Fear of the bogus

“If social enterprise is to stay under the third sector’s umbrella or more precisely under the umbrella of the Office of the Third Sector, mechanisms should be set up in order to monitor and control ‘bogus’ SEs that may be using the SE logo (and legislation) in order to maximise individual gains (in other words, cheating), that is, even in those cases when organisations have clear social or environmental aims and benefit the community.”

Outsider, missing link or  panacea? Some reflections about the place of social enterprise (with)in  and in relation to the Third Sector – Dr Leandro Sepulveda, Third Sector Research Centre, December 2009

The Office of the Third Sector is no more but the threat of ‘bogus’ social enterprises shamelessly generating untold riches by duping the public into believing that they’re really a bunch of underpaid community activists working themselves to the bone to earn less than they’d get for doing the same thing for the council looms large.

As the bogus purveyors of fake social change hoover up the contracts, plunder the profits and head off to Mustique to splurge the booty, it’s real, non-bogus social enterprises who’ll be left to pick up the pieces. I think. In the case of Dr Sepulveda’s paper, this is a frustrating detour from an otherwise thoughtful contribution on the relationship between social enterprise and what New Labour called ‘the Third Sector’ but it is something that many in the social enterprise movement worry about.

So far, the real life evidence that there are – or are soon likely to be – significant numbers of conventional business ‘using the SE logo (and legislation) in order to maximise individual gains’ is as thin on the ground as social enterprises that would survive as real businesses if they received no grant income. Aside from public sector contracting (of which more later), I can’t think of many commercial situations where a clearly dishonest or false claim to be a social enterprise could possible serve any commercial advantage – when compared to the alternative option of selling people or businesses high quality goods or services at a competitive price. Kids selling dishcloths door-to-door ‘for charity’ maybe?

Of course “in order to maximise individual gains (in other words, cheating), that is, even in those cases when organisations have clear social or environmental aims and benefit the community” may be suggesting that limited-by-shares companies with clear social aims and delivering positive social outcomes are in fact ‘bogus’ and ‘cheating’. If so, I struggle to get my head round who these businesses are cheating and on what basis.

Both non-distributive and distributive structures have a role in the social enterprise world. I don’t see the (ongoing) rewarding through share dividends of those who’ve either put in time (and maybe cash) as founders of a social enterprise, or those who’ve just made a financial investment to help make it happen, as something that makes that enterprise ‘bogus’ in any way as long as the company is open and honest about the way it operates.

There is another (more complicated) thread of bogusness debate, though. The bogus (or nominal) social enterprises that may be produced from public sector spin-outs. Peter Holbrook of the Social Enterprise Coalition, partly echoing the often expressed fears of Laurence DeMarco of Senscot, recently said that:

“There is a risk that, resulting from cuts, we will see the creation of spin-off organisations from public services that are not social enterprises, which could be vulnerable to buy-outs from the private sector. We need the government to give guidance and support, and make sure that commissioning enables real social enterprises to thrive.”

I’m less interested than Holbrook and others in the lobby in the issue of whether spun-out companies or others ‘are social enterprises’ – the official definition of a social enterprise is a conversation between the lobby and the government from which most social entrepreneurs are (voluntarily or otherwise) excluded – but I share Holbrook’s concern about the tag ‘social enterprise’ being used as a mechanism to deliver full scale privatisation of public agencies, particularly parts of the NHS.

The belief that health services should be delivered primarily by the private sector – specifically, large multinational outsourcing businesses – is a perfectly legitimate political position but it’s one that it’s supporters ought to argue for openly if they want to put it into practice. While Craig Dearden-Phillips has a more optimistic take on the possible outcomes of largescale spin-outs, the idea of social enterprise as the route to fullscale marketisation of health services is potentially disastrous for the social enterprise movement – with social enterprise at risk of becoming a focus for a public backlash against subsequent cuts in jobs and services.

The question is ‘what mechanisms or policies would enable the social enterprise movement to deliver the changes it promises without the possibility of being a scapegoat for an agenda that it doesn’t endorse or support?’



Filed under Uncategorized

4 responses to “Fear of the bogus

  1. You’re not the only one struggling to get you head around it David. Let me first plead guilty to being one of the bogus social enterprises.

