“While I can’t contest the social enterprise legal definition, I will say now why I think enterprises like mine should be allowed Guest Passes to the fold.”
So says former Social Enterprise Ambassador, Craig Dearden-Phillips, in a recent blog about the need for the social enterprise movement to ‘throw open its doors’ to socially conscious businesses. With electoral reform temporarily on the back-burner, lovers of nerdy but passionate debate may now have more time to concentrate on issues of social enterprise structure.
Dearden-Phillips’ argument is a fairly simple one. In order to get his new business, Stepping Out, up and running, he had to put a significant chunk of his own money on the line and it wouldn’t be worth the risk without the prospect of a decent return on his investment. In order to (have the potential to) get that return he has set the company up as a ‘for profit’.
The stipulation that the company will put up 20% of net profits to ‘invest in early stage social entrepreneurs working at community level’ does not alter the fact that, based on current definitions, it is not a social enterprise.
Dearden-Phillips calls on the social enterprise movement to find a place for companies likes his explaining: “I have said this before – there are thousands, possibly tens of thousands of firms in the UK just like ours which are, in essence, privately held but which subscribe to a broader view of their existence and indeed have the track-record to demonstrate this… At the moment, these companies have nowhere to go.”
There is a widely held view, cogently explained here by Ben Metz, that the use of the term ‘social enterprise’ to describe a type of organisation is on the way out and that, given the wide range of organisational structures under which socially enterprise activity takes place, social enterprise is best understood as what we do rather than what we are.
This is a neat conceptual shift that I broadly sympathise with but it does leave plenty of problems unsolved. One is that, while it’s not as important as what we do, organisational set-up does matter – even to people who object to the current definitions. If it didn’t matter then Dearden-Phillips would argue ‘I’m a good bloke with a great track record of achieving positive social change, clearly I’m not in this just for personal profit’ rather than actively stating that “20% – of both the company and the net profit will go to invest in early stage social entrepreneurs working at community level“.
People who know Dearden-Phillips would mostly accept the former statement but customers and the wider public – if they’re interested in the wider social value that a company provides beyond delivering a good service – need more than that.
In a recent interview with this blog, Social Enterprise Coalition chief executive, Peter Holbrook, cited the examples of The Body Shop and Ben & Jerry’s to illustrate some fundamental difficulties with straight for-profit structures – in terms of both of financing growth and embedding social ideals once the founders of the business are no longer in charge: “We shouldn’t get hung up on it but I think protecting against the dissolution of your social commitment is quite important to get right at the outset. It’s important that leaders recognise that at some point, whether they die or change jobs, they will move on and the values that they set up the organisation with, may or may not be lost. Is that a risk people are willing to take?”
This is an issue that supporters of ‘social enterprise as a verb’ cannot ignore. There is a risk that a for-profit social business could continue to benefit from its past social commitment long after that social commitment has ceased to be a reality. There’s also a connected risk – particularly in the current climate – that companies that deliver services in social sectors but have no wider connection or responsibility to communities could be mislabelled as social enterprises.
I don’t think, though, that these risks should prevent the social enterprise movement from attempting to bring together a wide range of people and organisations to deliver a more socially sustainable economy. On a practical level, finance is not currently available to deliver enough scalable social enterprises to make a major impact on the mainstream economy. On a more philosophical level, it would be counter-productive to actively exclude millions of people – such as Craig Dearden-Phillips – with a mixture of social commitment and desire for a financial return from the movement.
The question of social enterprise definition isn’t one that’s likely to be answered soon – and the issues of profit distribution and the asset lock are only two of many areas where there’s currently a wide range of views – but that’s not necessarily a big problem if we can accept that it doesn’t need to be. The challenge is to become more comfortable with our diversity – accepting that for the foreseeable future there will be both organisations that describe themselves as social enterprises and socially enterprising activity carried out by a wide range of different organisations and individuals. And get on with creating positive social change.