Lost in definition

Yesterday I (metaphorically) slung my beanbag over my shoulder, picked up my Oyster card and headed off to talk to some socially enterprising people. Other than being clever people with lots of good ideas, one thing that Amanda Jones of Red Button Design and Toby Blume of Urban Forum (interviews to follow in the next few weeks) have in common is that their organisations would not fit the current government and Social Enterprise Coalition definitions of a social enterprise.

In the case of Urban Forum, as Toby reflected ruefully, this is because a drop in public funding has meant that members have less resources available to buy their services so they no longer get 50% of their income from trading activities, for Red Button Design, the ‘problem’ is that – as many social enterprises claim to do – they really are seeking to provide a business solution to a social problem and they’ve raised money from private investors to enable them to do so. To put up £250,000 of their own cash, those investors need to be able to get a reasonable return.

These are just two examples of the ongoing problems we have defining social enterprises. Enter the Third Sector Research Centre (TSRC) with a piece of research that raises some serious questions about current descriptions of the scale of social enterprise and the varying definitions used to produce those figures, based on analysis of a number of surveys conducted in recent years.

The Social Enterprise Coalition currently claims that there “are 62,000 of them in the UK, contributing over £24bn to the economy, employing approximately 800,000 people“. In claiming this they site  “2005-2007 data from the Annual Survey of Small Business UK“.

The new TSRC paper doesn’t challenge whether or not this is true but questions what it actually means. The starting point for the Annual Survey of Small Business (ASBS) figures is this:

“This is the most quoted sources of information on social enterprise in the UK, being found in political documents and speeches of politicians of all parties as well as a range of lobbying organisations, and academic publications. The data presented in the past has been superficial, providing a single overall figure of a minimum of 55,000 social enterprises (rising in 2009 to a minimum of 62,000 based on a three year rolling average for 2005 – 2007).”

The biggest problem with the 62,000 figure is the process used to produce it and the large degree of interpretation involved. Based on the then DTI’s definition of social enterprise – ‘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 or owners‘ – small business completing the survey were asked to self define (or not) as social enterprises based on four conditions.

They should:

think of themselves as a ‘social enterprise’ (Q37 in the 2006/07 survey)

never pay more than 50 per cent of profits to owners/shareholders (Q36)

generate more than 25 per cent of income from traded goods/services (or receives up to 75 per cent of income from grants and donations) (Q34A)

think that they are a very good fit with the DTI definition of a social enterprise (Q38)

The 62,000 figure is based on a stratified sample so the actual number of small business (big enough to have employees) surveyed that identified themselves as ‘social enterprises‘ on this basis was 151 out of 2535 businesses surveyed. 88.7% of those 151 ‘have a legal form than places no constraints on the distribution of profits‘.

This 88.7% – reasonably enough – have stated that they ‘never pay more than 50 per cent of profits to owners/shareholders’ but have not answered (because they’ve not been asked) the implied question from a social enterprise point of view ‘do your governing documents allow you to distribute more than 50% of profits to owners/shareholders?’

As the TSRC’s researchers suggest: “The retention of at least 50 per cent of annual profits for reinvestment within the business is not unusual for growth oriented businesses and would not in itself be indicative of a social aim.” The point being that there’s no clear evidence from the ASBS that 88.7% of the notional 62,000 social enterprises in the UK are anything other than fast-growing small business choosing to invest half their profits or more in employing more staff.

For those of us who believe that ordinary companies limited-by-shares who are primarily focused on social outcomes are just as likely to be social enterprises as any other company formation, it’s not evidence that some or all of these companies aren’t social enterprises but it’s not evidence that they are – and it’s certainly not evidence that they’re social enterprises on the Social Enterprise Coalition or the government’s terms. And it leaves us in a situation where, if the 62,000 figure is worth the paper it’s written from, that paper probably didn’t come from a sustainable source.

That said, the conclusion to draw from this is not that there’s necessarily less than 62,000 social enterprises in the UK. The TSRC research also points out that as the ASBS is targeted at organisations that regard themselves as small businesses and therefore misses many social enterprises who regard themselves as part of the third sector. So according to the ASBS figures, there are only 8,000 social enterprises that are Companies Limited by Guarantee, Co-ops, Friendly Societies or Community Interest Companies, while the 2008-2009 Cabinet Office-funded National Survey of Third Sector Organisations found 16,000 third sector social enterprises that self-defined as social enterprises, while 21,000 third sector organisations were generating more than 50% income from trading but not self-defining as social enterprises.

