social enterprise

By Dr Rory Ridley-Duff (Course Leader, MSc Co-operative and Social Enterprise Management at Sheffield Hallam University, and a board member of CYH, SEYH and Viewpoint Research CIC).

Over the last 12 months, Cliff Southcombe (Social Enterprise Europe), Bob Cannell (Suma Wholefoods) have worked with me to introduce Co-operative and Social Enterprise courses at Sheffield Hallam University.  One learning activity that has sparked interest is a group task to apply the criteria of the Social Enterprise Mark (a kitemark for ‘quality’ social enterprises) to organisations in the social economy.  As a result, both participants’ and course leaders now have concerns about the purpose and impact of the Social Enterprise Mark (SEM).  This month’s blog builds on Neil’s argument (see last month’s blog) that Yorkshire’s social economy needs to reflect its roots in the co‑operative sector.

Neil claims that social enterprise support was developed by co-operative development agencies in the 1980s and 90s.  Cliff Southcombe and I, in a new research paper, add weight to this claim after an examination of influences on the UK movement.  In the 1980s, ideas were developed in community enterprise networks throughout Scotland and Northern England.  The concepts of social accounting and audit – now recognised as vital for identifying and communicating social value – were pioneered at Beechwood College in the 1980s in worker co‑operatives.

Co-operatives and their support bodies were also vital to the formation of the national support network for social enterprise.  Worker co‑operatives, co-operative development agencies and the Co-operative Party acted together to create Social Enterprise London.  National and regional social enterprise organisations – including those that formed the company to promote the SEM - were registered by the Co-operative Union.  The umbilical chord that provides intellectual nutrients for social enterprise development is provided by the co-operative movement.

Imagine our shock that participants on Co-operative and Social Enterprise courses identified trading charities and voluntary organisations as the most likely to meet SEM evaluation criteria!   Whether course participants came from the co-operative movement, public sector or charity sector, the results were the same.  All thought that trading charities were advantaged, and co-operative enterprises disadvantaged, by SEM evaluation criteria.

How is this possible?  What happened?

There has been a steady influx of US-thinking into the UK’s foundations and schools for social entrepreneurship.  This hails originally from Harvard University and was later evolved at the Stanford Institute.  It now influences (consciously or not) many ‘ambassadors’ for social enterprise in the UK.  Many have no schooling in either co-operative economics or labour movement politics, and therefore lack the intellectual concepts or practical experience to critique neo-liberal (US) business concepts.

US-style social entrepreneurship has its roots in venture philanthropy, not co-operative economics.  Moreover, it is likely to increase its influence for as long as the social investment industry continues to grow.  US-style social entrepreneurship relies on grants, donations and support from the wealthy (either individuals, businesses or the state) for its capital base.  It has no model for breaking dependence on state and private sector wealth to develop independent financial or social capital.  It, therefore, lacks a business model that is politically coherent and socially sustainable.  Co-operatives, in contrast, rely primarily on members’ savings, community and worker share capital as well as trading income to create a coherent economic and political strategy for independence.

The New Labour government, unfortunately, gave into charitable trusts and numerous funding bodies during the consultations on the Community Interest Company (CIC).  A fudge was born to satisfy both charitable trusts and government interests, and this fudge is now been carried forward into the Social Enterprise Mark (SEM) evaluation criteria.

The new research paper published by myself and Cliff Southcombe (downloadable from http://www.socialexchange.org/apps/documents/) argues that a trading charity or voluntary organisation can obtain the SEM without changing either its labour relations or systems for wealth creation / distribution.  In contrast, co-operatives and mutuals are barred from obtaining the SEM unless they adopt three charity-like characteristics: ‘social objects’; a ‘beneficiary group’; and an ‘asset lock’.  Concepts from the world of philanthropy have become central to SEM.  Co-operative concepts, on the other hand, have become optional.  A sizeable proportion of participants on co-operative and social enterprise courses at Sheffield Hallam believed that the balance will have to be reversed if it is to thrive in Europe, and this creates the incentive for more research.

The next stage of the research (comprising both interviews and a practitioner survey) will examine the extent to which the SEM reflects the entrepreneurial aspirations of co-operative owners and social entrepreneurs based in the UK.  Practitioner support for social enterprise concepts developed in the 1990s will be compared to those embedded in the Social Enterprise Mark.

Watch this space for the results of future research…

By Neil King, CERT and SEYH Board Member

In the beginning...............when social enterprise first appeared from the primal sludge of a worldwide recession in the late 1980’s who supported those fledgling businesses?

Was it the public sector? Maybe the chambers of commerce dashed to assist these new players? Did the mainstream business support organisations rush to develop new ways of working with them? Or maybe the local authorities clamoured to help?

No – actually the majority of them dismissed the social economy as an unwanted child of the co-operative movement and dismissed the whole movement out of hand – after all it wasn’t “proper” business.

A very small number of independent support organisations not only created an environment where the sector could be incubated and encouraged to grow but also sought to provide a high level of business support in a niche market. Often the support organisations were created out of co-operative development agencies or other third sector organisations.

Starting from scratch these agencies developed products to meet market need, sourced and trained staff to the highest standards and created new and innovative ways of funding and resourcing the sector. They established regional and sub regional networks and developed training packages and carried out research on the sector.

