Have cake and eat it strategy abandoned due to lack of bread

“The social enterprise sector spends a lot of time justifying itself by using the estimate of that there are 68,000 social enterprises. But it doesn’t question, firstly, whether the figure is accurate and, secondly, if it is, what the figure actually shows us.”

At first glance this may appear to be a quote from another needlessly pedantic blogger or academic, questioning the honourable attempts of the government and the social enterprise lobby to spread the good news about the inexorable growth of social enterprise in the UK. At second glance, it is in fact a quote from Lucy Findlay, Managing Director of the Social Enterprise Mark Company.

The estimate that there are 68,000 social enterprises in the UK comes from the Annual Small Business Survey (ASBS), conducted by the Department of Business, Innovation and Skills (BIS).

This is the criteria by which BIS decide whether an organisation is a social enterprise:

  • no more than 75% of turnover is generated from grants and donations
  • no more than 50% of any surplus is paid to shareholders (or never generate a profit
  • the business owner thinks of the business as a social enterprise, and
  • the business owner thinks the business is a very good fit to the definition “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 and owners”?

A previous ASBS found that there were 62,000 social enterprises in the UK and this figure was used prominently what was then the Social Enterprise Coalition now Social Enterprise UK (SEUK) and the New Labour government for several years.

When Lucy Findlay says that ‘the social enterprise sector’ doesn’t question the accuracy and meaning of this figure she’s either short of information or using a narrow definition of the social enterprise sector that excludes me, some of the UK’s leading social enterprise academics, and leading social enterprise support charity, Unltd.

The problem isn’t with the ASBS – which provides credible statistics based on clearly explained criteria – but with the fact those statistics have been prominently promoted by social enterprise support organisations that define social enterprise by very different criteria.

So, the criteria for Social Enterprise Mark holders are:

A. Have social and/or environmental objectives

B. Be an independent business

C. Earn 50% or more of its income from trading

D. A principle proportion (50%+) of any profit made by the business is dedicated to social/environmental pruposes

E. On dissolution of the business, all residual assets are distributed for social/environmental purposes

F. Can demonstrate that social/environmental objects are being achieved

So far, 462 organisations have been awarded the Social Enterprise Mark.

Regular readers may be aware that I’m not really a big fan of the Mark but despite my own opposition to the venture, I very much admire Lucy Findlay for her dedication and committment to a project that she believes to be socially useful. I also partly sympathise with her predicament on this point.

While Social Enterprise UK’s current team are not responsible – and those who werre responsible were clearly acting with the best of intentions – it is deeply regretable in terms of the credibility of the sector that the organisation that was then the Social Enterprise Coalition, as a co-owner of the Social Enterprise Mark company, found itself in the position of simultaneously promoting two significantly different definitions of social enterprise – one of which was purportedly the method for social enterprises to ‘prove they are genuine against a set of qualification criteria’.

It’s equally regretable for the Social Enterprise Mark Company, who have found themselves theoretically trying to sell their product to a clearly-defined target market of over 60,000 organisations when in reality the vast majority of those potential customers would be turned away if they attempted to buy the product. Of course, the chances of the Mark project receiving £964,000 worth of grant-funding from the combined pockets of Big Lottery and the government may not have been enhanced by a realistic assesment of the scale of social enterprise, as defined by Mark supporters, at that time.

At this point, we can be quite clear that there are at least 462 social enterprises in the UK and that there may be hundreds of thousands more than that, depending on your chosen framework for definition. In the 2009 – 2011 period, I found it difficult to understand how so many otherwise sensible people in the social enterprise lobby could justify the apparent ‘have your cake and it eat it position’ that there was need for significant government spending on supporting social enterprises but less than 462 social enterprises – less than one per parliamentary constituency – worthy of support. Even being charitable, this position apparently involved believing that over 60,000 organisations were waiting to apply for the Social Enterprise Mark and would do so once they got around to it.

No there is no money for social enterprise support – and the current government has no desire to promote ‘the social enterprise’ as a model – so the ASBS figure, though its meaning is entirely unchanged, is now virtually irrelevant. On the plus side, it means that what’s left of the social enterprise lobby is free to get on with promoting the social enterprise as a diverse social movement in all its glorious, hopeful messiness.

 

 

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14 Comments

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14 responses to “Have cake and eat it strategy abandoned due to lack of bread

  1. Oh dear! Has BIS drunk the KoolAid? Doesn’t “no more than 50% of any surplus is paid to shareholders (or never generate a profit” rule out a lot of non-CIC co-ops and mutuals? Both Con and Dem seem very keen on those now. And doesn’t it encourage enterprises to gamble on worker salaries instead of paying them part of it as dividends?

    Also, do you admire anything that shows dedication and commitment, no matter how harmful they are?