    We called what we do People-Centered Economic development and it began with a thesis which among other things described a model for social re-investment of profit, at least 50% with the remainder retained for growth apart from a small percentage employee share. Somehow that “at least 50%” becomes the DTI criteria for ‘social enterprise’ 4 years later.

    In another 5 years we see the social re-investment model formalised in the CIC. It takes the same approach suggested in our thesis, of modifying the company articles to declare a social objective the primary purpose of the business.

    between 2006 and 2009, I write several times to our local SE support body describing our work. In August 2009 I describe our model in a bid for lottery funding which fails. In 2010 something remarkably like our model appears as the criteria for the SE Mark and comes from the same support agency I’d been writing to.

    For 6 years now we’ve been effectively excluded from a grant funded community supported by taxpayers like ourselves by those who have slowly crept toward our for-purpose way of doing things and now attempt to brand it as their own.

    They don’t need to, it was published free to use in the spirit of the sharing meme it intended to propagate.

    From where I sit, it’s not us that are bogus.

    I’d have given up long ago id it weren’t for the cause we continue to work for, in the interests of the most vulnerable.

    Some now faced with the evaporation of the funding gravy train, now say ‘well really it’s our own money we’re working for”. Fine – so stand out of the way then.

    We’re all concerned about the deployment of faux social enterprise in the Health Service and I for one I have written to Unison in support.

    What all this fear of someone making gains is about, is to justify the controlling mentality which thrives on contemplating the worst of what humans do rather than stimulating that which is best in us. It is founded on pessimism and dogma.


  2. beanbagsandbullsh1t


    I agree about contemplating the worst.

    It’s often a soothing distraction from more uncomfortably realities – many social entrepreneurs find it easier to spend time worrying about whether so and so down the road is a bogus social enterprise, than to spend time working out why their social enterprise isn’t selling any goods or services.

    Frankly – while it’s not my personal view of social enterprise – if the local newsagent wants to call himself a social enterprise because he employs local people and sells them groceries that they need to survive, that doesn’t really bother me and I don’t feel that anyone needs to step in and prevent it. People can make up their own minds.


  3. Oh dear – more hints of focusing on protecting what social enterprises are instead of what they do.

    I consider myself a social entrepreneur and my small organisation, because we are trade as a partnership and thus the business assets and my own are not seperate, was told I cannot be a ‘social enterprise’ and cabnnot apply for the Mark.

    What I’ve recently discovered and seems to be the perfect way to demonstrate our business socoial, environmental and ethical values and committment is this:


    They rather cleverly deal with the issue of ‘bogus social enterprises’ by a process of public transparancy. Once you meet the standard your answers to some very searching questions are made public on their website where any customer, supplier, competitor or journalist can see for themselves what your organisation is there to do and why you are most certainly not a bogus social entrepreneur.

    For the SE sector to retain credibility it has to STOP focusing on structure and rules and START focusing on delivering sustainable, social, environmental and economic change for communities, people and future


  4. What happened here in the Forest of Dean should serve as a warning It began with a trade union led campaign to save local hospitals which was hijacked by local Tories and influential businessmen.

    The next step was the healthcare SET bid for SEIF funding which was not endorsed by the PCT, so they set about borrowing council tax funds to pay for consultancy where the cost of registering a CIC was over £8k. The consultant was unknown to the SE community though better know as a former director of a private healthcare business.

    The SET never traded and the issue is now under investigation by auditors. This really demands the attention of the SE community, as it is likely to be replicated wherever there is commercial interest with influence in local government.

    We’re founder member of the SEE network Robert mentions above by the way and I agree that this is a good way of showing the extennt of social commitment. However, it doesn’t guarantee any adherence to social enterprise values and FWIW hasn’t so far gained the attention of any potential customers or journalists.

    We’re small scale suppliers to the NHS and that’s where I see no problem with social enterprise – in the supply chain. We offer a product which manages clinic schedules and yields surplus to fund a social mission.

    I agree with Robert. Lets start focusing on what social enterprise is achieving, not the rhetoric of what it might achieve and whose banner it rests on.


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s