1. “Social Enterprise – the challenge of sustainability”
Dr Roger Evans
Evanter OÜ
Pärnu, Estonia / Troon, Scotland
© EVANTER OŰ

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

3. 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

4. What is social enterprise?
A more simple definition is:
a social enterprise is an organisation that trades for a social purpose. Sometimes social enterprises are described as 'not for profit' as any profit or surplus generated is used to further the social objectives of the business.
© EVANTER OŰ

5. 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

6. 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

7. 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

8. 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

9. 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

10. Types of social enterprise
It can be said that the majority of social enterprises in Europe are still operating in a traditional third-sector legal environment.
In countries where associations are more limited in this regard, such as the Nordic countries, social enterprises are more often created under the legal form of cooperatives.
In Italy, a new cooperative legal form – that of social cooperative (cooperativa sociale) – was introduced in 1991
Other countries followed the Italian example. Portugal, for example, created the ‘social solidarity cooperatives’ (cooperativas de solidariedade social).
© EVANTER OŰ

11. Types of social enterprise
The French ‘cooperative society of collective interest’ (société coopérative d’intérêt collectif, or SCIC), was introduced in 2001.
Another trend has been gaining speed more recently: that of introducing more general legal frameworks for social enterprises. This trend first appeared in Belgium, where the ‘social purpose company’ (société à finalité sociale in French, vennootschap met sociaal oogmerk in Dutch) was introduced in 1995.
© EVANTER OŰ

12. Types of social enterprise
In Italy and the UK have similar trends: the expansion of the set of activities
supplying general interest services other than welfare provisions including:
cultural and recreational services;
activities aimed at protecting and regenerating the environment;
services aimed at supporting the economic development of specific communities.
Under Italian law, a social enterprise is defined as a non-profit private organization, which permanently and principally carries out an economic activity aimed at the production and distribution of goods and services of social benefit, and pursues general interest goals.
© EVANTER OŰ

13. 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

14. 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

15. 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

16. Types of social enterprise
© EVANTER OŰ

17. Types of social enterprise
© EVANTER OŰ

18. Types of social enterprise
© EVANTER OŰ

19. The social economy
© EVANTER OŰ

20. The social economy
© EVANTER OŰ

21. The social economy
© EVANTER OŰ

22. 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

23. 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

24. 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

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

26. Six main ways to become a social enterprise
1. Community regeneration
2. Employee buyout
3. Local authority externalisation of services
4. Individual social entrepreneur
5. Voluntary organisation transformations
6. Voluntary organisation spin-offs
and this means starting a business- entrepreneurship!
© EVANTER OŰ

27. Motivation to build a Business
Classified into 2 broad types: 1. PULL FACTORS
2. PUSH FACTORS
© EVANTER OŰ

28. Drawbacks of running your own business
An entrepreneur:
a person who organizes and manages any enterprise, especially a business, usually with considerable initiative and risk.
Uncertainty of Income
Risk of Losing Capital
Lower Quality of Life
Complete Responsibility
© EVANTER OŰ

29. Start-up or Diversification?
“The practice of varying products, operations, etc. in order to spread risk, expand, exploit spare capacity, etc.” (Collins English Dictionary, 1994)
the act or practice of manufacturing a variety of products, investing in a variety of securities, selling a variety of merchandise, etc., so that a failure in or an economic slump affecting one of them will not be disastrous (Random House Dictionary 2009)
© EVANTER OŰ

30. Diversify- why, what benefits?
growth or business expansion
adding value and improve business profitability
Use surplus or available resources
provide more employment eg. for family
alternative source of income - survival!
possibility to grow and get better returns
hobby / personal interest
government or EU support schemes and grants
© EVANTER OŰ

31. Diversification © EVANTER OŰ For Against New business – more income
New/wider range of customers
Uses surplus resources or labour
Can grow the business
Wider product range – less risk
May divert resources from core business
May take too much time
Needs funding to start up
Could be risky if little experience
© EVANTER OŰ

32. 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

33. 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

34. 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

35. Drawbacks to starting a social enterprise:
Uncertainty of income for community stakeholders
Risk of losing capital for all investment stakeholders
Lower quality of life for owner managers while the company becomes established
Complete responsibility for business activities for owners, managers and community taking on managerial responsibilities
© EVANTER OŰ

36. Drawbacks to starting a social enterprise:
Factors that influence business failure include:
Weak idea
Poor management
Unfavourable economic conditions
Inappropriate type of company structure
Poor location
Over reliance on state or other subsidies to cover running costs.
© EVANTER OŰ