    You’ll probably need to increase that £954,000 once the dust settles on RISE’s collapse and we find out if/what else it has given to the SEM, despite it being forbidden by RISE’s M+A as I currently understand them… but with RISE having given free membership to SEM clients for a while before it died, I’m probably in a minority.

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  2. Beanbags admin

    Hi MJ,

    No, I don’t admire anything that shows dedication and commitment, no matter how harmful they are.

    My underlying assumption, which I hope is shared by most in the movement, is that the Social Enterprise Mark is a project that has been undertaken by good people with honourable goals – I think getting more customers for products and services produced in a socially enterprising way is a fundamentally honourable goal.

    The statement goes beyond that to express admiration for someone doing work that I personally don’t believe to be the most useful or effective way of achieving those honourable goals – in a dedicated and committed way.

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    • The road to hell may be paved with good intentions, but is it paved by “good people with honourable goals”?

      Getting more customers for products and services produced in a socially enterprising way would be a fundamentally honourable goal, but the goal of SEM CIC is actually to “Create social and environmental value through the promotion of social enterprise as a business practice and the promotion of indivudual social enterprises This will be achieved by the awarding of the Social Enterprise Mark to businesses that qualify under the criteria defined by the company and through the use of the Social Enterprise Campaign Device by supporters on a range of media, including […]” (quoted from Section B of the SEM CIC incorporation – an incorporation document signed by Peter Holbrook and then two unreadable signatures).

      So SEM is not directly about promoting sales by social enterprises, unless it’s seen as a way to sell more SEM licences. Which seems unlikely because some of us in the sharing wing dislike it as much as the liberal-definition wing.

      This is probably the second best marketing trick that SEM CIC has achieved, confusing even wise people like you about its stated aims. Maybe someone thinks that if enough people are confused enough, we’ll give up and welcome our new branding overlords. But that would be a sad day, directly opposite of educating and informing the public.

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      • Beanbags admin

        I wasn’t quoting the mem & arts. I think the underlying intention of those involved was to form a business promoting social enterprise as a business practice and promoting individual social enterprises in order to get more customers for products and services produced in a socially enterprising way. I was offering this as an opinion rather than a provable fact.

        I completely accept – and have repeatedly pointed out – that trying achieve that aim through the means SEM CIC have done was fundamentally flawed – both in terms of the premise and the execution. I don’t SEM CIC have performed a marketing trick to make me think they’ve done the wrong thing, badly. At least, not a very useful one.

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  3. David

    ‘it is deeply regretable in terms of the credibility of the sector that the organisation that was then the Social Enterprise Coalition, as a co-owner of the Social Enterprise Mark company, found itself in the position of simultaneously promoting two significantly different definitions of social enterprise’

    Indeed it is, but Id ask you to explain more fully why you say they werent responsible?. P Holbrook chose to invest, they chose the definition despite much protest at the time, wasnt Lucy promoted to the SEUK board at the time?

    In Nov 2009 there were 372 mark Holders, 90 new mark holders since then for £200k of taxpayers money.

    17 Feb 2009 http://www.socialenterpriselive.com/section/news/policy/20090217/social-enterprise-mark-breaks-out-south-west
    extract – Months of campaigning by Sunlight Social Enterprises CEO Peter Holbrook to make the mark UK-wide paid off last week as his community interest company, based in Gillingham, Kent, became the first recipient of the mark outside of the south west and its first ‘national champion’.

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  4. Beanbags admin

    John,

    There’s different two issues. One is ‘is/was the Social Enterprise Mark a good idea’. Clearly the position on Peter Holbrook on that, both before and after become chief exec. of SEC in 2009/2010 was ‘Yes’. I disagreed with him on that issue but disagreeing with me does not discredit the sector.

    Two is should SEC have simultaneously been telling people there were 62,000 social enterprises but that the Mark – which I can’t believe even its most enthusiastic supporters or worried opponents ever imagined could attract more than 10,000 holders in the first five years even if phenomenally successful – was the definitive kitemark for ‘a social enterprise’?

    In respect of issue two, I think Peter Holbrook took the SEC job at the point where the slightly embarrassing fudge of the last two years was probably the least worst option available – although I’m glad that was his decision and not mine.

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  5. “free to get on with promoting the social enterprise as a diverse social movement in all its glorious, hopeful messiness.” ROLL ON!

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  6. you say ‘I very much admire Lucy Findlay for her dedication and committment to a project that she believes to be socially useful’. Does that include closing RISE to pass the assets into the Mark Co?

    Im not glad it was his decision and not mine 🙂

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  7. Beanbags admin

    No. I know.

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  8. Almost all definitions of SE are based around the purpose and activity of the organisation, not the income mix used to achieve it.

    This creates an issue for CICs, how can we throw our weight behind SE when it wont recognise many who clearly are.

