Social Enterprise Workshop Report

Social Enterprise: the key to tackling poverty and creating sustainable cohesive communities?

December 2007

Prepared by Sarah-Anne Muñoz (MA, MSc, PhD, FRGS)

INTRODUCTION

On 22nd November 2007 the Sustainable Development Research Centre (SDRC) hosted a half-day workshop in Horizon Scotland (Forres) that considered the theme:

Social Enterprise: the key to tackling poverty and creating sustainable, cohesive communities?

Social enterprises are organisations that trade in order to meet a social or environmental aim. As many are initiated by community action, they signify the disadvantaged community claiming ownership over its own regeneration. Thus, they bring wider benefits such as community cohesion and sustainability to deprived areas. Many, for example, increase employment opportunities for marginalised groups and set out to tackle social exclusion.

This workshop explored the role that the third sector plays in the regeneration of deprived areas and, in particular, their association with processes of renewal and regeneration and their contribution to tackling poverty and social exclusion.

The workshop brought together academics, policy-makers and social enterprise practitioners interested in poverty, regeneration and sustainability. Delegates listened to presentations from the research and social enterprise communities. This led on to a structured discussion in which delegates debated the role that community-led social enterprises can play in processes of renewal, community cohesion and integration. The discussion culminated around how social enterprise research and support can progress.

The remainder of this document summarises the main themes to emerge from both the presentations that were delivered and the subsequent discussion involving all delegates.

HOW DO SOCIAL ENTERPRISES HELP TACKLE POVERTY AND DEPRIVATION?

Regeneration

Delegates debated the various ways in which social enterprises help tackle poverty and deprivation. Delegates suggested that the added value of social enterprises is often linked, in various ways, to the tackling of poverty and deprivation as it is often associated with facilitating community regeneration and helping marginalised and excluded groups.

Delegates highlighted that social enterprises often tackle deprivation through their focus on neighbourhood renewal. This can come in various forms – from community renewal to social, economic and physical renewal. Delegates felt that the majority of physical regeneration has been led by private developers with a corresponding focus on economic gain. It was felt that there is scope for social enterprises to become more involved in the physical regeneration of deprived neighbourhoods and create added value through such activities.

It was felt, however, that social enterprise is not the only way to tackle poverty and deprivation. Delegates stressed that the business model should, first and foremost, be suitable to the service that the organisation is there to achieve and that this may not be the social enterprise model in every instance. It was suggested that it would not be helpful for all voluntary sector organisations to strive to be social enterprises and that there is a useful place for charities to work within deprived communities.

Defining Social Enterprise

The discussions on how social enterprises tackle poverty and deprivation led on to a debate focusing around the definition of social enterprise. Delegates felt that before the true impact of social enterprise on the alleviation of poverty can be assessed, the research community needs a greater degree of consensus on the definition, or essence, of a social enterprise.

Delegates echoed opinions that are often heard in academic and wider literature concerning the problems of defining a social enterprise. It was suggested that there is a general lack of knowledge about social enterprise and that many people are confused about the characteristics of such organisations. The lack of definition and knowledge about the sector partly relates to the interchangeable use of the terms ‘social enterprise’ and ‘social economy’, despite the fact that they have different meanings.  It was felt that the social economy is broader than the term social enterprise and includes voluntary organisations such as charities that have a trading arm; co-operatives and mutual interest organisations. Delegates would like to see ambiguity removed and for the general public to understand that social enterprise is a particular business model operating within a wider social economy.

Thus, it was concluded that ‘social enterprise’ is currently not clearly defined. However, some delegates debated whether it is worthwhile to try and define social enterprise and felt that we should rather be content with its multiplicity and fuzziness. Yet other delegates felt that a level of definition is necessary, particularly in order to foster peer-to-peer support for social entrepreneurs and the establishment of a successful social enterprise sector that is identifiable to both the general public and the public sector.

Delegates agreed, however, that the definition most widely used within the UK is that which stemmed from the Department for Trade and Industry (DTI) with most definitions agreeing that the re-investment of surpluses in order to meet social or environmental objectives is a key distinguishing characteristic of social enterprises. The DTI definition also states, however, that at least half of a social enterprise’s income should be derived from trading. Delegates felt that this is not useful if used as an inflexible boundary because the proportion of income derived from trading often fluctuates above and below this level from year to year, even for well-established social enterprises.

Delegates also discussed the subject of definition in specific relation to the operation of such organisations within deprived communities. Some felt that the term ‘enterprise’ can be intimidating to those living within deprived communities who feel that they do not have the expertise to become involved in a business. It was felt that stressing the word ‘enterprise’ in any definition, therefore, could hinder the establishment of community-led organisations using the social enterprise model in deprived areas. It was suggested, however, that increasing knowledge of the potential of the social enterprise model within deprived communities would lead to it being adopted more readily and gaining more support in deprived areas.  

