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Employee Ownership

Dispelling the myths of Social Enterprise, Employee Ownership and Purposeful Business

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It is frustrating that the wider world tends to have a very narrow understanding of what the key characteristics of being a good business are. This is not helped by the media’s portrayal of a macho business world in programmes such as The Apprentice and Dragon’s Den and follows the news that often focuses on corporate scandal and businesses that are solely focused on the delivery of profit for shareholders at the expense of other models of business.

The rise of the ‘Purposeful Business

This polar focus is not the reality as most business owners and stakeholders realise that there is more to being a business than just making a financial profit, particularly in the light of climate change.  The rise of the ‘purposeful business’ has become a noticeable trend over the last few years. These types of businesses should aim to tackle the UN’s Sustainable Development Goals and address the negative effects of economic development.

One of the main ways to ensure that a business is driven by a social purpose and social impact though is to embed this in the governance of the business through either a specific legal structure/form such as a Community Interest Company (CIC) or an Industrial and Provident Society (IPS) that can limit shareholder financial gain.

Another way to ensure that a business is social values-driven is to write purpose, values and rules into governance both within governing documents and via the modus operandi of the Board of Directors and in the interaction with stakeholders.  This means that such a business can have a variety of legal forms. Social enterprises (SEs) and employee owned businesses (EOs) are good examples of these types of business. The Social Enterprise Mark ensures that that there is rigour in this approach by accrediting governing documents, trading levels and social impact.

Below we look in more detail at the overlap between the two and bust some myths associated with both:

Why consider employee ownership?

Becoming an employee-owned business intrinsically helps to create a people-centred business that values its staff. As the first large law firm in the UK to give all eligible members of staff an equal share in its profits, Stephens Scown is leading this approach and attracting interest from beyond the legal sector. In their experience, employee ownership means staff become more engaged and motivated to achieve growth with a view to the wider ethos and impact of the business. It also promotes a culture focused on each person’s contribution to the business and this in turn can support the development of a purposeful business.

The link between employee ownership and social enterprise

Becoming a social enterprise creates a values-led business because it puts people and planet before profit for shareholders. The Social Enterprise Mark has 12 years’ experience of applying and accrediting this approach internationally in all sectors. Additionally, in many cases there is an overlap between social enterprises and employee owned businesses because of the close relationship to values and valuing people. A good example of this is Social Enterprise Gold Mark Holder Integrated Care 24 urgent care providers which have offered company shares to all employees with the aim of gaining better staff engagement and ownership.

   

Myths around EO and SE abound, though. Here we outline a few of them:

Employee ownership and social enterprise models only work for a certain size of company

Not true… The John Lewis Partnership is a longstanding example of a large employee owned business. Market Carpets in Devon with 29 employees is a smaller example. In the social enterprise world we have a number of mark-holders with multi-million pound turnover such as University of Westminster and The Growth Company.

All the shares must be held by employees in the case of EO

A founder in an EO may wish to retain a shareholding as they are not retiring or it may be a family business with family members actively working in the business.

A social enterprise cannot have shareholders

Most do not have shareholders, but there are shareholder models such as Community Interest Companies Ltd by Shares and Community Benefit Societies but any dividend distribution is either zero or limited to 35% of profits.  At Social Enterprise Mark, a dividend cap of up to 49% of profits is also acceptable.

The employees use their own money to buy the company in the case of an EO

Not true…the company could seek bank funding but usually the purchase price is settled using the profits of the company over a period of time.

Both SE and EO are very niche rather than mainstream business models

Not true – in January 2021 it was found that employee ownership represented 1 in 20 private company sales. It is estimated that there are more than 100,000 social enterprises in the UK. So long as the business is maximising social value rather than profit for individuals the many businesses could qualify as Social Enterprise’s for the Social Enterprise Mark.

A founder/shareholder (if a social enterprise has shareholders) will lose money if they choose Employee Ownership or Social Enterprise over a trade sale/company sale

True and false in both cases – it may be that the perfect purchaser wants to buy the company for more than it is worth because it fits into their strategic plan or the company is their main supplier in the case of an EO. If certain criteria are met, choosing employee ownership can be advantageous from a tax perspective for a founder as there is a capital gains tax exemption if at least half the business becomes employee owed. In the case of a CIC limited by shares, shares can be sold at a rate that a buyer is prepared to pay. This rate is likely to be limited, however, due to the limitations placed on assets and profit distribution.

If a business is employee-owned the employees could do what they like with it!

Not true – the company’s managers are accountable to the employees rather than external shareholders. If the company has a governing document, this will usually set out how decisions should be made and if certain criteria should be prioritised in decision making such as the likely impact on the climate or employees of a decision.

A social enterprise can be sold to a private company and lose its social enterprise status

True and false – a social enterprise should have some form of asset lock which maintains its independence from its parent that it is sold onto. In the case of the Social Enterprise Mark accreditation there’s a requirement that any parent company also holds an asset lock or can demonstrate a business case as to why it doesn’t (in very rare cases)

Offering different legal structures for a business out outside the Company Ltd by Shares model helps to ‘bake in’ social impact for employees and stakeholders.

Greater understanding and uptake of these models would help to ensure that social and environmental action are part of the business DNA.

We need greater profile of these alternatives rather than resorting to more common legal forms which put individual shareholder gain at the centre.

As the old saying goes ‘legal form should follow business function’.

By Catherine Carlton (Stephens Scown LLP) and Lucy Findlay (Social Enterprise Mark CIC)

EDEEY

EDEEY: Helping Aspiring Entrepreneurs Conference

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The Ethical Digital Entrepreneurship for European Youth (EDEEY project) conference will showcase online learning platform that supports aspiring #entrepreneurs who are starting out on their ethical and social enterprise journey.

At the London conference you will hear from young people who are winners in the EDEEY competition to come up with a business idea and create a business plan. Expert speakers at the conference include our own Lucy Findlay MBE along with Christina Bonarou from Symplexis (Greece) and Sculpt’s Chief Executive Dr. Claire Bonham.