If you’re still with me at this point I imagine your head might be beginning to hurt. And ultimately, if you’re a social entrepreneur, you probably spend little or no time wondering about whether there’s 37,000, 70,000 or 230,000 social enterprises in the UK. You’re interested in delivering social change while somehow managing to pay the bills. But this stuff matters because the social enterprise lobby and politicians use these stats to justify their own status, in the case of the lobby, and their spending decisions, in the case of politicians.

It’s perplexing that the Social Enterprise Coalition are happy to continue to use the ASBS 62,000 figure to explain the scale of social enterprise in the UK when 88.7% of those business do not meet its definition of social enterprise, would not be eligible for the Social Enterprise Mark and would not receive services and support from their organisation. Readers can judge for themselves the extent of any meaningful connection between the TSRC’s report and the comments issued by Social Enterprise Coalition Chief Executive, Peter Holbrook, in response to it.

The reality is that the social enterprise movement is not agreed on the definition of what a social enterprise and the lobby currently has no meaningful evidence on the scale of social enterprise activity meeting the definition it supports. The TSRC report mainly serves to highlight the extent of the confusion. The TSRC researchers conclude with the statement that:

It is recommended that future surveys are clearer about what they are measuring, which sample frames they are drawn from, and most important, why they are doing so.

This is sensible advice but the bigger lesson for the social enterprise lobby might be that we’ve reached a point where they should consider spending less time about talking about the volume of social enterprises in the UK – however they’re defined – and more about the positive social change that is being achieved and could be achieved be social enterprises and social entrepreneurs operating under a wide spectrum of organisational structures.


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21 responses to “Lost in definition

  1. David, this is an interesting response to an interesting paper. The definition issue has bothered me for some time, but as someone who works as a researcher for an organisation with charitable status I am generally considered to be partial. Nevertheless, I remain of the opinion that there is no working, operatationisable (if there is such a word) definition of social enterprise. Which I think is a bad thing.

    I continue to be interested in the line: “There are 62,000 social enterprises in the UK, contributing over £20 billion to the economy and employing nearly a million people.”

    If the SE ‘sector’ employs this many people, I would expect that a relatively small number of organisations would account for a large proportion of the staff (as with charities). Is there a list anywhere of the biggest employers?

    And what does ‘contribution’ mean in this sense? GVA? Turnover?

    I think social enterprise is a good thing and I want to see more of it. But I also think that ‘boosterism’ – which I have also been accused of in the past by academic researchers – is not something that helps policy development.

    A working operational definition based on a replicable population frame is needed I think. And this needs to relate to work done by us (NCVO), Coops UK etc so that we can construct a venn diagram to show where, what and how the entities we are describing overlap or are in fact discrete.


  2. Great blog David!

    One question that is beginning to interest me in all of this is how many businesses out there who would describe themselves as social enterprises are self or loan funded and financially sustainable as opposed to grant funded and unsustainable without funding.

    Untill we honestly answer this question I fear we may be setting up to fail those who follow in our footsteps .

    Many people recognise how difficult it can be to start and successfully run a business never mind a social enterprise.

    I first went into social enterprise out of frustration at the reliance of some charities on grant funding. Grant funding that all too often did not recognise the need from the ground up and did not build on what worked.

    I fear social enterprise as defined now is in danger of heading in this direction and the majority of social enterprises as now defined will constantly need propping up and therefore will have to respond to the needs and requirements of funders rather than the needs and requirements of those they seek to help.

    It leads me to wonder if these strict definitions of social enterprise are productive and if we analyse properly businesses that come under this strict definition we may find that not many of them are actually self funded, independent and financially sustainable.

    If this were the case there would be an argument to say that social enterprise as now defined doesn’t work!!


  3. Why worry? I meet people all the time who run organisations that could be defined as a social enterprise but who frankly can’t see the point in sporting the badge.

    Instead they do what they know is right, in a way that is financially self supporting and makes a real difference to people and planet.

    Applying arbitary rules of definition then labelling social enterprises as ‘special’ strikes me as deeply unhealthy. Yellow stars and ghettos come to mind . .


  4. beanbagsandbullsh1t


    All good questions. I understand your position, and I’d agree that if being ‘a social enterprise’ is going to be widely used as an explanation for why organisations receive funding or are awarded contracts then a clearer definition is needed.

    But overall I tend more towards a mixture of Martin and Robert’s positions on this.

    I think social enterprise is best seen an activity or approach to things rather than an organisational form or a sector.

    We (Social Spider) are a social enterprise operating in the voluntary sector, carrying out trading activities but also hoping to secure public funding and looking primarily for grant income to develop new projects.

    Red Button Design (for example) are a social enterprise operating in the private sector, raising money from investors and then selling their products.