Out of these organisations rose some of the best and most successful social enterprises we see today – organisations that have had such an impact in their communities that they are now becoming a central part of government policy and seen as a real catalyst for change.

Someone once said ‘There are two sorts of leadership. One is where you go in front and lead from there. The other is where you wait and see where people are going and then run around to the front and take over.’

In recent times the latter approach has become the case in providing business and development support.

The Business Link network declared that it was going to support these businesses based on the rationale that they were for the most part standard businesses and so could be assisted using standard business support techniques. When this proved not to be entirely accurate they established specialist units to work with social enterprises. Finding that existing staff could not work effectively with these strange new organisations many eventually went back to the original support agencies and sub contracted them to undertake the work.

Every area that has received money from the Local Enterprise Growth Initiative found themselves needing to address the social economy as part of their applications for funding and of course turned to the independent support organisations for guidance. Once the funds were secured many (though not all) simply started delivering the support themselves.

Duplication has been rife – banks, social housing organisations, the health sector and many, many more jumped onto the enterprise support bandwagon almost always without being able to offer the requisite skills and experience a social enterprise should expect.

So where are we now?

Amazingly we have suddenly found ourselves in a massive void! Since the money for social enterprise business support has dried up we suddenly find that so has the support.

Business links are only able to offer support through their mainstream provision.

Other sectors are withdrawing from supporting the social economy or are looking at large scale externalisations rather than grass roots development and the gaping policy gap that is the Big Society is just making things worse.

The Local Enterprise Partnerships have been tasked with supporting the sector but to-date have not fallen over themselves to even get the required third sector representation on their boards.

But guess whose phones are still ringing? Yes - the independent support organisations who have been left behind in the rush for social enterprise support funding are still there and still trying to help – only now there is no resource.

Just a thought in conclusion. All of the biggest and best social enterprises came into being before the mainstream support organisations even recognised the social economy as relevant. Who helped that to happen?

All of the mainstream organisations eventually recognised that supporting social enterprise was not like any other business support. Who did they turn to?

Are we in danger of losing the very best support organisations and if we do where will we capture that expertise from in the future?

Here, I just wanted to say a few words about my second week, which was packed by events such as the Co-op and Social Enterprise Summer School, as well as other regional functions.

I attended the Co-op Social Enterprise Summer School on 29 and 30 June, 2010. We had a seminar which was delivered by Dr. Rory Ridely-Duff, a senior lecturer at Sheffield Business School, whose research area focused on the social enterprise. From his lecture, I must say that this seminar was a useful platform for those who have already stepped into the field to acquire further knowledge on its sector. The seminar was conducted in a form of tutorial group with 6 to 7 persons, where you can have free talks on debateable issues and you are free to raise your concerns or share your experiences on the relevant issues.

Frankly, before my intern at SEYH, I knew little about social, which was known as the “third sector”. My initial thought on social enterprises were that they merely some small firms launched by some non-profit/government organizations to help the minorities to be employed. When I started my work in SEYH, I noticed that the establishment of social enterprises and the development of the civil society have been built upon much greater than my expectations. I have had many chances to get along with different social enterprises and their networks during my work in SEYH. However, sometimes I really do feel sorry that I understand the so little of this sector, even though I am working in a regional network developing organization. In most occasions, people from social enterprises not only discuss about whether or not setting a social enterprise is a good option for a successful business, but they are also anxious in how to operate the social business in a sustainable manner. Loads of information has come across to my mind through hearing them talk, and as a result has sometimes confused me to an extent.

I really hope that eventually I will have a better chance to get a more systematic idea of the third sector operation and its governance. Thanks to the co-op and social enterprise summer school, it helps me to understand relevant issues and inspires me for the further self-learning.

On the first day of the Co-op and social enterprise summer school, Rory introduced the idea of mutuality and theorised the third sector. We had an inspiring discussion on the topics, like the nature of civil society, changes in the third sector organizations, and the contexts of the third sector. In a documentary which he showed called “the Corporate”, triggered some sparks in my thoughts. This documentary presents the existence of corporate and the influence that they have brought to modern human’s living. Sometimes, corporations do frustrate people, especially in those developing countries, by exploiting their work forces at an extraordinary low labour cost. The documentary gives me a vivid picture of the shortcomings of the corporation world. It is probably the high time for social enterprises to step in for a sustainable community.

On the second day, our discussion focused on the challenges in governing the social enterprises. Rory showed us several models of governances and charities, and we further discussed the democracy in social firms. The discussion has totally changed my understanding on social enterprise operations. Social enterprises need not to be run under several fixed rules or ways. Operating a sustainable social business requires a clear multi-stakeholders targeting, where you can choose to cater for some specific groups of minorities or concern the mass within a region. Rule setting within the organization is another key issue. It could be flexible as long as it is clear and fits for the purposes of your organization.

Through my experience here thus far, I really hope that my university could offer a similar course on this particular subject. We students from Hong Kong have been educated with the fineness of the private economy since secondary school. I cannot deny that I was not enough experienced at that age to criticize what we have learnt from class. This knowledge constitutes a part of our faith, belief, and ideology unwillingly. Thanks to the summer school and SEYH, it opens a door for me to think about the other ways of the business; beyond the private sectors of the economy. Businesses need not to be privatized, and profits are not necessarily the ultimate goal of people. I really hope those who are interested can take the information I have learned and share your ideas with me.

Lily