The learning platform has four available courses on:

1. Business Planning

2. Access to Finance and other support for your enterprise

3. Social Media and Content Marketing

4. GDPR and Digital Skills

Sculpt will be sharing the pilot cohort experience of the training resources in the UK, Cyprus, Czech Republic and Greece, and there will also be an opportunity to explore the online learning platform.

Lucy Findlay MBE says, “I am pleased to support the work of Sculpt. It’s really important for young people to find a source of support and guidance in their aspirations to help create a better world as well as to network and share with those with who have the same values.”

Book your place to attend in-person 22 June 2022 here.

Download the conference flyer here: Sculpt – EDEEY Conference JUNE 2022

 

Be the Best

The Golden Thread: Embedding social enterprise for better student outcomes

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All professional worlds have their own jargon.  The term ‘being student-centred’ is an important one for universities, but can be a challenge to achieve for an institution that has so many competing priorities. The increasing politicisation of the university world has also led to challenges around what exactly this term means.

On 25th April 2022, we held our first face-to-face networking meeting as part of a collaboration conference, for two years at the University of Westminster, one of our Social Enterprise Gold Mark holders. It was a really exciting and energetic event. The summary report can be found on our website.

Dr Peter Bonfield, Vice Chancellor, University of WestminsterBeing more student-centred around social enterprise was a key topic flagged up at the event. Dr Peter Bonfield, Vice Chancellor at University of Westminster said that 1 in 5 of their students go on to set up their own businesses, with many looking to make a difference to society and create a better world. Generational trends show that Generation Z are much more socially and environmentally conscious with many dedicated to fighting social and environmental change.

Mission and values are therefore of increased importance to students in gaining a higher education. They also want to see evidence of how these are being delivered at all levels of the institution. This is why the social enterprise business model is so crucial.  It provides the framework for a business that is creating social and environmental value as its raison d’etre.  It links directly into, for example, the delivery the UN’s Sustainable Development Goals (SDGs) and civic responsibilities.

It is not a by-product; it is a state of mind and culture – the Golden Thread.

Findings from our conference show that there is a need to make better connections between the different threads from the student’s point of view, both inside and outside the teaching environment. For instance, extra-curricular activity needs better academic credit as well as making the better links to local social enterprises by bringing the ‘outside in’ through knowledge exchange (KE) activities.

Finance is another area that needs greater connection and thought. Many universities are still not embedding social value with equal emphasis to financial value into their finance modules themselves. This leaves a disjointed approach whereby social value often sits separately in a different function within the institution.

SEEchange Conference Roundtable DiscussionsAchieving the right advice and type of funding and support is also a challenge with much start-up funding and support focusing on a narrow base of STEM and high growth companies. Pitching competitions can also act as a barrier as many more socially motivated and marginalised students to not feel confident in this style. We need more links to peer-to-peer lending and support programmes outside the university setting as well as pivoting internal university support (including pump priming and growth capital) to help social enterprises grow sustainably.

When a university shows leadership in this area, we see jigsaw pieces come together for students too. There are good examples of how universities, such as Westminster (that hold our Gold Mark) have done this as set out in my joint article with Diana Beech for HEPI.

By making more distinctive links between student’s needs, teaching, the community, research and values, we see the best outcomes for a supportive environment and greater sustainability for all in the longer term.

Lucy Findlay MBE

Managing Director, Social Enterprise Mark CIC

IWD Reflections for 2022

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Welcome to a very poignant International Women’s Day. 

This year it is so sad to remember where I was 2 years ago when I celebrated with my Siberian peer exchange and good friend Irina Makeeva and her family in Novosibirsk, followed by a trip to see Swan Lake.  In the days following, I met so many amazing people interested in and actively engaging in making a difference to their local and regional economies through social enterprise and social innovation. 

One of my most abiding memories, however, was when I listened to a disabled girl sing a popular tune at the local folklore school with her friends.  She sang with so much passion and hope.  She was due to sing the song with the star Jasmin who made the song a hit later that year, but then Covid19 intervened.

This year we have agreed with our Russian peers that we need to support one another symbolically – Women in Solidarity.  We are making a small gesture of cooking each other’s national dishes.  I have just made a big pot of Borsht!

Today we also celebrate a year of our Women’s Leadership Network which was launched on IWD21.  In a world where women often don’t identify with the term ‘leader’ we have together to exchange stories, tips and thoughts from inspirational women.  These are now all recorded and can be viewed on our YouTube channel. At today’s event we will be hearing from Daniela Papi-Thornton who will be speaking about her leadership journey and thoughts on reclaiming social entrepreneurship from the niche.

On Wednesday we are extending our celebrations to partner with out friends at Millfields Trust to run another women’s networking session in Plymouth on the theme of Breaking the Bias featuring Jenny Evans, an award winning young entrepreneur and artist. She studied textiles at Cardiff Metropolitan University, has won Santander’s University Entrepreneur’s national competition in 2017, and went on to set up a high growth, investor backed business in 2018 after raising a seed round of £350,000.   It’s not too late to sign up!

 

Lucy Findlay MBE

Managing Director, Social Enterprise Mark CIC

#BreakTheBias #IWD2022

WiSE100 2022 list announced

WiSE100 Announced…. Our Congratulations to All

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Exciting announcements this afternoon as the NatWest WiSE100 top women in social enterprise list is revealed!

Pioneers Post has now shared the incredible 100 women in the UK who are leading the way across the social enterprise sector…. and we are delighted that our own Lucy Findlay MBE is featured for the third consecutive year….

I am absolutely delighted to be named again this year in this prestigious list of amazing women.  It’s important to recognise the leadership of women, many often do not identify with the term ‘leader’.  Now more than ever we need a diversity in perspective that can help bring about a better world.

Lucy Findlay MBE, Founder & Managing Director, Social Enterprise Mark CIC

Also in the 2022 list of Women in Social Enterprise 100, we extend our warmest congratulations to Mark Holders who are brilliant ambassadors for the social enterprise sector: Devi Clark and Emma Lange of Impact Hub Kings Cross, Emma Lower of Lendology CIC, Julie Hawker CEO of Cosmic IT, Jacqueline Hollows of Beyond Recovery and Shannon Gorman of Resonance.

