Social enterprise, fad or future?

By Elyssia Dunmore

Having a name that is a mix of both third sector ‘social’ and private sector ‘enterprise’ means for some, social enterprise is a concept that is hard to reconcile.

Described as having a focus designed more around solving social or economic issues as opposed to generating shareholder profits, it is understandable why many would be quick to relegate social enterprises purely to the third sector. However, as the ‘State of Social Enterprise Survey’ indicated recently, they can be so much more.

Financially Savvy. With massive cuts to funding availability, long gone are the days of ‘shaking the tin’ and sole reliance on grants being practical. Diversifying from the traditional charity model, 27% of social enterprises generate income by trading with the public. Existing in both the goods and services industry, social enterprises venture into areas as varied as paint recycling and restaurant chains, indicating the inclusion of ‘entrepreneur’ in the job title is well deserved. Although many social enterprises were born out of times of financial uncertainty, the 47% that have increased turnover in the last 12 months alone show commercial resilience beyond some private sector organisations.

Alternative Thinking. As opposed to being drawn to already established areas, social enterprises see the long-term benefits of opportunity creation in less affluent communities. 28% currently operate in the UK’s ranked most deprived areas. By not only supporting disadvantaged groups (69%,) but also proactively providing employment in 44% of cases, the results generated are far reaching and go beyond purely economic by building confidence, skills and employability.

Diverse, not only in terms of gender with 51% of UK social enterprises having majority female workforces, but also in culture. The number of BAME led social enterprises stands at 12%, merely 0.9% under the national BAME proportion of the population. Reflective businesses with an awareness of community needs can be seen to be more sustainable, with customer loyalty more freely given, they act as aspirational business models.

The world of social enterprise however can be treacherous to navigate. Enterprises with specific missions may overlap or not appeal to all. Additionally, without the benefits of large funding reserves or shrewd financial knowledge synonymous with the private sector, this can create vulnerability to failure. Also, arguably still a general lack of clarity around social enterprise operations exists, meaning maximum possible benefits are not yet being achieved.

Ultimately however, the 25% increase in social enterprise numbers in the last 3 years suggests they are not merely a fad, but a continuation of a growth that shows no indication of slowing.

They have been endorsed by banks via accessible start-up funding and accepted by Government through investor tax relief incentives. Generating 13% more turnover than SMEs in the past 12 months, it would seem social enterprises are emerging as very real competitors. Further and fundamentally showing us that the main motivating factor of a business doesn’t need to be money, to make money.