Is it time to be more enterprising?

Charities should learn from social enterprises and not feel threatened.

Brown speaks at the Social Enterprise Action Plan lauch (Credit: Rob Matthews)
Brown speaks at the Social Enterprise Action Plan lauch (Credit: Rob Matthews)

Last week's launch of a £73m fund to promote the development of social enterprises in health and social care represents one of the Government's largest single investments in this burgeoning field.

Whitehall departments, previously accused of keeping the third sector at arm's length, are now falling over each other to embrace social enterprise.

Ivan Lewis, the junior health minister, who announced the fund, said social enterprises had "enormous potential" to transform the delivery of health services. He added that the enterprise sector had revolutionised public services in other government departments and hoped social enterprises could do the same in his own.

Although the Government is keen to proceed at a fast pace, many charities are concerned about the impact that the growth of social enterprise could have.

With more voluntary organisations talking of the pressure to cast off their charitable status to join the growing ranks of social enterprises, or instead set up a subsidiary body run under the social enterprise model, should charities feel threatened?

Different purposes

Richard Gutch, chief executive of Futurebuilders, believes they should not. "There will sometimes be social enterprises that are bidding for the same contract as a charity, but I don't think that's a major problem," he says. They have different origins.

Charities usually have a much broader purpose - to help beneficiaries - whereas social enterprises are much more focused on delivering a service that's going to earn money and have a social impact."

Gutch says there are clear differences between the two types of organisation.

"Charities are more likely to have user-governance and involve a broader range of people, whereas social enterprises usually have their directors on the board," he says. "There will be some differences in the way the two organisations go about what they do."

Others suggest the line between charities and social enterprises is more blurred. "I don't feel that charities should feel under pressure to change their brands, because many charities already have an element of social enterprise in their activities," says David Carrington, an independent consultant on the charity sector.

"Charities have provided social enterprise activities for hundreds of years, so we are not talking about a revolutionary shift here. We are talking about a recognition of alternative funding streams that might enable charities to change the way they receive money. This is an evolution, not a revolution."

Geraldine Peacock, former chair of the Charity Commission, agrees. "There is much more cooperation across sector boundaries than there used to be," she says. "The third sector is learning to be more enterprising."

As social enterprises grow, should government specify that funding to promote public service delivery goes exclusively to them rather than charities as well? Both Peacock and Carrington say that what matters is not how an organisation classifies itself, but whether it can successfully deliver a service.

"It's a case of doing what you're good at and resourcing it in the best way possible," says Peacock. "Contracts should go to whichever organisations can do both best. It's a matter of providing public benefit."

Carrington believes the Government's key priority should be to design a procurement system that is accessible to third sector organisations and "allows them to be paid a fair price for what they do".

And Gutch points out that social enterprises are less likely to take on contracts that do not meet their full costs. "Social enterprises are not going to have loads of charitable income to fall back on, so they are going to be even more focused on getting their price right," he says.

Charities are being told to aspire to full cost recovery, however. Perhaps - as third sector minister Ed Miliband recently suggested - social enterprise is a state of mind: to think in a business-like way is to drive a harder bargain and refuse low-budget contracts.

Some charities fear that associating themselves with the enterprise culture could damage their brands. "If they want to get involved in service delivery, charities have to be pretty careful to maintain their charity brand as well as the enterprise," says Gutch. "Otherwise they will cut themselves off from important sources of support."

But Peacock says it's a matter of perception. "Charities are in competition for money all the time, but they don't think they have the right to earn money, or at the very least they think it will discourage donors," she says. "What they need is a better public relations campaign to explain what social enterprise really is."

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