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Mythbusting: People buy from social enterprises purely on ethics

… many Fairtrade brands have progressed from the stall at the church coffee morning to the shelves of the major supermarkets, while many of their corporate rivals are now also producing their own Fairtrade products.

Unfortunately, many in the social enterprise movement observed the success of the Fairtrade brand and made some giant leaps of thinking that were superficially comforting but ultimately wrong”  – my latest mythbuster for The Guardian‘s Social Enterprise Network.

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The Social Enterprise Mark – what went wrong

It’s always been my intention for this blog, where appropriate, to be robustly critical of negative developments within the social enterprise world but to avoid being gratuitously rude or nasty. I’ve been attempting to come up with a suitable response to the article from the Mark team in this month’s (generally very good) issue of Social Enterprise magazine but unfortunately, the Mark saga has now reached a point where it feels distinctly unpleasant to be stating the facts.

The Mark’s Marketing and Communications Manager, Lesley Foster, explains that nine months on from its launch as a ‘national brand’ there are now ‘more than 250’ Mark holders. Based on (Mark partner) the Social Enterprise Coalition(SEC)’s claim that there are 62,000 social enterprises in the UK, the Mark is still some way off signing up 0.5% of those eligible. With grant funding for the project totaling between £814,000 and £964,000, current figures (now reported by the SE Mark team as 275*) show each £99 Mark award being subsidised with at least £2,960 of grant income*.

With 275 social enterprises signed up, trading income equals £27,225*. At best this represents slightly over 3.2%* of the project’s turnover. Given that at least 50% of a Mark holder’s income needs to come from trading, the Mark team must now be contemplating the possibility that – even if the project receives a further injection of grant or government funding – it will be morally impossible for The Social Enterprise Mark Company to display the Mark on its own website after March 2011.

As mentioned previously, I’ve never been a supporter of the Mark. It neither tells commissioners about what organisations do and how they do it, nor tells consumers about the social impact of the products they buy (like, for example, the Fairtrade Mark). I’m remain willing to sign-up to a Mark that does either of those things but I see no benefit in buying into what a friend in the movement describes as ‘a bumper sticker that delivers no social impact’.

Despite my own opposition to the Mark, I’m genuinely surprised it’s been as unsuccessful as it has been. My hunch at the time of the its launch was that as many social entrepreneurs are optimistic people, keen to try and make the best of things, often against their better judgment, many would apply for the Mark as a gesture of social enterprise solidarity.

As it is, the speed and scale of the comeback necessary for the Mark in its present form to become a sustainable business would, if achieved, rightly see the Mark Company registered as a religion in the next census. The Mark has been a cock-up from start to (looming) finish. Given the resources expended, the number of social enterprises signed-up is significantly less than the number who could reasonably have been expected to have been engaged in lengthy one-to-one discussion on their needs during the market research stage. Instead, the Mark has been a political fudge – who can forget the darkly hilariously proposals for a three-tiered accreditation system – that failed disastrously to even fudge the politics of the issue.

A clue to the debacle may possible lie in the fact that the project was pushed forward by a “14-member social enterprise identifier project steering group that was set up to find a way to brand the sector with professional marketing advice from the government’s Central Office of Information (COI).” I’m sure there are some good uses for a 14-member steering group but I don’t think any of them are directly-related to starting a sustainable business.

Current SEC chief executive, Peter Holbrook, is not to blame for what’s happened. He’s loyally and honourably backed the Mark after finding it in his inbox on taking up the job this year but he will hopefully be able to play a role in both sorting out the mess and making sure similar mistakes don’t happen again. Between them, Rise, SEC and the late Office of the Third Sector have – with undoubted good intentions – cooked up an embarrassingly expensive dogs dinner. Most worryingly, the Mark saga demonstrates the failure of many in the upper echelons of the social enterprise lobby to understand either what social enterprises need or how social enterprise works in practice.

Recriminations are no use to anyone but it’s time for a bit of humility and a lot of listening. I hope that it’s not too late to salvage something from the mess. Maybe there’s still time for a new Mark product, developed in consultation with people running social enterprises rather civil servants and umbrella body executives and enabling social enterprises to better explain what they do to commissioners and/or customers, to be brought to market.

*Figures updated in response to new information provided by the SE Mark team.

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