Frequently asked questions
If you’re new to the world of social enterprise or what to know more about the Social Enterprise Mark, then you can find more information in our frequently asked questions (FAQs), below.
Social enterprise is defined as a business that trades primarily for social and environmental purposes. Social enterprises work in almost every industry in the UK, from health to transport to IT to recycling to education and employment.
Some of them are well known, like The Big Issue, Age UK Enterprises, Eden Project and Bristol Community Health. But there are many more which are not high profile that are working across the UK and beyond to provide innovative solutions to some of the most pressing issues we face. Read social enterprise case studies.
Generally speaking, a social business is not the same as a social enterprise. There is no UK-wide legal social enterprise definition but the criteria of the Mark were developed and agreed by representatives across the social enterprise sector.
When setting up a social enterprise, you can use the Social Enterprise Mark to help you. The Mark’s criteria act as a template and show how a social enterprise operates. We can provide advice and guidance for setting up a social enterprise.
The Social Enterprise Mark is the only international, independent, certification authority that guarantees when a business operates as a social enterprise, using profits or surpluses to improve society and protect the environment, rather than making profits for shareholders or owners.
The Social Enterprise Mark provides social enterprise differentiation from their competition. Customers will recognise that businesses displaying the Social Enterprise Mark have proved they are trading to benefit people and protect the planet, assured that buying from certified social enterprises protects their own credibility. See the directory of social enterprises certified with the Social Enterprise Mark.
The Social Enterprise Mark reinforces social enterprise integrity and ethical values. It shows they are passionate about a better way to do business, part of the social enterprise movement aiming to change how customers buy.
You can apply for a licence to be guaranteed by the Social Enterprise Mark, which is renewable annually. The Social Enterprise Mark Company is a certification authority, providing a licence which acts as a social value guarantee; it is not a membership organisation.
Social enterprises are businesses doing really extraordinary things in new and innovative ways but they have until now been hard to recognise, partly because they work in practically every industry imaginable and range from community enterprises to international organisations.
The Social Enterprise Mark Company believes it is beneficial to our economy, our society and our environment to have a strong social enterprise movement and believes it will grow in size and strength if more people – from customers, to businesses to the government – are able to easily identify what a social enterprise is.
Greater awareness is needed, and as a social enterprise guarantee, the Mark can go a long way to raise the profile of social enterprise and bring it into the mainstream, where it belongs. Social enterprises work to a triple-bottom line (people, planet, profit), providing a sustainable business model for the future.
In response to the Public Services (Social Value) Act, social enterprises can demonstrate social value with the Social Enterprise Mark.
To qualify for the Mark, social enterprises must meet the criteria, which includes proving that between 50-100% of profits are spent on social purposes. The Social Enterprise Mark is the only way to guarantee this, acting as a benchmark when bidding for contracts.
Research conducted by COI on behalf of the Office of the Third Sector in 2008 found that even when pitching the concept of (and words) ‘social enterprise’ to sympathetic sections of the population, there was little recognition of the term and even some scepticism by the public that combining business practice with delivering social good was possible.
Further research suggested that a way to raise awareness would be through a ‘social enterprise identifier’ or ‘a social enterprise brand’. What is now the Social Enterprise Mark came out of extensive testing of different visual models and builds on the pilot in the South West, designed by Rise.
The licence for the Social Enterprise Mark is renewable and payable annually. The Mark provides independent verification that a business genuinely operates as a social enterprise, and also provides marketing advice and support – see the key benefits. The annual cost of the licence for the Mark varies according to the annual income of your business:
|Annual income||Fee (+ VAT)|
|less than £150,000||£350|
|£150,001 – £500,000||£450|
|£500,001 – £999,999||£550|
|£1,000,000 – £4,999,999||£690|
|£5,000,000 – £9,999,999||£1,200|
|£10,000,000 – £14,999,999||£2,000|
|£15,000,000 – £29,999,999||£3,000|
|£30,000,000 and above||£4,500|
If you are a member of Social Enterprise UK, Social Enterprise West Midlands, Plymouth Social Enterprise Network, or Milton Keynes Community Enterprise Network, you are entitled to a 10% discount off your first year’s licence for the Social Enterprise Mark. Likewise if you are a Mark holder, you will receive a 10% discount off new membership to these organisations. Similarly, if you are a member of Social Enterprise Yorkshire & the Humber (SEYH), you are entitled to a 5% discount off your first year’s licence for the Social Enterprise Mark and if you are a Mark holder, you will receive a 5% discount off new membership to SEYH.