Next week, Pioneers Post will reveal the finalists in each of the four awards categories: Social Business Leader, Star of the Future, Environmental Champion and Social Business Champion. This will be followed on 18th March 2022 with a daytime celebration of the final Awards and winners of each category kindly hosted by NatWest Social & Community Capital. Book here to secure your free place (tickets numbers are restricted but still available).

Read more and explore the full #WiSE100 list here.

Lucy Findlay at launch of the Social Enterprise Mark in 2010

Another year older, another year wiser?

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As we celebrate the 8th anniversary of the launch of the Social Enterprise Mark, I am proud of our progress, and how we have remained true to our original aim of identifying and certifying genuine social enterprises, and more latterly emphasising the upholding of standards to support this aim.

Since 2010, Social Enterprise Mark CIC (and formerly RISE, the umbrella body that supported social enterprises in the south west of England), has acted as an arbiter of robust social enterprise standards, working to ensure the social enterprise business model remains ethical, credible and commercial, through independent accreditation.

It would perhaps have been easier at times not to have ‘stuck to our guns’, but we have learnt many valuable lessons along the way. Plus, I do pride myself on the fact that my USP is not following the crowd! We have continually adapted our products to the changing marketplace, responding to customer’s needs, market opportunities and changes to the economy.

Launch of the Social Enterprise Gold Mark at House of Commons in 2014

Launch of the Social Enterprise Gold Mark at Houses of Commons in 2014

For example, we developed and launched the Social Enterprise Gold Mark in 2014, as the first (and only) standard of social enterprise excellence. This was in response to people questioning how you can identify excellence and good practice in social enterprise. The Gold Mark is not just an accreditation; it scores businesses in different areas of governance, ethical business practice, financial transparency, and social and environmental impact, and also provides an action plan going forwards to ensure continual development.

As we continue to see high profile private sector/corporate service delivery debacles putting shareholder interests before people and communities, e.g. Carillion, Virgin Care, G4S, Capita etc etc (not to mention the banking sector!), I can’t help thinking that we should surely be at a turning point by now?

The debate nationally still seems to be – ‘how can we get social enterprises to scale up to meet the needs of commissioners?’ Surely this is the wrong question. Bigger and bigger often leads to standardisation, mediocrity and a lack of flexibility to the local circumstances.  Plus, there is another way and it does not have to copy the corporate world! Social enterprise offers a flexible, credible, business approach to the problems and issues that society has, without hands tied behind its back with pressure from shareholders and investors. Maybe one day the penny will drop?

It does appear to be dropping with consumers; the 2017 Ethical Consumer Markets Report showed that almost ¼ of respondents reported buying goods/services specifically because of a company’s ethical reputation, a 28% increase on the previous year. The tide is turning and hopefully the public and corporate sector will sit up and take note and we will see a new paradigm where businesses can’t just tick a box anymore – they actually have to prove that they are making a positive impact on society and the world around us. Maybe then we will welcome an age where social enterprise is lauded as the true business model of choice, proving that it is not just a ‘lip service’ CSR department.

In anticipation of this, we believe it is crucial to get ourselves prepared with clear standards, which differentiate and protect the integrity of genuine social enterprises, and to help consumers identify businesses that are committed to truly trading for the good of people and planet.

That is why, as we embark on our 9th year as the social enterprise accreditation authority, I am confident that we are moving in the right direction and that the big times are still to come!

Venus Awards shortlist

Devon and Cornwall Venus Awards Semi-Finalists Announcement

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Alexis Bowater, Regional Partner of the Devon and Cornwall Venus Awards 2018 was host to over 100 people at the Treasury in Plymouth earlier this week, welcoming guests that included nominees and sponsors from all corners of the counties, and where the names of those progressing to the semi-final stage were announced.

The Venus Awards – dubbed by Channel 4 as “The Working Women’s Oscars” – celebrate the vital contribution that women in business make to the local, regional and national economy, and are unique in that anyone can nominate a friend, client or family member.

Lucy Findlay shortlisted for Venus AwardsOur Managing Director Lucy Findlay was delighted to be shortlisted as a semi finalist in two categories; Lifetime Achievement and Networker of the Year.

In its fifth consecutive year of the Venus Awards in Devon and with the new addition of Cornwall, the response remains consistently strong with over 1,750 nominations and 500 applications. The successful Semi-Finalists will be invited to the Finalists Announcement on 1st March 2018.

Regional Partner, Alexis Bowater, said of the awards; “I’m absolutely delighted to be taking the Venus Awards into Cornwall this year and increasing the reach of these business awards across the Tamar. It was another fantastic turnout and we are thrilled to congratulate our Nominees and Semi-Finalists.

“Once again we are celebrating some of the region’s most inspirational women and their achievements in their industry and I can’t wait to meet the Semi Finalists again.”

The Devon and Cornwall Venus Awards 2018 in association with Atkins Ferrie Wealth Management and partnership with Alexis Bowater from Bowater Communications will culminate in a glamorous Ceremony and Gala Dinner on the 27th April 2018 at the Crowne Plaza Plymouth.

It’s time to put social value at the core of our public services

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Former ACEVO Chief Executive Asheem Singh hit the nail on the head in his recent piece in the Guardian about the collapse of Carillion. I have written many times on the risks posed by the relentless focus on price above all other considerations when awarding public sector contracts (e.g. Cutting out a more effective way of doing business?)

This is not the first such story we have heard of big corporates failing in their delivery of public services; in fact they seem quite commonplace nowadays. So when will the Government recognise the increasing need to prioritise organisations that create added social value above and beyond the core service being commissioned?

Social enterprises, at their core, are committed to using income and profits in maximising social outcomes above that of individual profit motivations, creating real and lasting benefits for society. By embracing these alternative business models, the Government can move away from the short termism that has blighted public sector commissioning in recent years, and move towards a future where social value sits at the heart of our public services. It may not be the cheapest option on the face of it, but it could lead to significant savings in the long term.

Some of the work is already done…. the legislation already exists to require public bodies to consider the wider economic, social and environmental impact of the services they commission. It is a case of the Government putting their money where their mouth is, by doing more to ensure that the Social Value Act is fully implemented across our public services and widening its potential application to other areas of public expenditure.

