The benefits of social enterprises
Wednesday, July 11, 2012
A recent report found 58% of 'social enterprises' were growing, compared with 28% of SMEs. But the rewards require commitment
Thanks to a hoody-hugging government and a recession-engineered collective sense of being ‘in this together’, the term ‘social enterprise’ has become an increasingly common part of the national lexicon over the past few years, as businesses and individuals strive to ‘do their bit’ for local communities. And yet, despite its popularity, you’d be hard pressed to find anyone that can give you a straight answer as to what being a social enterprise actually entails.
Which is odd, because if you believe a report from the UK body that oversees social enterprises, those using the term to describe their businesses are enjoying seemingly rapid growth, increasingly vocal levels of government support and are appearing to fare better in the recession than other businesses. Printers, then, should surely be taking a closer look. But while there is much in favour of social enterprises, there is actually much to be held against them, too.
Social Enterprise UK, the national body for social enterprise, defines the social enterprise model as "a business that trades in order to tackle social problems, improve communities, people’s life chances or the environment".
This is not exactly clear. But it does elaborate in documents available on its website, saying ‘social enterprise’ is not a legal term, but an approach and an adoption of a set of principles. These principles include having a clear social and/or environmental mission set out in the organisation’s governing documents, generating most of the income through trade, and reinvesting the majority of profits to further the social mission.
It’s an approach that certainly seems to be working for many businesses – so much so that others are rushing to get involved. Social Enterprise UK’s recent Fightback Britain Report, which used findings from its State of the Social Enterprise Survey 2011, found evidence that in the economic downturn, social enterprises were faring better than SMEs, with 58% growing over the previous year, compared to 28% of SMEs. It also says social enterprises had more business confidence, with 57% predicting growth, compared to 41% of SMEs.
Unsurprisingly, then, many companies are keen sign up. Among a sample of 865 social enterprises, one-seventh had been founded since 2009. "[This] arguably shows a sector that is attracting entrepreneurs and entering a phase of rapid growth, particularly when compared to the proportion of start-ups among small business," says the report.
Printers have been among them. Lucy Findlay, managing director of the Social Enterprise Mark Company, which awards a kitemark allowing a business to prove it is a social enterprise, says that at least 10 companies currently holding the mark are involved in printing.
Supply Shack is one of those companies. Des Day, managing director, says the company was set up in April 2011 to benefit the community.
"I thought, what better way to give something back than to create a business model like this?" he says. "There’s a sense of satisfaction at the end of the year, when we know we have had a positive impact."
Profits made by Supply Shack are donated to non-profit organisations working in communities. The organisations that benefit are democratically elected by the company’s customers, which is obviously a fantastic marketing tool when seeking new business. However, Day says that this sense of social mission cannot be relied upon as the only draw to convince customers to use Supply Shack.
"We’ve had to get this business off the ground and launch it fairly aggressively, demonstrating we are always value for money," he says. "Anyone running a social enterprise can’t be complacent enough to not be competitive."
Customers agree that competitive pricing is important. Edward Rothman, managing director of tuition company Numberworks ‘n Words, says he has used Supply Shack for office supplies and print work, but says he did not set out to specifically find a social enterprise.
"I happened to come across them, and the fact that it is a social enterprise is the frosting on the cake – it’s a feel good-factor," he says. "But the real reason I worked with them is the level of service, as we have to look at the bottom line."
That said, there are many businesses that are setting out specifically to find a social enterprise when looking for a supplier. This has in part been encouraged by the Social Enterprise Mark Company’s 50 in 250 campaign, launched last December, which is aiming to get 50 large companies to sign up to buy from at least five Social Enterprise Mark holders within 250 days.
Alex Castle, head of supply chain management at property giant Telereal Trillium, says the company has taken part in the campaign and has used the printing social enterprises Netherne and Supply Shack. "If they are able to compete on cost and quality, we believe it’s our responsibility to consider organisations that have social and environmental purposes at their heart," she says.
The Social Enterprise Mark Company’s Findlay believes the economic climate could be helping to drive more businesses to use social enterprises as suppliers. "Given what has happened with the corporate sector over the past few years, doing this can show they are doing good – it’s the next phase of corporate social responsibility," she says.
Arthur Stitt, one of 12 directors at the printing social enterprise Calverts, agrees that CSR policies are playing an important role. "For example, we recently won some work for the Olympics. The organisers wanted to work with a local company, but also a social enterprise," he says.
Calverts operates as a co-operative, with every member of staff being paid the same and being a director of the company. Stitt says another benefit of the company operating like this and of the social enterprise ethos in general can be staff motivation. "A certain type of person works here – they have to think beyond their salary, they have a lot of commitment," he says, explaining that the average staff tenure at Calverts is 12 years.
But for any printing company that is thinking about becoming a social enterprise, or for those that are thinking of starting one from scratch, many point out that it is not all plain sailing.
In its Fightback Britain report Social Enterprise UK found 44% of social enterprises said they were still hampered by the availability and affordability of finance.
"One issue is getting money into the business, particularly equity," says Findlay. "There is an absence of those that want a lower profit distribution. It’s problematic as we’re saying profits need to be distributed primarily to social and environmental causes."
But things have started to improve in this area. For example, in April the government launched the independent financial institution Big Society Capital, which was capitalised with £600m. Around £400m of this came from dormant bank accounts and £200m from contributions by the high-street banks Barclays, HSBC, Lloyds Banking Group and RBS. This money is passed to socially orientated investment organisations, which provide loans and other investments to charities and social enterprises.
A number of other government and bank-led programmes that have been launched over the past year or so indicate this is an increasingly popular area of investment. Yet this is all largely irrelevant if the common knowledge of social enterprises continues to be very low. Social Enterprise UK found that 15% of social enterprises felt this lack of knowledge was still an issue. And 9% said cultural understanding with banks was an issue.
Calverts’ Stitt says lack of awareness of business models can sometimes be problematic in tendering processes, too. He says there is starting to be more awareness of social enterprise now, but the company can still have some problems explaining it is a co-op.
"Often in these processes they want to ask what type of business you are and ‘co-op’ isn’t listed there," he says. "And even over the last year some have struggled with the idea that we are a non-hierarchical organisation."
Finally, some point out that social enterprises can also face a difficult balancing act, having all the financial pressures of any business, but also needing to manage the social aspect of the organisation.
"What can be hard for social enterprises is being able to keep an eye on the social and financial bottom line," says Findlay. "Sometimes those two things don’t go together. When we see a business opportunity, we have to think about which opportunities increase the social and environmental impact. There is a constant balance."
While the challenges may be substantial, however, the benefits are more so. Becoming a social enterprise can boost your customer base and boost your profile, and with clients getting more picky about who they place work with, having a social enterprise model to show off could be a positive recession-proofing device. That said, the real benefits are in working for a company that gives others a helping hand – in business it is all too often about the individual, yet social enterprises enable a broader, more community minded approach.
TOP FIVE REASONS TO BE A SOCIAL ENTERPRISE
- Demand from the public There is an increasing desire from the public to purchase from – and see in their communities – socially responsible businesses that are driven by more than profit
- Demand from businesses There is evidence that ever-more businesses want to include social enterprises in their supply chain as part of their CSR policies
- Staff motivation and retention Many social enterprises and experts in the field say staff are more engaged and motivated in social enterprises, feeling proud to work in a company with social values
- Availability of finance Although some social enterprises still find there is a lack of finance, the social investment market in the UK does appear to be growing, especially as awareness of the business model increases
- Risk-taking Some point out that because social enterprises are not only driven by profit, they are able to take risks that other businesses may not, and in the long term can benefit from this approach