    There are lots of registered charities who approach their work in a socially enterprising way.

    What we all share is an enterprising approach to delivering positive social change but I’m not sure what there is to be gained by trying to unite us under a specific operational definition and, in doing so, excluding organisations who don’t quite fit that definition.


  5. David, Martin, Robert
    LOL! The perils of hastily responding. With a little fear in my heart, another hasty response:

    1. I think SE is a good thing. More please. But to understand whether we can have more of this good thing we and whether policy stimulus is working, we do need to track it – hence my frustration at fuzzy definitions.

    2. I am strongly of the view that SE is a verb not a noun. I cannot for the life of me see the difference between some of the poster children of the SE sector and the poster children of the voluntary sector. All are producing social outcomes using a mix of earned and voluntary income (and increasingly social finance), all reward paid staff and use volunteers, many collect/refurbish/sell donated goods.

    So I dont think SEs should be labelled special any more than charities should. I repeat my utter frustration that we as NCVO produce stats like 750k employees in the third sector…then SEC produce the 1m figure – and policy people just add them together. A few others then double them because they can. I just dont think this helps anybody, hence the venn diagram argument.

    Finally, there is a fantastic book called the third sector in europe, by adalbert evers and jean louis lavelle. They challenge the who notion of discrete sectors – and I think they are right. They include a great diagram that explains it – I’ve used it in the past and it is reproduced here (slide 8): http://www.slideshare.net/karlwilding/defining-the-third-sector


  6. Karls’ right – those who seek to measure these things are actually doing so to strengthen their own cause, although in their defence I guess they feel that the bigger the group the more they Govt support can demand.


  7. beanbagsandbullsh1t

    I think we’re more or less agreed on point 2.

    In terms of labeling, I think Robert and I – in slightly different ways – think social enterprises should be labeled less than charities.

    There are defining characteristics of charity – rightly so, because there are major tax benefits to charitable status.

    The Social Enterprise Coalition thinks there are defining characteristics of a social enterprise which they have successfully used to produce their Social Enterprise Mark.

    I agree with you that there isn’t currently a useful, working definition but I disagree about whether we need one, although I do see the value of your argument in point 1.

    Agree completely that the suggestion that the figures for Third Sector and SE employees don’t overlap is quite ridiculous.


  8. A last response for now: there are defining characteristics of…erm…voluntary organisations – see the Lester Salamon Structural Operational Definition. But charity is a status that is enjoyed by a number of organisations that are held up as model social enterprises.

    I would find it useful to know what we are including – not so we can be childish and say who is or isnt in our gang – but so we can use that as the basis to discuss the values and operational characteristics that in turn define organisations in pursuit of the good society. SEs may well not have de facto tax advantage – but saying an activity is an enterprise with a social purpose will confer on that activity a moral superiority in the eyes of the buying public. So that such an advantage is not enjoyed by free riders, I think it is important that we recognise it, identify it and support it.

    If we follow the route that we are talking about activities, this raises some challenging issues: if Coca Cola suppports the excellent ColaLife, does that part of its work deserve to be treated differently? Or maybe we just go down the old fashioned route and create a separate entity within a group structure that has charitable status. I dont know. I think – I’m not sure – that I am concluding that just as we tag our blog posts, it remains important that we tag our activities according to how social they are…and then afford those differently tagged groups different tax/moral/political legitimacies.

    Crikey, I think I need a lie down…


  9. Coca Cola a social enterprise – hmmmm they might very well make that claim but surely the buying public would see through it. I guess in my book (literally as it’s out in a fortnight) if any trading organisation can make it’s social impact/work a point of market difference, then it is somewhere on the spectrum of social enterprise.

    Where it sits on the line will be dictated by marketplace, mission and moment) when.


  10. Karl, nor was I reading you that way. However I could imagine some quite unpleasant interpretations of social enterprise emerging from the Boardrooms of corporate giants.

    There is a need to educate the consumer to expect true social impact rather than lip service. Especially in the soft drinks industry where the very product itself is 99% marketing hype and actually of no real value to the consumer at all. (Tap water is after all a far healthier drink than any cola!)


  11. Hi all – I see the importance of the discussion + the definition, but it is mostly an internally-facing or inward-looking conversation (for research and policy purposes). I’m not sure the customers, clients, beneficiaries etc care. For them, as ever, it is about what is provided, the quality of it, and the impact it has, not what it is called.

    I remain grateful that our founder saw it right to call us the School for Social Entrepreneurs not the School for Social Enterprise. Thus ensuring we were about ‘verb’ not ‘noun’ (see slide 6 of my slideset Karl! http://www.slideshare.net/SSE/skollemergesseppt), about mindset, attitude and behaviours, and about being entrepreneurial (not choosing an enterprise).