As Asheem points out, social enterprises should take the Carillion debacle as a ‘platform for action’. It is a prime opportunity for us, as a sector, to demand changes and present social enterprise as a solution that can ensure public interests are put first and foremost in service delivery.

A new year’s resolution that you can stick to

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I am sure many of you have recently set new resolutions for the year ahead, be they personal goals (e.g. eating healthier or exercising more) or a commitment to make changes on a wider scale (e.g. using less plastic, getting involved in volunteering). However, how many of us actually stick to our resolutions for the whole year (and beyond)??

Perhaps then we should focus more on long term permanent changes to our behaviour, rather than short term ‘fads’ that we are likely to give up on at some point. Given that 2017 saw continued growth in sales of ethical products (up for the 14th year in a row), this gives me hope that perhaps more people will start to focus on their consumption habits and consider the impact of these on the wider world. An easy start would be pledging your commitment to supporting a growing movement of businesses serious about creating positive change.

We launched our Beyond the Badge campaign last year, to help consumers and organisations do good business, by looking out for credible independent labels as proof that a business is living up to its claims, therefore enabling them to make more informed choices.

Beyond the Badge campaign partnersTeaming up with a diverse group of fellow standard-setting bodies that share common values and principles in our approach to accreditation, we aimed to engage consumers with independent standards/labels and educate them on how these can help them to identify businesses that are serious about doing good.

We were excited to recently welcome Investors in People, the standard for people management, as a campaign partner, and would be keen to hear from other organisations interested in getting involved.

Despite the reported increase in ethical consumerism, we are conscious that there is still work to be done in promoting this message on a wider scale, to encourage everyone (both consumers and businesses) to consider the impact of their purchase decisions. This is why we are continuing the campaign into 2018 and I encourage you all to ‘Go Beyond the Badge’ this year, and look out for credible independent labels that actually mean something.

Independent third-party standards play an important role in providing an external endorsement of claims made by businesses – that is, they help consumers know that they can trust a business is committed to doing good. This year, it is one of our own resolutions to push this message into the mainstream, and encourage consumers and businesses across different sectors to use such standards and labels to be sure they are buying from a company they can trust.

I invite you all to commit to a New Year’s resolution you can stick to – you can start by signing the campaign pledge (below) and spreading the word to your contacts.

Beyond the Badge pledge

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Share this with your friends:

     


*We will add you to our supporters mailing list, which we send regular updates to about our network of accredited social enterprises and our accreditation services. You can unsubscribe at any time by clicking the unsubscribe link in the email.

 

Profiteering from the NHS – have we reached a new low?

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Back in 2014, I predicted that we would, in the future, question the values that are used to make public spending decisions.  However, we now seem to have reached a new low.

Following an unsuccessful bid for a children’s services contract in Surrey, Virgin Care had threatened legal action.  This has resulted in hundreds of thousands of pounds (if not a few million) being taken out of the local cash-strapped NHS, which could have been used to help diagnose and treat people of all ages, in order to settle the dispute out of court.

Virgin Care has the power of a big corporation and a team of lawyers behind its every move.  Most tenderers could not, and would not, sue the NHS if they failed in a bid.  However, when the internal values of the business are first and foremost commerciality, the logical step is to challenge if you can.  I also wonder if this tactic will make other Commissioners think twice about turning down a Virgin Care bid?

With more than 400 contracts, Virgin Care has a growing track record in the health and social care world, but at what price?  They might make a big deal about how they will improve services and treat staff well, but someone has to suffer with profit maximisation being squeezed from the tight NHS budget.  The cuts in front-line staff ultimately lead to a poorer service for patients, who have no choice in the matter.

At least in this case the winners of the bid were two social enterprises and an NHS Trust, which will not be focused on creating profits for shareholders.  Surely it would make sense for this to become a more explicit criterion for commissioners to judge a contract?  Not only is it better value for money, but the values of the service are aligned to NHS delivery.

My Christmas message, and wish for 2018, is that public spending decisions need to become more values based!

Conquering misconceptions around social enterprise

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We were interested to see a social enterprise pitching on Dragon’s Den recently. It’s always good to see alternative forms of business profiled in the mainstream media. However, it was disappointing to hear Peter Jones dismissing the entrepreneur by saying she was confused as to whether her venture was a business or a social enterprise…. this is a continual challenge for the sector; the misconception that social enterprises aren’t real businesses.

The first rule of social enterprise is that financial sustainability is of utmost importance, as without this, a business will not be able to achieve their social objectives. We don’t agree however that there is a choice to be made between operating a business or a social enterprise; the choice is what you do with the profits a business makes… this is essentially what defines a social enterprise.

It seems the sector is struggling to shake off the notion of a charity type model, reliant on grant funding and donations, even though recent figures show that almost ¼ of UK social enterprises earn more than 75% of their income from trading*. Although some progress has been made in bringing social enterprise to the mainstream, it seems we still have a way to go in achieving complete recognition and understanding of the business model as a credible alternative to capitalist structures.

So, how can we address the misconceptions that surround social enterprise?

The independent accreditation provided by the Social Enterprise Mark and Social Enterprise Gold Mark offer a solution by providing a credible standard, backed up by sector agreed criteria as to what constitutes a social enterprise. Organisations are externally assessed on application and on an annual basis, to ensure they are truly operating as a social enterprise, with the core motivation of using profits and income to create benefits for society and the environment. These Marks provide a visual sign that a business is trading for people and planet; trading being the operative word.

The key is credibility; to be taken seriously by consumers and businesses, social enterprises need to demonstrate they ‘walk the walk’ when it comes to operating as a credible organisation that is committed to creating real social change. The Beyond the Badge campaign aims to raise the profile of independent labels and how they can help consumers (and businesses for that matter) to easily identify businesses that are proven to be doing good.

We clearly still have a journey ahead of us on the path to widespread awareness and understanding, but, by enabling organisations to demonstrate they have a sustainable business model, with the potential to create real social impact, we are doing our bit towards conquering these common misconceptions.

