When York St John University asked us to work with them on understanding the social enterprise sector in York, my initial response was “how are you defining social enterprise?”.
See for me, social enterprise means something completely different to everybody. It’s a bit like art, or architecture – so subjective. We all have a gist, but who’s view is right? Even the professionals disagree: we collected definitions from Oxford University’s Skoll Centre for Social Entrepreneurship and Creating Economic Space for Social Innovation spaces; the Government’s Legal forms for social enterprise; national sector body Social Enterprise UK; and British Council. All of whom had similar, but differing interpretations, which makes the whole job of self-identity so much harder for us. By analysing these definitions, we came up with our own criteria, for the purpose of this study:
Social Enterprises are nothing without the people behind them. From the leaders who live and breathe their social purpose, through to their supporting team who buy into the ethical goals and aren’t just there for the monthly pay cheque. It includes the volunteers who dedicate their time to support the common goal, and the very customers who purchase the enterprise’s services or products and believe in ethical consumerism. So for our definition, we felt that people were the first and foremost important factor – does the leader live and breathe the organisation’s values? This alone, however, doesn’t differentiate us in any way from the charity and not-for-profit sector.
Not only should a social enterprise have a very obvious social benefit, but it should also be very open and transparent about what that benefit is. This is completely achieved through an asset or mission lock – a legal guarantee that you will stay true to your social purpose for perpetuity or transfer your assets to another equally purpose driven organisation. So, does the organisation have a clear social purpose locked in? But again, this purpose is wholly true of the charity and not-for-profit sector. But here’s where the road begins to fork…
A dirty word in the charity sector, and I’ve personally come under attack from other groups and individuals in York for my insistence that profit isn’t a bad thing. And I stand by that statement. It’s what you do with the profit that differentiates social enterprises from the business sector. I believe strongly in profit with purpose. It creates sustainable models of social impact, not reliant on hand outs. A good social enterprise should increase it’s profits every year and be able to demonstrate how it has reinvested more than 51% of this net profit into furthering its mission.
And the final ‘P’ that really differentiates us from the charity sector and aligns us more directly with the business sector is how we generate our income. We sell products and services in both business to consumer (B2C) and business to business (B2B) relationships. A good social enterprise will do this very successfully, and will be flawlessly commercial in its strategies to target audiences, position itself in the market, evolve and grow. So the final question is, is the majority of your income made from selling a service or product?
To qualify as a social enterprise, I therefore feel that all four of those criteria need to be met. I was amazed at how many people didn’t think they were a social enterprise, or conversely thought they were when they’re clearly not. And of course, as I said at the start of the blog, there are so many differing views on what is and isn’t a social enterprise – mine is just another to add to the list!
But why does a definition matter? Who cares? You might be thinking “We’re doing good stuff, let’s just get on with it!”. And you’d be totally right. But this exercise really helped me solidify in my mind what makes a social enterprise, so I thought I’d share my train of thought. And by understanding that, it also allows me to direct resources, energy and support to the right people.
What do you think? I’m sure you’ll be reading this either nodding in agreement, or thinking “no, you’ve got it all wrong!” or “You’ve missed out this and this!”. Feel free to drop me a line to share your views, or engage with us on social media with the #profitwithpurpose hashtag and @socialvisionuk handle.
You can stay up to date with our social enterprise project with York St John here