E-Magazine
Wray Irwin
Now the election is over and some semblance of normality returns, the new government has swung into action to promote their idea of the ‘Big Society’. Whilst at present for many commentators the concept remains woolly and disjointed the roles of social enterprise and social entrepreneurs have been promoted as key drivers for achieving the strategy.
But what are social enterprises? And how are social entrepreneurs different from commercial entrepreneurs? And why are they being seen as so important?
In the UK, social enterprise is defined as ‘a business with primarily social objectives whose surpluses are principally reinvested for that purpose in the business or in the community, rather than being driven by the need to maximize profit for shareholders and owners’. This definition highlights that we are firstly talking about ‘a business’, and that the driver for that business is not to return a dividend to shareholders but to make a significant impact in addressing social and environmental problems faced by society.
It is the success of managing the tension between running a sustainable business and ‘doing good’ that marks out the difference between the social entrepreneur and the commercial entrepreneur. Doing good is not always profitable, but unless impact is achieved the raison d’etre for the enterprise disappears and unless profits are made the business disappears. Social entrepreneurs are therefore required to be major innovators in the true Schumpetan meaning of the word; innovating across new markets, product/service development, working practices, and business models to ensure that this balancing act can be achieved.
But is this really new? The history of the social enterprise movement for many dates back to 1841 with the formation of the first industrial co-operative society in Rochdale. In a direct challenge to the practice of adulterating food, and over charging workers by fixing weights and measures, the Rochdale pioneers guaranteed quality and value for money and more importantly developed a business structure which allowed those that shopped with them become members and share in the profits of the business, a practice which continues today through every Co-operative store. Today there are over 55,000 social enterprises contributing in excess of £8bn to GDP.
Social enterprise is not only a UK phenomenon with examples to be found on every continent of the world. In the US, social enterprise is more commonly referred to as the ‘Non Profit Sector’ with its roots in the American Revolution and a cultural hostility to royal power and state authority. Whilst the Non Profit sector has strong links with the US Government and is seen as a key partner in the delivery of welfare programmes, this anti-state attitude persists and the term ‘independent sector’ is also used to describe the sector.
In Europe the term ‘Social Economy’ is more often used to describe those organisations which are social enterprises. A much more defined group of organisations, the ‘social economy’ includes co-operatives, associations, and mutual societies which have developed to allow communities to come together to provide products and services they need to improve their lives. Whilst in Spain there is no formal definition of a social enterprise, the social economy has a constitutional right to State support to enable them to start and grow and accounts for over 20% of employment. Spain also has one of Europe’s largest social enterprises, the Mondragon Corporacion Cooperativa, which employs over 83,000 people and has a turnover of in excess of £15bn, delivering a range of services including banking, insurance, manufacturing, and even running its own University with over 4,000 students. All of this from humble beginnings in 1956 producing paraffin heaters from a small workshop.
Even in communist counties we can trace forms of social enterprise activity which in the past supported local communities through trading activities. For example, during the 6th and 7th century Tang dynasty in China, agricultural and mutual aid societies were evident engaging local producers to work together to get the best prices for their produce but also to ensure that the benefits were felt across the community.
Due to the lack of consistent definition it is impossible to gauge the total number of social enterprise organisations, but if we look at the figures from the International Cooperative Alliance which represents just one part of the social enterprise sector, they have over 240 organisations in 90 countries representing over 800 million members either as employees, customers, or by association. The sheer size and potential of such a large international sector has led the United Nations to declare 2012 the International Year of Co-operatives, which will promote cooperation and the benefits of a social enterprise trading business.
Whilst we in the UK ponder what a ‘Big Society’ might be, its worth thinking that wherever you are in the world there will be social enterprise activity of some kind. Whilst they may all look different the one thing that ties them together is a commitment of passionate people who want to change the world and make a difference to society. Entrepreneurs in the truest sense of the word.
Wray Irwin, Northampton Business School
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