 

* State of Social Enterprise report

WISE100 launch

Lucy Findlay named among top women in social enterprise

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Lucy Findlay, Managing Director of the Social Enterprise Mark CICWe were delighted to discover last week that Lucy Findlay, Managing Director of Social Enterprise Mark CIC, is included on the inaugural WISE100 (Women in Social Enterprise 100) index, which recognises inspirational women in social enterprise.

A new initiative from NatWest SE100, the WISE100 was launched at a special event in London last week.  The index is the first of its kind, and aims to recognise the invaluable contribution of 100 of the most inspiring and influential women in social enterprise, impact investment and social innovation.

Responding to the news, Lucy said “I’m honoured to have been recognised as part of the first inspiring WISE100. Women are taking the lead in so many ways in the social enterprise world and it’s important that this is acknowledged and celebrated.”

Lucy was also delighted to be joined on the list by female leaders of several Social Enterprise Mark holders, including Julie Hawker from Cosmic, Amy and Ruth Anslow from hiSbe, and Kate Welch from Social Enterprise Acumen. More than 250 women were nominated for the index, with the final list selected by a panel of judges. The full list can be found here.

The social sector outperforms other sectors when it comes to gender equality; in the UK, over 40% of social enterprises are led by women, and more than half of all social enterprises have a majority female workforce*. In comparison, just 6% of FTSE100 companies have female leaders. The WISE100 initiative is therefore important because it will help to inspire other sectors to diversify their workforce, bringing benefits not just to women but to business in general.

 

* State of Social Enterprise 1027 report

Podcast – A different way of doing business

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In the latest interview released on Tony Loyd’s Social Entrepreneur podcast, Lucy Findlay talks about the development of the unique social enterprise accreditation offered by Social Enterprise Mark CIC, which provides accreditation for businesses that enhance the greater good.

“We recognize the type of business that is putting the money it makes back into society and the environment rather than using it for shareholder gain….our Mark helps them to prove that.”

Lucy also talks about her own route into social enterprise, from a land use and town planning background, through to the launch of the Social Enterprise Mark back in 2010, to now scaling the business up internationally.

“This is a movement that has spread around the world.”

You can hear the full interview on Tony Loyd’s Social Entrepreneur podcast, or via podcast apps including iTunes, Google Play, and SoundCloud.

Lucy Findlay, Managing Director of the Social Enterprise Mark

Have we reached the point of diminishing social return?

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Lucy Findlay responds to the 2017 State of Social Enterprise Report

State of Social Enterprise 2017 - Social Enterprise UK

State of Social Enterprise 2017 – Social Enterprise UK

The 2017 State of Social Enterprise report was launched by Social Enterprise UK last week.  The findings around profitability got me thinking.  Apparently, larger social enterprises are more likely to make a profit; 72% of those with more than 100 employees, compared with 45% of those with less than 10.  I guess that this is not that surprising as economies of scale are achieved and therefore likely greater margins. Of course, 100 employees is still regarded an SME by government definitions.

Profitability of is only part of the story for social enterprises, and as this survey highlights, it’s impossible to report on the measurement of social impact and the ideal size of business to deliver to maximise this.  This is a perennial conundrum for the social enterprise sector.  When does the law of ‘diminishing social impact returns’ kick in?  Are local social enterprises better at delivering local services because they know the patch, and can they still do a good job when they upscale? That is, when do they start to demonstrate some of the negative characteristics we see in corporate delivery (e.g. lack of personal service, flexibility, understanding of local conditions etc)?

The need to scale up is also a challenge for social enterprises that wish to trade with the public and corporate sectors. To gain a place on the ‘preferred supplier register’ there is often a requirement to deliver a consistent service over a large area.  The report shows that there has been some progress in terms of consortia and replication, particularly in London, with 29% part of a consortium and 18% replicating their work.  But this remains a major barrier in terms of trading in today’s climate that sees big as being better.  What price for social value?

Another concern is the continuing high reliance on public sector for profitability, particularly for large social enterprises (although it has fallen from 57% to 51% since the last report). I highlighted this in a previous blog back in 2015.  In a climate where the public sector is still facing major cuts, diversification is key.  We need to spread our wings and think as laterally as possible, rather than just expecting commissioners to change.  Anecdotal evidence from our Mark holders shows that commissioners are becoming more risk averse, not less, with some services delivered by the social enterprise sector retreating back into the NHS for example or being delivered by a bigger player whether the service is better for patients or not.

All that being said, I was very encouraged to see that “almost four-fifths of social enterprises use their social enterprise status in marketing their products and services (37% to a great extent, 40% to some extent). Only 6% do not use it at all. This continues a pattern seen since 2011 when only 53% of social enterprises used their status Social Enterprise Markin their marketing in some way.”

It’s great to see that social enterprises are becoming louder and prouder about their USP and what better way to prove your social enterprise credentials that applying for the Social Enterprise Mark!

Social Enterprise Gold Mark

Beyond certification – the Mark of a better business

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Following the news in the summer that Sainsbury’s are replacing the established and trusted FAIRTRADE Mark with their own in-house certification scheme, there seems to be a general trend in this direction by big producers. Multinational giants Mondelez International (which owns Cadbury), Unilever, and Barry Callebaut (world’s biggest producer of chocolate and cocoa products) have all confirmed they are now using their own ethical standards, eschewing independent third party labels.

This is a worrying development. How do we know how rigorous standards are really being applied and assessed if they are not subjecting themselves to third party scrutiny? Multinationals and corporates make huge shareholder profits, and not to submit themselves to third party scrutiny seems to further reduce the accountability of their operations. As I wrote in my blog about the Sainsbury’s story back in July, we are concerned that this could also lead to erosion of consumer trust in any labelling schemes, which should ultimately exist to engender this trust, not damage it.

Social Enterprise Mark CIC has recognised that standards should not just provide openness and transparency, they should also challenge the business to become even better at what it does. This is why we now collect social value information on an ongoing basis, alongside developing the far more demanding Social Enterprise Gold Mark, which goes into much more depth around ethical practice in every area of the business, from procurement and sourcing to employee relations and governance.