HOW DO SOCIAL ENTERPRISES HELP CREATE SUSTAINABLE, COHESIVE COMMUNITIES?

Policy Context

Delegates felt that the policy context within which social enterprises operate is central to their ability to create sustainable communities. Many felt that recent political changes have led to an increase in the opportunities available to social enterprises with increasing governmental interest in the role that social enterprise and entrepreneurship can play in deprived areas.

Delegates felt that there is a need for a policy focused on a long-term strategy for social enterprise development and support in order to increase the work they do within deprived communities. A long-term strategy may be better placed to incorporate an awareness of the long-term benefits that social enterprises can bring to marginalised and excluded groups. Other delegates felt that social enterprise practitioners should be offered the opportunity to be involved to a greater degree in the design of services in conjunction with local authorities – rather than just responding to tender advertisements that offer limited scope for innovation. It was felt that in order for this to happen there will need to be support, and a desire to put this into place, at various levels of government. However, involving social enterprise in service design may lead to the development of services that better meet the needs of deprived communities. It was suggested that social enterprise support organisations could act in a leadership role to encourage a movement towards the public sector buying from social enterprises to a greater degree.

Volunteering

It was discussed that Scotland has a strong volunteer base which is a huge advantage for social enterprises. It was pointed out that using volunteers in an organisation can help a social enterprise deliver its services and generate added value. It was suggested that involving those from marginalised or disadvantaged social groups and communities within social enterprises as volunteers can offer them a part to play in the regeneration of their own communities. It can also act as a first step that leads on to an employed position or encourages the individuals to start their own social enterprises. Many businesses rely on volunteers initially, and then gradually start to employ people.  An introduction to social enterprise in a voluntary capacity can take away some of the fear of ‘enterprise’ mentioned earlier in this report.

Delegates discussed that it is not possible to get disadvantaged people to become involved in community regeneration until their own home situation is stabilised.  Once this has been achieved, they will be able to focus on improvement in the wider community.  It was felt the best way to get the socially deprived to participate in community regeneration is to start as volunteers so that there is not too much commitment, and it is therefore not such a scary step.  Involving as many people as possible provides community identity and social cohesion.  It can lead to an increase in skills, confidence and self esteem for all involved.

Funding

There was much discussion surrounding the role that grant funding can play in social enterprises’ ability to provide services in deprived communities. Although it was generally agreed that social enterprises strive to meet their social goals primarily through traded income, some delegates stressed that the opportunities affording by grant funding should not be completely dismissed by social entrepreneurs. Delegates felt that there is a great deal of pressure for social enterprises to move away from grant funding and be completely self-sufficient through trade.  It is felt by some social enterprise practitioners, however, that without any external support their organisations would not be able to survive. They felt, therefore, that social enterprises should not move away completely from grant funding because, in particular, it can be useful when the enterprise wants to expand or try something different because it mitigates financial risk for the organisation to a certain degree. This may be particularly useful for those organisations looking to provide services to deprived communities in innovative ways.

Delegates felt that social enterprises should not dismiss the option of grant funding as being ‘un-business-like’ because private businesses can also receive grants, e.g. start-up grants. Therefore, the use of grants to a certain degree does not detract from the ‘enterprise’ side of a social enterprise. It was pointed out that in the United States, social enterprises often consider grants as earned income because of the amount of time and effort that has been put in by their staff to winning the grants. However, many delegates felt that social enterprises should compete for business grants rather than against charities for grants aimed at the voluntary sector.

Contracting

Delegates felt that social enterprises have a contribution to make to the creation of sustainable, cohesive communities by playing a greater role in the delivery of services contracted out by the public sector. However, delegates lamented that the public sector often appear to view social enterprises as a cheap option and, thus, many social enterprises are losing money by running contracts that are not sustainable.

Therefore, in order to be able to contribute in a meaningful way to the provision of services in deprived communities, social enterprise will need to gain a sustainable price for their services from the public sector. It was discussed that social enterprises must use full cost recovery with the generation of a surplus built-in. However, this will be successful only if the public sector is willing to pay for social enterprises’ surpluses.

Delegates also raised the issue of the inclusion of social clauses in contracts. It was felt that this would be one way to recognise the added value that social enterprises bring when providing services to deprived communities. However, delegates felt from their own experience that there has not been a wide-spread adoption of these within the public sector. It was felt social clauses would benefit social enterprises because it would shift the emphasis away from them proving they are better than the private sector towards private companies being forced to prove that they can offer the same level of added value and community benefit as social enterprises.

