Developing new income streams is a major priority for most charity and social enterprise leaders, and according to the latest National Council for Voluntary Organisations UK Civil Society Almanac, earned income is the fastest-growing area for the sector. In considering how to develop new enterprising models, two of the fundamental questions are who will pay and who the customeris?
For many organisations in the sector, this has been government in various guises, from central to local to the NHS. The challenges that face charities and social enterprises when they compete in public service markets have been well rehearsed and are becoming more acute. Austerity, reconfigurations of statutory bodies and the drive for scale in contracting have all conspired to increase uncertainty, preclude many organisations from particular tendering processes and, even when contracts are won, to reduce margins.
A great deal of other social enterprise activity is based on selling directly to the public. This can provide significant resilience because the wide spread of customers can help to reduce volatility in earned income. But winning over new customers can be hard work and is a constant challenge.
A third model that hasn’t had so much attention is selling to large corporates.
This is an agenda that Social Enterprise UK has embraced with its Buy Social Corporate Challenge. It is working with a range of high-profile multinational businesses that are jointly aiming to spend £1bn with social enterprises by opening up their supply chains to the sector. These companies include Amey, BP, Johnson & Johnson, Linklaters, LV=, Mace, PwC, Santander, Wates, Robertson and Zurich. Together, these businesses employ more than 700,000 people around the world and have a combined turnover in excess of £153.6bn.
SEUK has recently been working with FriendlyFires, a consultancy that specialises in building corporate and social enterprise collaborations for maximum enterprise and social impact gains. It is going to start drilling down into more detail about where the best opportunities sit for social enterprises within the supply chains of corporates and what challenges social enterprises have to address to break further into these markets.
This has included analysing huge amounts of data from six corporations on what they buy and how much they spend on different sorts of goods and services, and trying to develop some common categories for sectors where social enterprises might be able to play a bigger role. Research has included detailed interviews with procurement leads in those businesses.
This work has identified 25 product categories that could offer new market opportunities for social enterprises. These cover a diverse range, from scaffolding and waste management to recruitment and marketing. More work is now needed to quantify how many of these opportunities might realistically be accessed by social enterprises.
For many of these product areas, the impact model from a social enterprise perspective is likely to be based on providing employment to those who are otherwise excluded from the labour market. But this is by no means exclusive and there is huge potential for the sector to explore different impact models that could compete in these markets.
For social enterprises to break into these markets, there are a number of challenges.
First, where do social enterprises best fit within these supply chains and how can corporates seek to more proactively manage them to develop a role for the sector? This might mean partnering with a "prime" supplier to develop a particular expertise in a broader market.
Second, how can the sector continue to address the perception that its capacity is limited and suitable only for particular sorts of roles? This challenge might be exacerbated where the impact model is based on relatively low-skill and low-paid employment.
And finally, how do we make sure that investment capital is aligned to these market opportunities so that charities and social enterprises seeking to scale in this way can have the resources they need to grow?
There is more work to be done to better understand the detail of the market opportunities here, but this group of corporates – and many more besides – want to use their procurement decisions to drive social value, and in many of these areas there are viable social enterprise opportunities. We just need to make sure they are joined up.
Seb Elsworth is the chief executive of Access, a foundation that helps widen access to social investment for charities and social enterprises