A couple of readers may have noticed that there’s been a shortage of Beanbags posts in recent months. This is mainly because I’ve working on lots of other writing including:
- an exciting report on voluntary sector advice services and digital technology published last week
- and three imminent reports on various aspects of the UK social investment market
- not to mention overseeing the publication of Waltham Forest’s leading community newspaper
but blogging is important and I’m keen to respond to Andy Brady’s recent post: “Can social enterprise revive the ailing third sector?”
While umbrella leaders will point out the many charities to which the problems raised are not directly applicable, it’s a good overview of the challenge for the particular part of the professionalised, service-delivering voluntary sector that’s currently facing up to the end of government grants and increased competition for other grants and donations.
My instinctive responses to the central question were: (a) to note that it might’ve revived the ailing (section of) the third sector already, and mostly hasn’t and (b) to wonder what problems social enterprise solves that traditional voluntary sector approaches don’t.
Social Enterprise has been the next big thing for a really long time
On (a), Andy’s blog focuses specifically on the example of Furniture Resource Centre (FRC). FRC are one of a handful of long-established, relatively large social enterprises – HCT and Greenwich Leisure are other, larger examples – who (while they have existed for longer) came to prominence and began to grow significantly in the early-2000s New Labour golden era of social enterprise.
These organisations are rightly acclaimed for their successful track records but – with the possible exception of some public sector spin-outs – it’s not clear that there is a new generation of social enterprises emerging with the ability to operate at a similar level.
As a self-confessed social enterprise nerd, if a friend or family member asked me to name some social enterprises they might have heard of, I’d still name either these examples or some of the handful of famous consumer-facing social enterprises from (roughly) the same era: The Big Issue, Fifteen, CafeDirect, Divine Chocolate.
These 7 organisations would have been 7 of the 10 (off-the-top-of-my-head) most famous social enterprises in 2005 – I probably would’ve added The Co-Operative Group and The Phone Coop, and possibly John Lewis – and would still be 7 of my 10 now.
Aside from London Early Years Foundation (LEYF, which existed in 2006 but wasn’t a prominent social enterprise), there’s no obvious new entrants to the list in 2016.
While we may have seen a big increase in overall social enterprise activity over the past 10 years, and a few large contract-focused charities such as Turning Point and Catch 22 have rebranded themselves as social enterprises, we haven’t seen the emergence of a significant number of widely recognised social enterprise brands.
This is not to assume that a social economy characterised by growing numbers of large, well-known social enterprises is necessarily desirable but I think many of us expected it would’ve emerged by now and it hasn’t.
Taken for granted
When it comes to (b), Andy gives a decent overview of some of the difficulties facing the traditional charitable sector over recent years, followed by the FRC example of a social enterprise that has been successful providing services that have a viable trading model – through the combination of local government/housing contracts and people buying furniture.
I’m not sure how far this helps us to understand whether or how social enterprise is an alternative to grant and/or donation based models.
With the (possible) exception of The Big Issue, all our two hands full of famous social enterprises – and the relatively big newer social enterprise spin-outs we haven’t heard of – have succeeded by entering existing markets and competing successfully with private sector providers.
This is difficult because they have to:
- provide products and services that people want to buy
- provide those products and services at a price people want to buy
- do additional social good either in the process of provide those goods and services, or on top of providing those goods and services
But it’s not as difficult as trying to trade in a market that doesn’t exist.
As we at Social Spider CIC found out when trying to create a commercial model for a mass circulation mental health magazine , it’s hard enough when the reason that a market doesn’t exist is that there’s some people who plausibly might buy your product or service but they choose not to.
Unfortunately, the situation for many of the most socially vital grant/donation funded charities is much worse than that: they are operating in situations where there isn’t a market because a customer does want and/or need their service – whether it’s a food bank or mental health support group – but can’t pay for it.
Taken together, the facts that:
- your charity exists because the market doesn’t meet a particular social need
- the government is unwilling or unable to pay you to meet that need
- and you can’t get (enough in) grants and donations to meet that need
do not add up to ‘social enterprise is the answer’. They are more likely to add up to ‘we have to close’.
LEYF, my single example of a new, well-known social enterprise emerging in the past 10 years, are a phenomenally rare example of a charity taking (an adapted version of) their grant funded service, flipping the business model and selling the service successfully in an existing commercial market.
There is definitely more than one charity in the UK with the potential to do that but it’s highly unlikely that there are thousands.
The question is whether, if grant/donation funded charities can’t just sell their grant/donation funded services to a market, social enterprise can enable them to do something else.
If you’re currently a grant/donation funded charity: does your social track record provide you with any kind of commercial advantage that would help you to create a viable trading business? And will the business you could create help you to meet the social need you were previously meeting through grant/donation funded activities?
Charities who can’t answer a strong “yes” to both of those questions shouldn’t set up a social enterprise. Just because there are fewer grants and donations to be had, that doesn’t make trading a better model for paying for products or services that no one wants to/can buy.
Where that potentially leaves us with is gaps where the market is not meeting social need, government is not meeting social need and the organisations that were created in response to market failure have themselves failed to attract grants and donations. And that’s the gap for social enterprise. Where do we sign?