Growing incredulity

Last night’s RBS SE100 awards ceremony was a curious mixture of the positive and the sombre. Based on first impressions, this year’s report is a more valuable document than last year’s – which, in itself, was a useful starting point in terms of describing the current situation in the sector. Concerns, raised by a number of commentators, about whether it was useful to regard growth as an end in itself have been addressed.

This year’s growth award went to Cool2Care based on high percentage growth from – in social enterprise terms – a reasonable turnover at the start of the year, and based on a clear plan for continued growth and sustainability.

Where social enterprise optimism syndrome is still in evidence is in terms of this year’s renewed attempts to compare the growth of participants in the SE100 with growth in other sectors of the economy. Report publishers Social Enterprise Live state:

“The revenue growth of the FTSE100 in 2010 was around 5%, and the fastest recorded growth period of the UK’s small and medium sized enterprises in 2006 showed growth of 8.4%. In comparison, the total combined revenue of the RBS SE100 top 100 enterprises grew by 51% and the revenue growth of all those on the index that submitted figures was 14%.”

While this clearly is a comparison, it’s not one that tells anything much. The RBS SE100 top 100 enterprises is made up of the fastest growing 100 social enterprises from a self-selecting sample* of social enterprises who’ve entered into a competition with a cash prize for achieving growth. The FTSE is an index of the 100 most highly capitalised companies listed on the London Stock Exchange. Growth in the previous year is clearly not the only factor affecting a company’s market capitalisation. To avoid confusing readers with jargon, the basic point is that companies are likely to be on the FTSE100 because they’re really big not because they’re growing fast.

If we wanted to make an accurate comparison between growth in the social enterprise sector and growth in the mainstream private, we’d need to compare the RBS SE100 top 100 enterprises with the 100 mainstream private sector enterprises that have achieved the most growth in the last year – or, in the case of the second figure, with the 100 SMEs that have grown most in the last year.

Another moment of possibly unjustified optimism comes from Peter Ibbetson, chairman, small business, RBS, who tells Social Enterprise Live that: “The SE100 helps us demonstrate the unique role this sector plays in terms of its social impact and rapidly increasing contribution to the UK economy.”

Even the headline figures on page 6 of the report suggest a slightly different understanding of a ‘rapidly increasing contribution’ at RBS to elsewhere. In 2010, 350 listed companies turned over a total of £812 million, while this year 409 companies turned over a total of £844 million. This represents a reduction in average turnover of 11% (over £256,000).

That doesn’t tell us that there’s necessarily been an 11% decrease in the average turnover of all social enterprises but given that the RBS SE100’s self-selection process hasn’t – to my knowledge – changed significantly, the fact that those who chose to enter this year are collectively turning over 11% less on average than those who chose to enter last year can’t logically be regarded as evidence that the sector is growing.

One problem with suggesting that the sector is growing significantly when it isn’t is that it has the potential to let key stakeholders – the government in particular – off the hook. Civil Society Minister, Nick Hurd, who spoke at last year’s event and has subsequently offered regular endorsements of social enterprise as an idea, was unable to speak last night as he was called away to a vote in the House of Commons. That was a shame as I imagine many of those present might have been keen to ask him if and when the Coalition is going to back up its theoretical commitment to social enterprise with some measures which are practically useful to social entrepreneurs.

The reality is that while many social enterprises are growing (and the RBS SE100 is valuable way of recording and celebrating their success), the sector as a whole has – along with most other sectors – had an extremely difficult year. With the publication of the Public Services White Paper yesterday – and the success of many social enterprises in generating income from sources other than the state – there’s plenty of opportunities to deliver a more socially enterprising future but, while optimism is a vital quality, it’s equally important to balance it with pragmatic realism.

