complex and dynamic economic, business and financial environment in which they live. It should help them leave school well-informed and well-prepared to function as consumers, employees and potential employers. (Ofsted June 2011) The Social Enterprise in Schools Award was created in partnership with Scottish Government to develop enterprise, employability & entrepreneurial skills of young people & awareness of social enterprise as a way of doing better business in Scotland. How “to foster a culture of social enterprise, ...especially through inspiring the next generation to start thinking about the social impact of business”. © EVANTER OŰ

Enterprise education issues - HE Development issues re enterprise in HE (Guardian 2011): Develop a framework not dependent on an institution or educator Reflect a commitment to enterprise in your staffing policies: Embedding enterprise into a university is a massive culture change Beware of retro-fitting HE to meet business needs: there is a difference between what we want students learn & reverse engineering HE to meet an often poorly articulated business need. Universities should view themselves as engines of economic development: for regional success HE in that region……linked to employers & produce students ready to start businesses to grow the local economy. Joined-up thinking is essential: breaking down the silos between disciplines is critical © EVANTER OŰ

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