Social enterprise? What's that?

Politicians may have fallen for social enterprise, but for most people it remains a mystery. David Ainsworth asks what's being done to improve understanding of the movement

Progresso social enterprise
Progresso social enterprise

The powers-that-be have fallen in love with social enterprise. Politicians of all parties are queuing up to sing the praises of a movement that involves tens of thousands of companies and now accounts for more than 1 per cent of the UK's GDP.

But for people who are not closely involved with the social enterprise movement, the term is almost unknown. The vast majority of people are ignorant of it, potential investors are baffled by it and many social entrepreneurs are surprised to learn they are part of it.

According to the Government, a social enterprise is an organisation "with primarily social objectives whose surpluses are principally reinvested for that purpose in the business or community, rather than being driven by the need to maximise profit for shareholders and owners".

However, even when this concept is explained to the average person, most still can't name a single example. According to a recent series of interviews conducted by online social business forum ClearlySo, most people asked to name a social business were able to do no better than a vague reference to the Fairtrade Foundation.

It is a problem the Social Enterprise Coalition, the umbrella body for the sector, is well aware of. "Social enterprise is imperfectly understood even by people who are quite close to the sector," says Steve Wyler, deputy chair of the coalition and the head of a project to raise the profile of such organisations. "That's partly because there's still a legitimate and almost inevitable debate about what a social enterprise really is. There are lots of types of social enterprise practised by a lot of different people."

Cliff Prior, chief executive of social enterprise support organisation UnLtd, says one problem is that there is no single legal model and no tax breaks for running a social enterprise, which make it difficult to define them.

"Whether or not you think there should be tax breaks for social enterprises, it would make it easier to define for marketing purposes," he says.

The concept of a social venture in the minds of the public is much broader than the technical definition, Prior says, taking in ideas as diverse as the Body Shop and Comic Relief.

"We should support any organisation that works toward a social good," he says. "Perhaps the answer is to have a two-tier system: one tier for organisations with a legal and tax structure, and another, wider category for others."

To try to clear up some of the confusion, several support organisations are trying to get information out to social entrepreneurs.

Business Link London, for example, is helping to create a website it hopes will act as a one-stop shop for the social entrepreneurs of tomorrow.

"Many people set out to start a social enterprise before they know what it is," says Tamara Pekelman, social enterprise business adviser at Business Link London. "Usually, they find out that this group of people exists and that there is support out there. But I've come across people who have formed businesses and got them up and running without realising they're social enterprises."

Now, she says, Business Link is working with several partners to develop a website where all the information will be easily available in one place. "The most common question we deal with concerns legal models; another is where to find finance," she says. "We aim to answer those."

Social enterprises also need to raise their profile among potential investors. These organisations often have trouble getting loans from banks, so raising their profile among other investors with cash to spend is crucial, says Geoff Burnand, co-founder of social investment consultancy Investing for Good.

"When people understand social investment, they really get it," he says. "They love it. But we need to make it more widely understood. A growing number of private and institutional investors are interested in putting their money into this space, but we still need to raise awareness among them."

One group that needs to be targeted, says Burnand, is financial intermediaries such as independent financial advisers, wealth managers and private banks: "We need to raise awareness through this intermediary class. Investors are keen, but lack knowledge. We need to educate the middlemen."

He says one way to increase awareness is through well-known names, particularly charities, getting involved in social investment.

But even ordinary people could become a powerful force for spreading the news about social enterprise if they could be persuaded to invest in community projects, he says: "People have a powerful attachment to something if they've put money into it - even a small amount."

The most visible attempt to improve public knowledge of the sector so far has been based on the desire to create a distinct, easily recognisable brand, inspired by the success of the Fairtrade Mark.

The Social Enterprise Mark, which was created by the umbrella body for social enterprises in south-west England, Rise, has now become a wider focus for study by the Social Enterprise Coalition, headed by Wyler.

"The quality mark is key," Wyler says. "It's already being used, but we need to raise its profile. We need something that makes it easy to identify a social enterprise and which guarantees a degree of certainty about the company - that shows it does business in a certain way. Once we have a certain number of organisations carrying the mark on their products, that will raise visibility a long way."

Social enterprise is a concept that sells itself, Wyler says, but marketing has been too focused on the Government rather than the public. "The time has come for a national awareness campaign," he says. "That is what we're going to put together. We think social enterprise can make a big impact."


- 'People are missing opportunities' - Eleanor Cappell, social entrepreneur in residence at Birmingham East & North NHS Trust, is working to improve understanding of social enterprise in the local community

Eleanor Cappell's job is to support social enterprises that improve health in Birmingham, and part of this consists of working to improve the profile of the sector.

"I encounter very wide variations in what people know about the social enterprise movement," she says. "Most people within the NHS have heard of social enterprise, but many don't know much about it. NHS directors are often receptive, but they have tended to suggest problems and ask whether they can be solved by social enterprise, rather than suggest solutions themselves. Some local politicians are extremely clued up, but others are much more vague."

The knowledge of people within the third sector is also patchy, she says. "Even in the third sector it's a very mixed bag. Social enterprise as a concept is alien even to the chief executives of many community organisations, although those running infrastructure organisations usually do understand."

Cappell says more work is needed to increase knowledge, even among community organisations that might want to set up social enterprises. "There's little knowledge of angel investment, equity finance or community finance," she says. "People are missing the opportunities that are out there."

Much of her job involves explaining what a social enterprise is. "The standard of knowledge among ordinary people who don't work in the sector is very low," she says. "Social enterprise just isn't in the public domain. It's not an easy concept for many people to grasp, especially that it's not 'not-for-profit' but 'not-for-personal-profit'."

Many people, she says, think of social enterprise as a public sector activity. "I certainly feel we need a lot more effort to get social enterprise into public awareness," she says. "Fifteen and other enterprises are helping to raise this profile, but a lot more work needs to be done."

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