    EG- A woman starts a CIC to deliver an after school reading class for children that have fell behind. She gets a start up grant from a local foundation to cover basic costs and takes donations from parents and sponsorship from local businesses to maintain the service. For this example the donations by parents are voluntary, as the class is designed to help those children that are from poor family backgrounds that cant always pay. Assuming an income mix of grant (50%) donations from parents (25%) and local business sponsorship (25%)

    Is her CIC a social enterprise? The SEMark CIC and SEUK would say no, but could either say she isnt a social entrepreneur?

    Id have given up debating this long ago if it wasnt so important. We can easily use the term social business to describe ourselves (technically probably more accurate) and most already accept that CICs are social enterprise.

    However, I do feel there is a lot being lost to both CIC and SE and the social economy at large by insisting upon definitions that dont allow convergence.

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    • I can see the social benefit, but where’s the business there? It looks like it could be 100% donation-funded (because grants and sponsorship are sometimes just donations in the eyes of the funder) – why isn’t that a charity? Maybe it is a social enterprise because there’s trade happening on the supplier side, but it’s not clear from the description.

      Nevertheless, I’d probably be inclined to let it pass and call that a social enterprise if I hadn’t met so many people from donation-hooked enterprises that try to tell me that the co-op I work for isn’t a social enterprise. Usually they say that the co-op is TOO commerce-based (2 one-off grants in 10 years), that it pays its members in the wrong way (partly through dividends) or that its asset-lock has no external regulator (but in the reading CIC example, there were almost no assets to lock).

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  9. Slight hijack of the thread discussion, (sorry David) but ive set this example to express the problem of definition. For this discussion it isnt a Charity as she started it up with a friend helping her and wanted total control to ensure her vision of what the organisation would be and didnt have much buy in when she tried to gather supporters at the start. It remains an option for her to consider as she develops.

    The point though MJ is almost all definitions of what an SE is make no mention of an income mix, here’s wikipedia’s entry on social entrepreneur

    – ‘ A social entrepreneur recognizes a social problem and uses entrepreneurial principles to organize, create and manage a venture to achieve social change (a social venture). While a business entrepreneur typically measures performance in profit and return, a social entrepreneur focuses on creating social capital. Thus, the main aim of social entrepreneurship is to further social and environmental goals. Social entrepreneurs are most commonly associated with the voluntary and not-for-profit sectors,[1] but this need not preclude making a profit’

    You mention that many might view it as 100% donation, even so that doesnt mean she hasnt had to apply entrepreneurial principles to achieve it, or that the social purpose is negated in any way. David makes an excellent example of this in ‘Onsustainability – Part 3’ https://beanbagsandbullsh1t.com/2012/01/30/on-sustainability-part-three/

    She has set out on the path of delivering social value, how she develops will no doubt be an ever evolving strategy, to make the point lets say the aforementioned 50% grant was instead a contract direct with the local school. It was a great success and the contract length was for 3 years. Due to funding cuts the school couldnt afford to renew the contract but worked with her to secure funding through a national Charity, which provided a grant for the reading class for a further 3 years.

    The work has never changed, but we’d allow her to call herself an SE in years 1-3 but not in years 4-6?OK, so SE isnt really a consistent identity to use throughout an organisations lifecycle.

    We want to use language that is inclusive, consistent and simple. I cant use the term social enterprise practically if it excludes CICs.

    Would any challenge/issues arise from her saying
    I am a social entrepreneur
    I run/work for a social business
    I’m part of a social economy

    That all CICs are Social Businesses is clear enough, what do you say MJ about all Co-ops being able to make the above statement?

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    • I’m not quite sure which statement you are referring to as “above”, but I don’t see how one can say “all CICs are Social Businesses” else there wouldn’t be any reason to have a regulator. It’s possible to start with a good structure like CIC and then screw it up. Similarly, it is technically possible for a business to form as a co-op and then fail because it’s not delivering social value such as providing education and information, or contributing to its communities, which are both basic co-op principles. I would say that all fully-functioning co-ops are social enterprises, though.

      I feel you need to make a distinction between the social entrepreneur – which she clearly is – and the social enterprise, which I think is more questionable in that example.

      Now I’ll go read David’s new post!

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      • the statement ……
        Would any challenge/issues arise from her saying
        I am a social entrepreneur
        I run/work for a social business
        I’m part of a wider social economy

        Im looking for commonality of language that we can agree on, notwithstanding screw ups which will no doubt happen the CIC status is renewed each year with the Regulator.

        There’s an event in Burnley on the 22nd Feb called CICS and Co-ops – A Conference, which will cover legal, finance and start up issues and commonality between CICs and Co-ops (incl the Co-op CIC or CIC Co-op however you prefer). Parts of those pre-event discussions have led to discussing language we can all use, hence wanting your opinion on the statement above.

        Again noted that there needs to be a distinction between social enterprise and social entrepreneur, hence thinking social business (or social organisation) are less contentious for her to use.

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