*The term self-selection in this instance refers to whether the organisations choose to opt into the process, not whether they are regarded as social enterprises

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4 Comments

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4 responses to “Growing incredulity

  1. They asked me to participate. The reason, I believe, that I’d contributed before and there is still a lack of representation in the South West. In financial terms there wasn’t much to write home about. Our income had decreased in fact, but they asked for a social report and that’s where we could demonstrate impact.

    We’d endured and overcome a smear campaign by sticking to our principles in speaking up about organised crime in childcare institutions. At the same time struggling to obtain late payments from many customers, with those who saw the negative commentary as reason to exclude us. A personal health battle had also been overcome and had brought full remission by this time of the report . Our work both in raising awareness and lobbying for change had influenced the policies of three governments. Two of these were to embed social enterprise as a major part of their development strategy and the recommendations applied were to see a 40% increase in the domestic adoption of children .

    The arguments for re-thinking capitalism where business has a social and financial objective, from this very public advocacy had crossed over into mainstream business thinking RBS use the term ‘social business’, for us a non-dividend distributing approach with a primary social objective, so
    So when they asked for a social report to accompany our accounts, that’s what they got. In return, not a word for the time I’d taken to participate.

    http://socialbusiness.socialgo.com/magazine/read/people-centered-economic-development–social-impact-report—march-2011_25.html

  2. admin

    Well, Jeff, while I’m sceptical about some of the SE100 team’s conclusions, I think it might be a bit much to expect their small team to deliver a personal message of thanks to all 409 companies who took part. They’re doing a big, complicated job with fairly limited resources.

    Good that you’ve produced a social impact report, though. Is that something you’ve done before?

  3. No David, I hadn’t done this before and when solicited to contribute, found myself wondering just how I could relate it. There were two things at the back of my mind. One was Muhammad Yunus in his talk on social business where he describes the ‘bottom line’ of Grameen Danone being the number of children removed from malnutrition. There was also our own 1996 treatise for an alternative to capitalism, which stated that “Economics, and indeed human civilization, can only be measured and calibrated in terms of human beings. Everything in economics has to be adjusted for people, first, and abandoning the illusory numerical analyses that inevitably put numbers ahead of people, capitalism ahead of democracy, and degradation ahead of compassion.”

    This is perhaps meaningless where a social economy is being measured in terms of financial turnover. There is no tool to my knowledge, which can quantify the value of a life or of a loving family environment.

    We’re also doing a big complicated job with limited resources which can be difficult and dangerous. It has meant inordinate sacrifice, including going without salary and what we contribute in time or intellectual property represents considerable investment on our part.

  4. Hi David

    Thanks for the write up, well balanced assessment. Just to pick up on a few of your points-

    The SE100 is self-selected but our researchers do a lot of work contacting social enterprises across the UK to complete the questionnaire. We make it clear that there is both a competitive element and that the information volunteered will be used to build statistics on the social enterprise sector as a whole. It is opt-in but each organisations’ motivation for doing so differs.

    This means a lot of social entrepreneurs such as Jeff- many thanks for your input- provide us with a wealth of information with no expectation of making the top 100. Out of the 409 organisations many offered information showing a slow down in growth, and gave information on profitability, even when making a loss.

    This isn’t the same as mandatory participation but it does mean that the comparison between the FTSE100 and the main index (which includes all 409 participants) isn’t so outlandish.

    We do include information about the growth of the biggest social enterprises too, which you can compared to FTSE100- this is on page 19 of the data report. There is a supplementary pdf as well with the top 50 social enterprises listed by size too. Currently the supplement doesn’t include a growth figure, but I am looking into that now.

    The data report is not just about growth but impact reporting, social investment, profitability, market and regional breakdowns, senior management structures, and more.

    The headline topics are obviously celebratory. Monday night was an awards ceremony after all. For those who want to delve deeper into the numbers, read the report- http://www.se100.co.uk.

    Supplementary numbers here: http://www.socialenterpriselive.com/supplements/the-rbs-se100-data-report-2011-supplementary-information

    Matt

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