Viewpoint: Make a profit and a difference

Community interest companies provide the perfect balance of profits and social responsibility - if only more entrepreneurs knew what they were.

The last thing the sector needs is another acronym. Initiatives, funding programmes and even the various needs charities set out to counter all have the politically correct descriptive title summarised as an acronym.

What makes it worse is that acronyms quickly become nouns – nouns that are difficult to say and impossible to understand. Thus it was that I first heard about community interest companies. Someone was talking about ‘kicks’. Perhaps it was a drug rehabilitation programme, or some sporting initiative. Only when I saw it written down, did I realise what they were actually saying was “CICs”.

The great shame for CICs is not just that they have been rapidly assimilated into the acronym-packed language of the third sector. What disturbs me most is that the ‘for profit’ sector remains blissfully unaware of both the concept and the opportunity.

CICs present the perfect opportunity to bridge the perception gap between those focused on profit and those focused on change. Set up a ‘limited by share’ CIC and you nail to your mast two very important pennants. First, you commit to invest at least 65 per cent of your profits in doing good, building your capacity and supporting your chosen beneficiary group. Second, you are able to reward your shareholders by distributing 35 per cent of your profits as dividends. For the first time, you can legally, ethically and honestly make a profit and help your beneficiaries.

Of course the third sector is full of prophets, whereas profit is unfortunately seen as a dirty word. Die-hard Guardian-reading third sector leaders in every community scoff at the notion that it might be acceptable to make a profit as well as a difference.

These hairshirt-wearing charity professionals have grown accustomed to grants. The logic is simple: my cause is worthwhile, so someone will pay me to pursue it. When the money stops, so does the work. Cut the funding and the soup kitchen closes, the queue that gathers every morning hesitates, then disperses, hungry, rejected and confused.

Tomorrow’s world will be very different, and CICs are the vehicle that will deliver the sustainable future every vulnerable group within our community has a right to expect.

CICs are not, in my view, for the existing charity sector. Sure, some organisations are adopting the model, but by employing the familiar ‘limited by guarantee’ structure they miss the real opportunity. It’s difficult to teach old dogs new tricks. So why, I’d argue, even bother to try?

When they wake up to the opportunity, entrepreneurs of all persuasions will set up CICs. They’ll recognise that, at last, there’s a way for everyone to combine making money with making a difference.

For a start, they can pay themselves the proper rate for the job, offer performance-related pay to their staff and pocket 35 per cent of the profit as a dividend. At the same time, the self-funding nature of social enterprise avoids the perils of mission drift that reliance on public funding can lead to.

CICs will also attract customers. In most marketplaces today, quality and service are no longer points of difference. Everyone is excellent or they’re quickly out of the game. Social conscience is the new point of difference, and most would support a social enterprise with heart over a high-profile corporate with a vague policy of corporate social responsibility.

Entrepreneurs shouldn’t even see the capping of share value growth, imposed by the CICs regulator, as a handicap. Most businesses are small, employing fewer than 10 people, and rely on their founders for commercial acumen. Take the owner out and there’s no momentum, no sale value. Hence, few businesses actually become valuable in their own right, and capped share value is just an extra incentive to work for profit today.

Businesses need profits and charities need prophets, but social enterprise is where people learn that both are of equal importance. Which spelling are you using in your organisation?


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