Sector star demands action on identity

matt.chatterley · 15th January 2009, 02:57 PM

Here goes - this is partly self promotion, partly genuine question and partly waking the forum up, because it has been quiet!

We are involved in two (arts and crafts related) projects, which are probably not social enterprises. However, they have some (albeit lame?) connection to such a model. I'd be interested in hearing how others would define a social enterprise - I would not really dub either of these ventures as one - because I don't feel they are "altruistic" enough.

Yes, we tout benefits to the community we are working with, but at the end of the day, we are clearly aiming to pay the bills, and make a modest return.

1. Collaborative eCommerce - an eCommerce store which will be set up and administered by us, with another local company handling the shipping of goods (similar to a drop-ship model in some ways). Members must meet certain criteria (locally produced or manufactured goods), they sign up, pay a small monthly admin charge, and small commission - proceeds are split between ourselves and the people handling the orders - after a reinvestment is made for advertising.

2. New link in my signature - a crafts community site, which will self-fund via advertising. We are less interested in making a return from this, although the site must financially support itself (and pay for the time invested in it, at least at 'cost') - and more interested in the promotional opportunities this offers the crafts community AND some of our customers!

Thoughts..?

At what point do you cross the line into a social venture? In my head a key element would be that the venture is undertaken in order to benefit a community or group, rather than explicitly because of financial imperatives?

masyomo · 15th January 2009, 04:20 PM

Having set up and run a community interest company for the past couple of years I'm thinking that the term "social enterprise" is more and more a nonsense.

I'd say that broadly you're right with the definition it needs to be an organisation primarily established for community gain, and not profit. There lies the nonsense though - any organisation that wants to do well needs to seek to make sufficient profit to carry out its activities. So I see no problem with an organisation that sets out to make a profit, but promises that it intends to put that profit towards community benefit.

If you accept that, there's maybe then a question of how much of that profit should be put back into the community? It could be reasonable for example that you decide its in the best interest of the organisation to keep on making a large profit so that in the future you're able to benefit the community even more. On the otherhand you may feel you shouldn't build up profits as this would be seen as unethical, yet arguably this prevents you from being capable of making an even bigger impact in the future. So where do you draw the line? Is Shell a Social Enterprise because it uses some of its profits to support community projects?

Bottom line for me is I don't think it matters. Its been a trendy buzzword for a while, but actually what really counts is encouraging organisations big and small to 1. consider the impact they make on society, 2. to encourage those that are able, to make a positive contribution to society. I think some sort of 'Community Contribution Policy' along the lines of how many organisations now have an 'Environmental Policy' could probably have much more impact than the wishy washy world of 'social enterprise'.

adrian.ashton · 20th January 2009, 12:29 PM

well - this is a can o' worms...

I've worked on various social enterprise support programmes and everyone (i.e. different government bodies, trusts, etc) seem to have their own definition and criteria. However, as someone who's been 'doing social enterprise' for over a decade, and being recognised by various regional and national bodies as an 'authority' on them, my criteria is as follows:
1) primarily social aims,
2) income primarily generated from trading
3) an ownership model to ensure accountability and that future members/shareholders cannot distort the founding purposes for exclusively personal gain

this is based on - needing to make money for the sake of achieving the aims, rather than simply for the reason of making more money; and the need to ensure continuity for the enterprise and protect it from being 'hi-jacked' by a minority of people for their own personal benefit.

there's also a number of other articles I've had published available at www.adrianashton.co.uk/articles under 'nailing the jelly'

so - have I provoked anyone enough with the above to stimulate a wider discussion?

Ross McCulloch · 21st January 2009, 10:04 AM

I think point 3 is interesting - "an ownership model to ensure accountability and that future members/shareholders cannot distort the founding purposes for exclusively personal gain"

I wonder if the majority of 'social enterprises' operate in that manner or if a large chunk are still run as private enterprises?

adrian.ashton · 21st January 2009, 02:00 PM

well, most 'legitimate' social enterprises can easily show their ownership model as appropriate by how they are consituted (guarantee company or charity) - however it becomes a bit murky where you have proper social enterprises in what appear to be private ownership (i.e. private and public share companies or partnerships), but in these instances, its still possible to manage the ownership and governance models to ensure that although privately owned on paper, the enterprise exists for a wider public benefit and is safeguarded to do so into the future by 'tweaks' in the governing documents around assets locks, distributions of profits and in some cases by regulatory bodies too.

fascinating as this all is for an anorak like me (who got excited when reading parts of companies act 2006 - the bit about the extension of directors legal responsibilities in relation to the environment, employees, suppliers and the community), I wonder if this is the place to start to get into further technical detail? If so, I'm happy to keep posting increasingly obscure references and case studies (including the S&M club that almost become a CIC...)