The Social Enterprise Gold Mark was developed to provide a quality benchmark for social enterprises that can demonstrate excellence in key business areas, such as governance, business ethics, and social/environmental impact. As well as providing proof of a commitment to business excellence, it also acts as a business development tool – successful applicants receive an individually tailored action plan for continuous improvement, in line with Social Enterprise Gold Mark guidelines of best practice. Therefore, it is very much an ongoing development process, not just covering a snapshot in time at the point of assessment.

Given the high-profile scandals that have hit big brands such as Mondalez (formerly Kraft), which came under fire in 2011, when they closed a UK chocolate production factory following their takeover of Cadbury, there is a need for more businesses to submit to the scrutiny of external assessment with regards to their business practices and how they make and distribute their profits, and how they treat their workers.

At the time of the Cadbury takeover, Mondalez made assurances that production would remain in the UK and that the Somerdale factory would remain open. However, less than a week later an announcement was made that the factory would in fact be closed, at the cost of thousands of jobs.

In order to prove applicants’ businesses are excelling as genuinely socially responsible organisations, the assessment for the Gold Mark digs deeper to examine key aspects of the operations of a business. This includes looking at how they govern the organisation, employee engagement and terms of employment, as well as how income is used to create social and environmental impact.

Maybe this is the future of certification…. A visible and trusted identifier of those doing better business, in every aspect of their operations.

Profiteering from the sick and dying…chapter 2

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Another bonanza for the shareholders?

This blog follows on from a previous blog on this subject, published in 2014

My family and I have recently been subject to the vagaries of NHS system and the bewildering world of social care.  Like so many families when a loved one falls seriously ill, you take a dive into a parallel universe that you might have thought about, but suddenly get thrust into for real.  It starts with shock and confusion and pretty soon moves on to frustration at trying to find your way round a system that is supposed to put the patient first, but often fails due to being overstretched and managed by too many ‘cooks’.  I am aware, however, that in many ways we are in some ways more fortunate (if that’s the right word) than others in this situation – the illness is cancer, not dementia.  The NHS goes into full swing for us and we don’t have the added stress of to try to work out which care agency to use, how much it’s going to cost and how to pay for it.

The Conservative Manifesto suggests that in the future more social care will have to be paid for privately, if necessary by remortgaging any property without a financial cap.  I understand that there are pressures on the system, but what will the real cost be and who will be the winners if this policy is enacted?  It probably doesn’t take a detective to work it out, but one thing’s for sure, with an aging population there will certainly be profits to make.  The likelihood is that the private care sector will ramp up to fill the gap with little or no protection on costs from the government, along with equity release companies who will charge interest for the privilege of staying at home.  You only have to look over the Atlantic to see the impact that such private companies have on the lives of people who should be concentrating on caring for their loved one, rather than being stressed out about deciding which care/health company is good or bad, whether the insurance will cover it, and if not how to pay for it (possibly selling/remortgaging their house).

It is a shame that more creative and equitable solutions are not being considered in the future of social care as well as how to fund it – they do exist!  There is always a rush to look for a private solution, with the same old business models, which put their shareholders first.  The Manifesto talks about encouraging Public Sector Mutuals, but the current Government has made no real effort to encourage the formation of social enterprises that could reinvest profits back into the system as well as behaving more ethically.  The local community could even have a stake in such companies!  What is clear though is that if we are talking about delivery outside the state, then there is a need for regulation and a guarantee that people can have confidence that shareholder financial gain is not the underlying goal – profiteering from the sick and dying is inexcusable, morally questionable and one of the key reasons that the NHS was set up in the first place.

The rise of ethical consumerism: considering the impact of purchase decisions

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Although it is heartening to see that consumers are increasingly looking at sustainability and ethical issues in their purchasing decisions, as evidenced by a recent international study by Unilever, I do worry about whether they are actually able to make an informed decision.  The proliferation of ‘greenwashing’ does mask and make buying decisions more confusing.

Greenwashing is the corporate practice of using clever PR and marketing claims to mislead customers into thinking a company and its products are ethical/sustainable/environmentally friendly etc. Sadly, the rise in consumer interest in sustainability and ethics seems to be marked by the rise of this tactic by big corporate brands.

This is a smoke screen for their anti-social behaviour, as has been evidenced time and again in the hypocrisy of the banking world.  I will never forget, on the passing of the Public Services (Social Value) Act, being lectured about what to do to add social value by a big name High Street bank, whose Chief Executive the week before had been apologising for yet another expose leading to huge fines by the regulator.

Another very high profile example is the Volkswagen ‘Dieselgate’ emissions scandal in 2015, where the organisation admitted fitting cars with software designed to give false readings in emissions tests. This served as a public reminder of the need to be vigilant for misleading messages – if a multinational giant that was once considered a leader in sustainability was deliberately deceiving customers, then it poses the question – who else is up to this dodgy practice??

Unfortunately, greenwashing isn’t always easy to spot, especially where there is an existing high level of consumer trust within a brand. Even where there isn’t trust, many consumers take claims at face value and do not question other behaviours of that company – people have short memories! There are so many ethical labels and claims used by brands to entice customers to buy their products, so where to start for consumers when it comes to knowing who they can trust?

This is the focus of our latest campaign – Beyond the Badge – which aims to help consumers identify genuine labels and claims, and therefore make more informed choices, rather than taking things at face value.  For instance if a product claims to be ‘fairtrade’ – did you realise that it is only certified as such if it displays the FairTrade Mark?

We are pleased to have the support of several high-profile partners, including Soil Association Certification and Ethical Consumer, to engage with a wider consumer audience across multiple sectors.

In our research , I was interested to come across the UL Environment ‘Seven sins of greenwashing’, which identifies seven of the most common greenwashing tactics used by big brands. Interestingly, these include ‘the sin of no proof’ – where a claim is not substantiated with any reliable proof – and ‘the sin of worshipping false labels’ – where the impression is given of a third-party endorsement, where no such thing exists.