Community Issues

Delegates debated possible strategies for social enterprises to become more involved in the generation of sustainable, cohesive communities. It was suggested that instead of trying to change where money is spent within poorer communities, it would be beneficial for social enterprise to run things such as betting shops and fast food outlets. This would mean that the money spent in such establishments stays within the community and surpluses can be invested in community projects. To succeed, the people involved in such organisations would need to have a fusion of community and business skills.

Some delegates felt that for social enterprises to make the maximum impact on deprived communities, their efforts need to focus on geographically bounded communities, not just social groups. It was discussed that opportunities and mechanisms should be provided to place-bounded communities to take control of their own regeneration as this will be more successful than forcing them to conform to an externally imposed model of regeneration.

WHAT ARE THE KEY DIRECTIONS FOR FUTURE RESEARCH ON SOCIAL ENTERPRISE?

There was a general consensus amongst delegates that there is a need for more research in order to gain more understanding of social enterprises and social entrepreneurs. There was a desire, for example, to understand more about the drivers of entrepreneurialism and how successful social enterprises operate and function.

Delegates felt that research could provide more empirical evidence to demonstrate the benefits of social enterprise. In particular, research could provide empirical evidence of the degree to which social enterprises help tackle poverty and deprivation, which would underpin the work of social entrepreneurs.

This led the discussion on to consider the use of Social Return on Investment (SROI) and Social Accounting within social enterprises and whether they can be used to measure added value. Delegates felt that if such techniques are to be truly successful at measuring impact both social entrepreneurs and the public sector need to recognise their worth. Many felt that at the present time, social enterprise practitioners do not see SROI as worthwhile as the results will not be viewed as valuable by anyone outside of their own organisation. Delegates pointed out, however, that SROI results have the potential to be used as a marketing tool but they need to be presented in an accessible format that will be easily understood.

An additional key avenue of research suggested was to find out exactly what the public sector requires from the social enterprise sector in order to make procuring with them easier. 

It was also discussed that it would be interesting to determine through research how successful government policies are at achieving their aims of supporting and fostering a social enterprise sector.

WHAT KINDS OF SUPPORT DO SOCIAL ENTERPRISES NEED?

 Training

The key area of support for social enterprises that delegates discussed was that of training. It was discussed that it is important for those involved in the running and control of social enterprises to have the appropriate skills and training in the issues that will affect the business. Delegates discussed that there is training available for social entrepreneurs but that this can be expensive and particularly costly for those based in more remote and rural areas who must also add on the cost of travel and accommodation when attending training courses outside their immediate vicinity. There is money available for sponsorship, but there are a lot of voluntary organisations that compete for the same funds.  However, delegates felt that training was essential for social entrepreneurs – especially in order to marry their good ideas with business sense in order to make a successful organisation.

Other Forms of Support

There were a number of other ways in which the delegates felt social enterprises needed support. It was thought important, for example, for social enterprises to receive business development and financial planning support for the long-term sustainability and success of their organisation.

It was discussed, however, that networking between social entrepreneurs is particularly important and that it would be beneficial for events to be organised that would facilitate this. Networking would not only provide peer-to-peer support but also allow social enterprise practitioners to feel part of a wider community and develop the identity of the sector. It was mentioned that there are Social Enterprise Networks in Scotland that provide peer support. It was also discussed that sharing best practice case studies is very useful, although it was stressed that care should be taken because case studies often only show the successful projects and not the ones that failed – even though important lessons could also be learnt from these.

CONCLUSIONS

The delegates generally agreed that social enterprise has an important role to play in the alleviation of poverty and in providing tailored services to deprived communities. It was felt that social enterprises are particularly beneficial because of the added value that is generated by such organisations and the multiple ways in which their activities can help marginalised and excluded groups.

Although delegates did not see social enterprise as a panacea for poverty, it was felt that they can play an important part in processes of regeneration. It was suggested, however, there is further scope for social enterprise to be involved in physical regeneration such as the construction and refurbishment of properties and community facilities.

Delegates discussed how the policy context within which social enterprises operate can open up opportunities for them to work within deprived communities. It was highlighted that the public sector is increasingly looking towards contracting organisations that can demonstrate added value, to work within disadvantaged areas. However, it was suggested that a long-term strategy from central or devolved government aimed at supporting social enterprise would help such organisations increase the amount of work they do in deprived communities. Delegates also felt that grant funding should not be dismissed by social enterprise as it can be a particularly useful tool for funding innovative services and expansion into new areas.

Delegates agreed that there are some key avenues for future research on social enterprise that centre on its relationship with poverty alleviation. Most felt that greater evidence is needed of the impacts made by social enterprise in deprived areas. Some felt that for this work to be carried out, the research community needs to achieve a greater degree of consensus on the definition of a social enterprise; whilst others felt there is more value in maintaining a loosely-bounded concept of social enterprise.