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Social enterprise entrepreneurs emerge

Increasingly, an organisation’s objective is not just profit, but social or environmental change. Frequently, clients’ investment propositions are social or environmental impact, alongside good returns for investors and owners.

Social enterprise vs corporate social responsibilty

Corporate Social Responsibility, CSR, became popular during the 1960’s. However, the issue gained prominence in the last 15 years. International companies adopted the term to show they were serious about improving the communities around where they operated.

Traditional CSR programs are reactionary. The drivers are mainly external, not internal.  Companies typically launch such initiatives to respond to employees, customers, regulators and investors’ concerns about the company’s conduct.

Cynics view CSR as part of a large company’s marketing function. The initiative’s objective is to enhance reputation, rather than to deliver results. Hence, the growing number of social enterprise entrepreneurs is partly due to large companies’:

  • Failed CSR policies;
  • Failure to address sustainability;
  • Focus on short term gains.

Social enterprise entrepreneurs personally ensure their business delivers a positive social or environmental impact. Large companies add-on a CSR policy that hopefully shows minimal negative impact.

Social enterprise adoption

Social Enterprise UK’s 2015 survey identified around 70,000 UK social enterprises in the UK that:

  • Contributed £24 billion to the economy;
  • Employed nearly a million people.

Nearly a third of the 70,000 social enterprises were “start-ups”. This suggests a growing number of new social enterprises.  Startups.co.uk is the leading online resource for starting and growing a business, and said:

  • “With technological innovation and the expansion of social enterprise support,
  • 2015 looks set to be the year for the entrepreneurial superhero”.

We see young dynamic entrepreneurs who regard the “profit with purpose” model as rewarding because it’s about:

  • Creating social good;
  • Leaving a positive energy to impact on future generations; and
  • Not just creating shareholder value.

These social enterprise entrepreneurs measure not only profit, but how they made that profit and their impact: e.g. pollution of the environment, health impact of sugar, etc.  They believe that businesses should not:

  • Distance themselves the consequences of their operations;
  • Leave tax payers or governments to pick up the bill for their negative outcomes.

Some commentators now call for all businesses, large and small, to redefine themselves as social enterprises. Firms with a social cause stand out. The public notices them. The public responds to their narrative.

Social enterprise business assistance

There are angel networks that support social enterprises, e.g. Clearly Social Angels.  Grants and awards are available from e.g. Nesta  and Unltd, as well as many other charities.  There are a plethora of incubators and accelerators, e.g. Bethnal Green Ventures.

There are many notable social enterprises. In the UK examples include:

Social enterprise legal structures

There is no legal definition of what constitutes a social enterprise/business. However, you can choose from a variety of legal structures. Nevertheless, it is not the legal structure that makes an organisation a social enterprise. It is the business’ activities and objectives.

There is a spectrum. At one end, are for-profit companies with commercial goals. Charities occupy the other end.  Between them is a broad range.

Legal structures adopted by social enterprises

There are a wide range of possibilities:

  • Unincorporated Association, perhaps also a registered charity;
  • Company limited by guarantee perhaps also a registered charity;
  • Company limited by shares;
  • Community Interest Company, limited by shares or by guarantee;
  • Industrial and provident society.

Each structure has advantages and disadvantages. The appropriate structure for you depends on:

  • Future funding requirements;
  • Income generating opportunities;
  • The extent to which members receive profits.

Nevertheless, all structures:

  • Trade for a social and/or environmental purpose;
  • Possess a clear  “reason for being”, or “mission”; and
  • Define:
    • The difference they make;
    • Who they help;
    • How they will achieve this;
  • Set rules for
    • Profit distribution/reinvestment;
    • Accountability and transparency.

 

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