To me, these seem particularly relevant to the markets in which we operate, as from its inception, social enterprise has been plagued with vagueness and moving the goal posts.  The advent of social impact reporting and social investment have not helped this cause as they do not support the uniqueness of the social enterprise business model – essentially that by putting people and planet before shareholder profit the business is focused on the social/environmental need that it aims to address.  It may be hard to prove – but the social outcomes are central, not a by-product.  Hence the Social Enterprise Mark – a way of assessing and identifying genuine social enterprises that have a proven commitment to trading for the benefit of people and planet.

We want to encourage everyone to consider the potential impact of their purchase decisions, and to think about whether brands that they support are actually living up to their ethical and sustainability claims. I invite you to get involved, by pledging your support to the campaign and spreading the word amongst your own networks, by joining our Thunderclap campaign, which will send an automated social media post out from your account to create a buzz of conversation about the campaign.

Lucy Findlay at launch of the Social Enterprise Mark in 2010

Celebrating 7 years of upholding the standard for social enterprise

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On the  7th anniversary of the launch of the Social Enterprise Mark, I am reminded of how far we have come as a sector in that time, but also of how far we have to go in being truly recognised as competitive, sustainable businesses in the mainstream business world.

sem-homepage-buttonSince our inception back in 2010, Social Enterprise Mark CIC has endeavoured to ensure the social enterprise business model remains ethical, credible and commercial, through independent accreditation. As well as providing a single recognisable ‘identifier’ for genuine social enterprises, which are externally assessed against sector-agreed criteria, we work to promote the capabilities of social enterprises as a credible alternative to more traditional business models.

This is not easy by any means, especially when it comes to spreading the message to the public and consumers. However, there is clearly a shift change occurring in consumer attitudes towards the sustainability of brands and organisation, as seen in a recent study by consumer goods giant Unilever, which found more than a third of consumers now choose to buy from brands they believe are doing social or environmental good.

We are currently planning a new campaign, which will aim to encourage consumers to consider how they can be sure of the ethical/sustainable credentials of the organisations they buy from. By working with several high profile partners, we hope to spread the message to a much wider audience and to start a global conversation about how consumers can be sure brands are ‘walking the walk’ and not just ‘talking the talk’ when it comes to sustainability and their social purpose.

Another constant challenge is influencing government policy and embedding social enterprise within their mindset. I was interested to see PM Teresa May allude (albeit briefly) to her vision for an inclusive business strategy in the foreword of the government’s Green Paper on the Industrial Strategy: Building our Industrial Strategy. Although there was no direct reference to her recent Shared Society speech, the PM declared that the government wants to “move beyond short-term thinking to focus on the big decisions that will deliver long-term, sustainable success”.

As I wrote back in November in a post looking at the pressures faced by the public sector, tight financial constraints have been resulting in a rather short-term focus, where the bottom line has become of overriding importance, over and above what may be best for society in the long term. Social enterprises are rooted in their stakeholders and communities, and are therefore well placed to respond to the biggest issues facing society. They are set up to address a particular social issue or objective and this remains their driving, primary purpose for the long term – of course profitability is also important for the business to remain sustainable, but profits are used to serve the needs of social stakeholders and feeds back into their social objective.

As we begin our 8th year as the social enterprise accreditation authority, I am confident that we are moving in the right direction to achieving these goals, and look forward to what the next 8 years will bring.

Is the Shared Society all ‘Motherhood and Apple Pie’?

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Theresa May’s recent announcement of a ‘Shared Society’, after all the fuss about the Big Society when it was launched, has been greeted with a healthy degree of scepticism, but it is worth having a look at the finer detail and trains of thought that lie within the speech.  Much of it is ‘motherhood and apple pie’, but there are some key themes that chime with me, as she was talking directly about social enterprises (albeit in a limited context of social finance).

Firstly, she highlights the limits of the cult of the individual and how social enterprises help to break this down.  For me, this is a fundamental point about social enterprises.

Social enterprises aspire to be more than a single founder or entrepreneur, however charismatic and publicity hungry such individuals can be in driving the business forward. The most effective social enterprises are rooted in their stakeholders and communities. Conventional business may also be bigger than the individual who runs or sets them up, but social enterprises are set up to address a particular social issue or objective and this remains their driving, primary purpose for the long term; profitability remains important, but it serves the needs of social stakeholders above that of the whims of individual shareholders and their personal profit motivations.

Alongside this the PM also talked about how social enterprises (as well as charities) are not only dependent on the people involved, but also the trust which they engender in the way they work.  The Charity Commission and new Fundraising Regulator are working to help the government with this.  However this does not address the trust placed in social enterprises.  This is where the Social Enterprise Mark comes in – we externally assess social enterprise credentials as well as commitment to providing additional social value. The Mark acts as an independent guarantee that an organisation is trading for the primary benefit of people and the planet.

Lastly, social enterprises also often provide goods and services that address the needs of a whole community, not just the poorest, although they may have programmes that are targeted at or support those in the most need.  The fact that they are run as businesses (and as I touch upon above, must therefore be profitable) allows a cross- subsidy model and does not require grant funding, which tends to be more specifically targeted at the most marginalised.  Therefore you can legitimately argue that the social enterprise business model can help ‘the just about managing’.

Post truth and post authenticity?

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I write this on a day when Donald Trump has been announced as President Elect of the USA.  There are many questions being asked and much soul searching for answers to them. Amongst others – are we in a post truth era or an era that wants to kick over the traces of corporate and institutional power that have bypassed them? One thing is for sure, it has been very difficult to see the truth from the myths and the authenticity of the message.

A lack of transparency and clarity from leaders and commentators regarding the business model has also been a feature of social enterprise too for as long as I can remember.  This has served a purpose; to pump-up the sector in terms of size and diversity without asking too many questions.  It has also served a small number of well-connected social enterprises that know and can milk the system, which has led to the development of opaque business models that have benefited from the patronage of government and support programmes, e.g. Social Impact Bonds and the advent of Social Investment.

se_brand_approved_rgbIt was partly for this reason that we set up the Social Enterprise Mark as a project 9 years ago, and 3 years later as a business in its own right.  We now have the longest pedigree and experience of social enterprise accreditation in the world and are indeed seen as leaders, with international academics and experts looking to us for our expertise in this field, e.g. British Council in China. Social enterprises outside the UK have also decided that they wish to accredit directly through our process, e.g. Fairtrade Labelling Organisation (FLOCERT). This proves that there is an appetite for being seen as different and being able to prove it credibly.

trustmark-logoWe can draw an analogy to TrustMark, a Social Enterprise Mark Holder, which evolved in response to concerns in the building sector. It is a government-endorsed accreditation scheme for trades in and around the home, providing reassurances that businesses must regularly stand up to scrutiny to.