    I’ve been tracking this for 5+ years, so do see http://del.icio.us/SSE/definition for much much more.


    • That’s one fine collection of bookmarks you have there Mr Temple. Afraid I will have to recommend that, and your slides, to the students on the Cass charity MsC courses, not mention colleagues here.


  12. Thanks Karl: so rare to get a compliment for my bookmarks….happy to deliver in person at Cass if that would be helpful in future! + thanks for the favouriting on Slideshare (*rushes off to reciprocate*)


  13. There would seem to be an incredible amount of effort put into describing what social enterprise is not doing, far more than valuing what it does do.

    Our P-CED model conceived in 1996 was of at least 50% of profit invested in the community. The suggested format was 50% for social purpose, 40% reinvested in business growth and 10% in employee profit share. Until Yahoo Geocities closed, it could be found on web archives going back to 2002.

    Where did the DTI get their definition from? If not seen the ‘at least 50%’ anywhere else before 2000.

    It’s now like at least 50% of gross revenue as we struggle with late payment from public sector and also corporations who advocate social enterprise. They don’t know we’re a SE because the only way of being visible is to receive grant funding.

    As it is, the P-CED model as found in About-History on my website would be congruent with all forms including Yunus’ social business, a non-loss, non-dividend distributing company focussing on major social problems.

    !Oooh look they haven’t got an asset lock” a public sector tosser exclaims.

    OK but we’ve had major impact in Eastern Europe in the areas of microfinance and childcare reform. I don’t see them standing beside or even behind us when we call out organised crime.

    I’d be more than willing to slap one or two of these off their cosy grant funded perches and drag them bodily to Eastern Europe and the graves of the disenfranchised children our work focusses on.


  14. Correction I meant to say the P-CED model could be found on web archives going back to 1999, now they only go as far back as 2002.


  15. Simon Teasdale

    Just reading through all the comments. This blog is much more interesting than our rather dry report.

    I just wanted to make clear, the report examines a range of surveys used to estimate the numbers of social enterprises. We found that around 90% of the “62,000” figure would NOT NORMALLY be considered part of the third sector due to their legal form.

    We do not suggest that this means they are not social enterprises. Defining social enterprise is a political exercise and should be left to practitioners like yourselves. We just ask that researchers make clear what defintions they have used, and how they have operationalised them in order that readers can make sense of their findings.

    Incidentally it would be fairly easy to argue that the Third Sector Research Centre is a social enterprise based on the defintion used in the ASBS. We derive most of our income through trading (contract). Less than 50% of profit is paid out in dividends. Some people working there would agree that we are a close fit with the government defintion.

    Finally, just out of interest, one of the earliest papers I read on social enterprise was from Harvard Business School:

    Kanter, R., and Purrington, C. (1998) Lockheed Martin IMS: Making a Contribution and a Profit. Harvard Business School Case 399-018.


    Does this beat Coca Cola?


  16. @Simon

    Our own paper for a social enterprise research centre was very much aligned with the “at least 50%” criterion.



  17. fascinating reading this thread…. much i agree with and great job David in shining a light onto some of these issues – and for mentioning me in glowing terms…obviously! 😉

    In particular;
    there is a problem in definition and i agree with Karl that we do ourselves no favours by overstating our true size (to the point where we risk sounding slightly absurd).
    I’m also with Nick (and have been for many years) on the desirability of social entrepreneurship, rather than just social enterprise. being entrepreneurial can mean having great ideas that people want to give you a grant for (and neednt mean being ‘investment ready’). this is important as not all socially useful activity has income generating potential. I would have thought that all of us, whatever our ‘business’ can sign up to being more entrepreneurial…which helps break down a potential ‘us and them’ between those who trade to generate income and those that dont (think Orwell….contracts, good, grants, bad).
    i also think there’s a useful pointer in the DTI definition of social enterprise about self identifying as a social enterprise. Some long standing and hugely successful social enterprises (and social entrepreneurs) i can think of never self identify in this way. in fact they’d probably run in the opposite direction to distinguish themselves from the crowd. Dont know what that means…just an observation.

    And final thought from me…

    i think it is useful to distinguish between charities and social enterprises and other social businesses. For me the asset lock is important – if social enterprises are to establish (long term) the same degree of trust that the charity ‘brand’ enjoys. However i also think we need to scale up in a huge way more social businesses – and in so doing raise the bar from CSR which often does little to help the most vulnerable in society – to something more socially useful.


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