If you are a new Community Interest Company awarded the Social Enterprise Mark, you will receive a discount on your Social Enterprise Mark to the level of your CIC registration fee, when requested by you. This offer is valid until 10 September 2014.
Only one discount – the largest one – is claimable.
The primary objective of the Mark is to provide a guarantee when a business genuinely operates as a social enterprise. The Mark develops knowledge and understanding of social enterprises by establishing a social enterprise definition and independent certification to represent businesses trading for people and planet.
The second objective of the Mark is to create a network of social enterprises. Having the Mark will give a social enterprise access to a network that connects them not only with each other, but with consumers and other businesses for trading opportunities.
- Does it have social and/or environmental aims?
- Does it have its own constitution and governing body?
- Are at least 50% of company profits spent on socially beneficial purposes?
- Does it earn at least 50% of its income from trading?
- Can it demonstrate that social/environmental aims are being achieved?
- If the company ceased trading would remaining assets be distributed for social/environmental purposes?
Some Social Enterprise Mark holders decided to modify their constitution or adopt a new one to meet the Social Enterprise Mark criteria and become certified social enterprises. Find out how.
If a social enterprise meets the criteria listed then it is easy to get the Mark. If there are social enterprises that are borderline applications or ones which are not straightforward to assess, they are reviewed by a panel of business, legal and social enterprise experts.
Yes. The licence to use the Mark is granted for one year and Mark holders will need to renew this annually. Some of their organisations details will remain the same which means that renewal is a straightforward process. However, it is necessary to check that the social enterprises are still meeting the criteria to retain the Mark’s integrity.
Government figures estimate that there are 70,000 social enterprises in the UK, contributing £24 billion to the economy and employing at least 800,000 people.
Recent data (The People’s Business, shows “the social enterprise sector in the UK is thriving, with a huge proportion of start-ups and high expectations of growth. Social enterprises are attracting more female leaders and more leaders from Black, Asian and Minority Ethnic communities than mainstream businesses. Common indicators of business success – growth, optimism and innovation – are very healthy among social enterprises compared with mainstream businesses. Social enterprises are more likely than SMEs (small and medium-sized enterprises) to report that their turnover has grown in the last year.”
Your business needs to have its own constitution (eg not be part of a local authority or a sole trader) and in your constitution you need to show that you have clear social and/or environmental aims, and that a principle proportion (50% or more) of any profit made by the business is dedicated to social/environmental purposes, as well as any remaining assets, if your organisation was to close.
You need to show that at least 50% of your income comes from trading.
Q. 50% of my organisation’s profits are distributed to members/shareholders – is there a cap on the maximum share dividend?
No, there is no cap on share dividend, only on profit distribution to members/shareholders (50% maximum). The remainder of the profits must be used for social purpose.
Most of the evidence you need is contained in your constitution and your most recent set of year-end or final accounts, typically field at Companies House/FSA/Charities Commission. We would also like to see an example of any externally verified evidence to show that your organisation is meeting its social or environmental objectives.
Q. Do I need to provide separate pieces of externally verified evidence to show that my organisation is measuring both its social and environmental impact?
No, we suggest that you provide whichever type of impact is most relevant to your organisation and its objectives.
At least 50%.
Trading is defined as income from sales, a contract or service level agreement with defined outputs. Trading excludes grants and donations. 50% traded income is accepted as a way of distinguishing a business from a grant reliant organisation. In relation, to total income generated from trading activities:
1. Where an applicant has a high level of income from the public sector, a closer assessment may be required to confirm this is from contract/s not grant income.
2. If you are unsure whether an income stream is a grant or a contract (trade), consider the following: is it competitively tendered, are costs fully recovered, are there numerical targets, are surpluses retained by the delivery organisation?
If the answer to these questions is yes, it is likely to be traded income.
