The growing social economy could be boosted by a social enterprise currency, encouraging social business and consumers to spend socially.
Local currencies have sprung up in recent years in places as diverse as Bristol, Brixton, Lewes and Totnes, building on a long international heritage and recent work by the New Economics Foundation and others. Under these schemes, individuals and businesses that convert money from pounds sterling typically receive an extra 5p per pound in the local currency (with an equal penalty for converting back out of the local currency) to incentivise them to buy locally. Participating local businesses may also offer discounts to customers who pay with the local currency, adding to that incentive and helping to encourage the development of local supply chains.
If a 'social enterprise pound' were developed, which could be spent only with participating social enterprises, it could, similarly, be used to incentivise the development of social supply chains. A 5 per cent uplift could be given to encourage conversion of pounds sterling into social enterprise pounds, with an equivalent penalty for converting back to sterling.
Additional discounts might be offered by social enterprise suppliers when customers pay with social enterprise pounds. For example, a social business holding social enterprise pounds might be more likely to buy office supplies from a social enterprise such as Supply Shack, if it would effectively receive a built-in discount of at least 5 per cent by doing so. Someone might be more likely to eat at social enterprises restaurant such as Brigade or Fifteen for the same reason.
A sectoral currency of this type could add to the momentum of Social Enterprise UK’s Buy Social campaign, which encourages individuals to buy socially and social enterprises themselves to bring other social businesses into their supply chains.
Social enterprises exist primarily to do good, while also making a reasonable financial return. But they are arguably shooting themselves in the foot if they buy only from the conventional, finance-first business sector. In order to enhance the reach and resilience of the social economy, it would be far more productive for them to buy from each other. A social enterprise pound could be a way for organisations to encourage themselves to think harder about whether they could trade with social enterprise suppliers instead of purely commercial companies. Social enterprises could even consider paying their workers partly in social enterprise pounds, giving them an incentive as consumers to buy from ethical suppliers.
A social enterprise pound does have one apparent disadvantage against the local currency model, in that there would be no obvious route for converting currency back out of the system without losing money. In local currencies such as the Bristol pound, the local authority acts as a buyer of last resort by allowing businesses or individuals to pay their business rates or council tax in Bristol pounds if they can’t find an appropriate local supplier of goods or services to accept the currency. It is rather more difficult to see who could play that role nationally in a social enterprise currency scheme. Social banks such as Charity Bank, Triodos or the Co-operative could accept payment for their banking services in social enterprise pounds, providing a way to spend social enterprise pounds that is likely to be useful to all of those participating in the scheme.
A potentially simpler alternative to the establishment of a social enterprise currency is a sector-wide purchasing cooperative. Social enterprises, individual cooperatives, mutuals and consumers could all be members, trading with one another through the sector co-op. Members would then receive an annual dividend proportional to the level of their transactions with the co-op, effectively providing a financial incentive to trade with the other members of the co-op. The mutual trading exemption from corporation tax could help ensure that the sector co-op did not incur a corporation tax liability in respect of those profits before they are distributed among the co-op’s members.
A sector co-op moves away from the currency concept to something that might be easier to administer, but it still retains the aim of encouraging social businesses and consumers to buy within the social sector. By doing so, social enterprises could directly contribute to the resilience of their own sector, as already recognised and encouraged by the Buy Social campaign. A social sector currency or purchasing co-op could provide incentives to help them put their (social) money where their good intentions already are.
Simon Steeden is senior associate at Bates Wells & Braithwaite