Ross McCulloch · 21st January 2009, 02:02 PM

Obscure reference away! I think it's a discussion which need to be had and is largely avoided by many within the sector.

"The S&M club that almost become a CIC..."
You have to tell us about that!

matt.chatterley · 21st January 2009, 02:07 PM

Quote:

Originally Posted by Ross McCulloch

Obscure reference away! I think it's a discussion which need to be had and is largely avoided by many within the sector.

"The S&M club that almost become a CIC..."
You have to tell us about that!

I'm being quiet at the moment, but am here, following the thread with interest - this is an area which, although it doesn't really impact me at all - I'm intruiged by.

For example - I wouldn't personally describe the project I started off mentioning as "Social Enterprise", because ultimately (albeit 100% indirectly), the goal is to make a profit - although this is off the back of publicity, etc achieved - and the project itself, apart from this, might qualify.

So yes! Obscure reference away - and I agree with Ross, you can't leave us hanging on that one..

adrian.ashton · 21st January 2009, 06:51 PM

well, I think the CIC as a model is a nice study owing to several factors including the variances between the detail given in the initial public consultation about how it should work, and then what was encated in legislation.
Subsequently, a key aspect of this - the definition of the 'community of interest' was re-interpreted by the regulator to mean a CIC has to serve a geographical community, NOT a community of interest (i.e. people experiencing disability, or people with no qualifications) which was the original intent. And it was the S&M club's application which caused this (see also - http://www.russell-cooke.co.uk/downl..._structure.pdf and http://www.bateswells.co.uk/Files/News/0752_001.pdf)

lots more background on this, (and in particular the S&M application) via an 'easy listening' interview I gave for the entreprenurses podcast series (available in 2 parts - see links below). These also looked at some of the other legal forms and how different ownership models cause different effects.
http://web.mac.com/busynurse/iWeb/Site/Podcast07.mp3
http://web.mac.com/busynurse/iWeb/Site/Podcast08.mp3
just the thing to download and listen to on the train/bus/boring meeting...

'does that sate your appetite for S&M for now?'

masyomo · 21st January 2009, 07:41 PM

genius! I'm not sure what to make of that. I wasn't aware that communities of interest now had to be geographical, and find that surprising.

We were one of the first to become a CIC - it seemed an ideal model as it allowed us to trade as a company but reassure people that our motives were good. Soon after registering I spoke at an event with the then CIC regulator about the benefits of becoming a CIC. It was during that event when asked questions from participants (and more interestingly listening to responses from the regulator) that I started to seriously question the wisdom at having become a CIC (awkward when you're supposed to be there to promote it!). It seemed to provide plenty of restrictions, but no tangible benefit. When we took on an Accountant, one of the first things he asked was why on earth did we register as a CIC?!

I think Adrians three points are sound. Personally though I'm looking to happily trade as a regular company and will channel our charitable activities through 'our' independent charity. The one benefit I thought we did have from being a CIC was its status, but I don't think anyone was ever remotely interested, except perhaps for being bemused like the bank was when we tried to explain what we were! The crunch time came when having been told we were eligible to apply for lottery funding, and then subsequently putting weeks into putting a bid together, I then got an apologetic call from them to say actually they were confused and we weren't eligible afterall! I gather now this has been cleared up, and maybe eventually there will become tax benefits to operating as a CIC, but for now I wouldn't advise anyone to adopt it as a structure.

adrian.ashton · 22nd January 2009, 11:58 AM

as a CIC, I'll then ask you my standard question that I ask all CICs I meet:

"doutbless you chose the CIC model with some degree of advice and guidance from 'profesionals' and 'experts', but how have you reconciled the powers of the regulator within your governance? i.e. the CIC regulator has the powers to restrict your trading and sue others in your name (amongst others) and without your prior consent or consultation. The CIC model also forces you to have unequal power structures at board level too..."

look forward to your ideas, or requests for clarification on those rather contentious comments...