Mark holders come in all shapes and sizes. We have companies limited by guarantee, community interest companies, industrial and provident societies, companies limited by shares.
Yes, in fact many social enterprises provide ongoing financial support to social or environmental activities and so will never aim to make significant profits.
Yes, if you can meet the trading criteria.
If you are thinking of setting up a social enterprise, now is a good time to look at the Mark criteria. You can use it as an action plan to inform your choice of legal structure and to be eligible for the Mark when you can demonstrate you meet the criteria of 50% of your income from trading.
Tell your customers you are unique: with the growth of ethical consumerism, customers want to buy from a company that puts profits back into the community rather than to private owners, and prefer to buy from organiations that make decisions based on concern for society and the environment.
Ensure social enterprises are separately constituted and can show in their constitution that they have clear social and/or environmental aims, and they have an asset retention clause. Specifically, they should:
- have social and/or environmental aims?
- have it’s own constitution and governing body?
- at least 50% of the company profits spent on socially beneficial purposes?
- earn at least 50% of its income from trading?
- demonstrate that social/environmental aims are being achieved?
- If the company ceased trading would remaining assets be distributed for social/environmental purposes
Renewing your licence could not be simpler – you need do nothing initially!
- One month before your renewal is due you will be sent a reminder email, asking you to advise us of any changes together with payment. The online renewal form asks for some basic information about changes to your constitution, your recent accounts and achievements. If you remain eligible and provide payment, your licence will remain in place.
Applying for the Mark couldn’t be easier: complete the simple online form or call our helpline on 0845 504 6536. We’re here to help Monday to Friday, 9am til 5pm.
Simply, agree to the Terms and Conditions and we’ll help you complete the online form.
When you register for the Mark and you will be sent your login details by email. Verify your login and you can complete the form or we’ll help you.
In a nutshell, we need to know:
- Does your company have social and/or environmental aims?
- Does your company have it’s own constitution and governing body?
- Are at least 50% of the company profits spent on socially beneficial purposes?
- Does the company earn at least 50% of its income from trading?*
- Can your company demonstrate that social/environmental aims are being achieved?
- If your company ceased trading would remaining assets be distributed for social/environmental purposes?
Q. My business has social and environmental objectives, but the constitution is that of a commercial company, am I eligible?
Social and/or environmental purpose should be expressed in the legal objects of the business. Find out how current holders of the Social Enterprise Mark have changed their constitution to be able to get the Mark.
Additional evidence may be required to verify your independence.
Q. Why do we need to show that we are an independent business with our own governing document and governing body?
Independence and self-governance distinguishes business from the public sector and from ‘projects’ within larger organisations. If you are an externalisation from the public sector, additional information may be required to verify your independence.
NO, however you must be able to provide evidence to show that you have commenced trading. For example, a copy of a contract (if you have one) and management accounts showing earned income.
YES, you must have your own legal identity evidenced by a Company or IPS registration number.
At 12 month renewal you will be reminded of the pledge to be trading at this level; you will then be able to make an informed decision about whether or not to renew, based on your performance to-date and projections for the coming year. If, at the 18 month stage you have not reached the required trading level, we will have to cancel your licence.
Q. We are a consumer co-operative that pay dividends to members, made on the basis of purchases from the society, is this acceptable use of our profits?
Yes profits can be distributed in this way (to a maximum of 50%), the remainder should be used for social purpose.
Q. We are a worker co-operative and make dividend payments to worker members of cooperatives, does this meet your criteria about profit distribution?
Yes, so long as no more than 50% of distributable profit is shared in this way. Remaining profits should be used for social purpose, to ensure that profits are primarily used for wider social benefit.
Q. Is operating to cooperative principles an acceptable social/environmental object, even if the primary object is commercial trading?
Yes, this would meet our criteria of having social objects. We would need evidence for criterion F, to demonstrate how you operate to co-operative principles, in particular Co-operative principle 7, concern for community.
Whether or not co-operatives are eligible or not depends very much on the wording of the Constitutions they have chosen; the Constitution does need to meet the relevant criterion. Currently, 9 out of 10 co-operatives that applied for the Mark have been awarded the Mark.