Tag Archives: bogus social enterprises

Mythbusting – bogus firms threaten the social enterprise movement

Unlike Salesforce — who were quite genuinely using the term to describe something else entirely — there are plenty of companies in the UK who claim to be trading for a social purpose but are not what many of us would regard as ‘real social enterprises’… My latest mythbusting column for The Guardian‘s Social Enterprise Network on why social entrepreneurs shouldn’t waste time worrying about ‘bogus social enterprises’.

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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?’


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