37. Drawbacks to starting a social enterprise:
These factors may also be compounded by poor preparation and planning including:
Poor or inadequate market research lacking in-depth analysis of specific market segments
Excessive secrecy in developing the business ideas, limited external evaluation and advice/comment
Lack of planning for development of client base or marketplace for the products/services
Lack of capital
Lack of a contingency plan
© EVANTER OŰ

38. What makes a successful start-up?
1. Motivation & determination
2. Idea & market
3. Ability & experience
4. Support- family, local, national
5. Good communication
6. Administration plus possibly good support from a board
7. Resources
8. Good planning
© EVANTER OŰ

39. Factors that influence failure
Weak Idea
Management
Economic conditions
Type of Firm
Location
Businesses receiving state subsidies
© EVANTER OŰ

40. Common problems encountered by new businesses
Poor or inadequate market research
Lack of in-depth market research
Keeping your business ideas to yourself
Not knowing your clients or marketplace
Lack of capital
Lack of a contingency plan
Poor cash-flow
© EVANTER OŰ 40

41. Common problems encountered by new businesses
Setting sights too high
Focusing on sales volume or size not profit/surpluses
Setting up poor supplier contracts
Poor stock control
Over-investing in fixed assets
Hiring the wrong people
© EVANTER OŰ 41

42. Overcoming these challenges
Education / Information
Education in diversification through courses, examples, demonstrations
Train entrepreneurs, financiers, politicians to new and creative thinking in social enterprise
More research into new diversified systems
Provide better access to information
Management Solutions
Work jointly rather than in competition - support each other
Take risk on one prototype area
© EVANTER OŰ

43. Overcoming these challenges
Financial / Economic Solutions
Develop support for individuals trying new options
Provision of start-up grants / advice
Have loans guaranteed by public sector
Individual Attitudes
Keep an open mind and be willing to experiment
Accept failures
Trust others
© EVANTER OŰ

44. Successful business start-up
Happens when:
they like what they are doing and get family or relatives involved
There is a real market demand
The product / service is of high quality
They start small, plan well and grow naturally
They have good market information on which to make decisions and keep good business records
They can create a loyal customer base
You are future oriented
© EVANTER OŰ

45. How to become a better risk-taker
Being a risk-taker is vital, whether in business, or just in life.
Being a better risk-taker will affect everything from product design, your sales and marketing, and the journey you take.
We think our tolerance for risk is something we are born with, but it is never too late to learn to increase your tolerance for risk.
© EVANTER OŰ

46. Assertiveness Being assertive is a hard thing to do well. Confidence
It is not about becoming a tyrant.
It is about having a deep-seated belief in your own worth.
Confidence
Don’t undersell yourself
Learn to say ‘no’
© EVANTER OŰ

47. Success factors in Scottish social enterprise
In a recent study on success factors in social enterprises the Scottish Government identified a number of key issues surrounding the concept of success in social entrepreneurship
© EVANTER OŰ

48. Success factors in Scottish social enterprise
Social enterprise leaders tended to identify success in terms of achievement including:
delivering on objectives achieving outcomes and changing lives and communities whilst at the same time-
maintaining the financial viability of the company.
© EVANTER OŰ

49. Success factors in Scottish social enterprise
The research showed clearly that successful SE’s need to possess many of the characteristics of strictly commercial companies:
1. a clear and shared social mission;
2. strong and inspiring leadership;
3. close alignment with stakeholder and market needs;
4. a product of value to others;
5. effective relationships;
6. systems that ensure operational excellence;
7. an entrepreneurial streak and strong business awareness;
8. a culture of learning, openness, and innovation;
9. a sustainable scale and income base
10. a strong grasp of the finances.
© EVANTER OŰ

50. Success factors in Scottish social enterprise
Scottish Enterprise (2005) identified 14 characteristics that define successful businesses (i.e. those that are able to compete and grow), which might also be applied to SEs:
1/ able to manage change
2/ active networkers
3/ customer aware and focused
4/ committed to continuous improvement
5/ entrepreneurial in culture
6/ environmentally and socially responsible
7/ global in their outlook
8/ committed to innovation
9/ active in their uptake and use of ICT
10/ possess detailed market knowledge
11/ active in promoting learning
12/ able to establish a strong asset base
13/ strategic thinkers & long-term planners
14/ visionary in their leadership
© EVANTER OŰ

51. Thank You
© EVANTER OŰ