Social Enterprise Mark CIC had an original mandate from our sector to provide a similar service in the UK, verifying businesses who are genuine social enterprises.

We have learned, from the experiences of Fair Trade, of the importance of having a status that could confer genuineness and authenticity.  At the time many different models were banded about, e.g. self-certification, CSR marks, membership bodies etc.  We were clear that certifying authenticity can only be achieved through independence (the certification panel) and with transparency (application of the criteria consistently). This is why we operate as an independent CIC and not a membership body.  Membership bodies depend upon and exist to promote the interests of their paying members, and through their sector – a potential conflict of interest.

We take our customers and accreditation very seriously and have built the value added to ensure that our accreditation does not stand still and is really clear to the outside world – for example, developing social value declarations to help demonstrate the commitment that all social enterprises should have to making a positive difference for people and planet, as well as the Social Enterprise Gold Mark as an indicator of business excellence.

The term “accreditation” may be used to distinguish a system of certification that actually seeks evidence in confirmation of an organisations credentials. The Social Enterprise Mark has always done this and we are challenge-stampcurrently working with international sustainability standards, established by ISEAL, to help align our Marks with best practice models of accreditation. Whenever you see the term “certified”, ISEAL encourage people to “challenge the label”; to consider a few critical questions that help determine what that certification is really worth.

In striving for the best practice in accreditation, we have been and will continue to consult Mark Holders (and the wider sector). Our aim is to continue to provide a certification process that offers genuinely credible accreditation, one that social enterprises can take pride in and learn to improve from the world over.

Cash cows and money milking

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The public and press have short memories. Today and over the last few weeks there has been flurry of scandal and comment about corporate greed. Even the right wing press are shouting about how BHS has been asset stripped, leaving a huge pensions hole. From offshore accounts and tax evasion, to BP paying a huge bonus to their CEO (despite huge losses being made by the company), the prevailing behaviour seems to be keep milking as much shareholder profit out, pay very little tax and forget thinking or caring about the consequences and who it affects.

A magnifying glass is held up to this sort of behaviour whilst it’s top of the news agenda, but it soon goes back to business as usual. There is no consistency in reporting either. One day there will be exposure of corporate greed in delivery of public services and the next day that company will be telling the business pages what a great job it does in valuing its employees and customers – maybe the figurehead head becomes another government ‘business czar’ – and getting CSR awards to boot?!

It doesn’t have to be like this though. If social enterprise was seen as a viable alternative, not just a niche, do-gooding, market failure option then perhaps we would get somewhere! Instead we forever seem to be hidebound by the current business orthodoxy of business schools the world over; ‘business is there to make money for its shareholders’.

This is why we get into problems with arguments about lack of investment too. The orthodoxy is that it’s hard to expand unless you can attract equity providers. However, as a famous local business person told me, ‘this is the equivalent of selling the family silver’. It means that you are at the behest of the equity stakeholders and even if they own a small proportion they are likely to influence in a purely commercial direction as their role is one of primarily making money. The wider social value of the business comes second.

What we need is a radically different business model that is seen as mainstream, not marginal. I don’t think that this is Corporate Social Responsibility. Rather it’s about truly putting people first. The old co-operatives of the last century were the centre of their community, because they were owned by the people that lived there. They were first and foremost about serving the locality, not making a fast buck and running.

There are those out there that share this ideal and business model that are not just niche; they are a substantial part of the economy. Universities, colleges, theatres, arts groups, membership bodies, sports clubs, unions – they all have a strong social mission but operate in many cases as businesses. They are our allies and we should be working together more closely to present a vision of what we want business to look like, not what business dictates to us.

Our conference in June, entitled ‘Standing up to Scrutiny’ will look in more detail at how we can work together to promote social enterprise as a credible and sustainable business model for the future. We will discuss the importance of accreditation and standards systems, and how these can help social enterprises to measure, demonstrate, and report on their social impact. Please click here for more information and to book your ticket.

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Hooked on government support…

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…from one dependency to another

You can’t have failed to notice the high profile fall of Kid’s Company over the last few months.  It reminded me of some of the dangers that can lie in reliance on government contracts for the delivery of public services, which has been repeated as a mantra for the social enterprise sector for nearly 20 years.  This of course is not the only issue for Kid’s Company, but one that I focus on here.

Many forget that, historically, social enterprise has its roots (along with the charity sector) in delivering where the conventional market has failed.  However, unlike charity, it uses a business model that creates enough revenue to either:

  1. deliver very low profit margins to reinvest because the social value/impact is included in their business delivery model which would otherwise increase profits; or
  2. deliver high margins in one activity that supports the cross subsidy of another less profitable social activity, freeing the company to deliver its social mission without the interference of others.

This provides a very flexible model that is really focused on social need. It is often more resilient too because it tends to have a number of revenue generation sources.

The government’s (and others’) wider promotion of opening up public service delivery, and the more recent emphasis on social investment as a means to deliver public services, whilst providing potential profit for investors, have realigned  and shifted the focus of social enterprise policy.  In fact, in my view, the term “social enterprise” was coined in the early 2000’s in many ways as a result of the opportunities that the spin out of public services presented to new and existing social enterprises.

It is perhaps not surprising that the government became so interested in social enterprise, given the drive to look at alternative delivery models.   I remember the Labour Government’s social enterprise strategy was pretty much solely focused on this aspect.  A number of us at the time, including the likes of Nigel Kershaw from The Big Issue, questioned why the government weren’t interested in supporting social enterprise to succeed in the open market as well.

It is only when I speak to social enterprise practitioners and commentators outside England that I realise how focused and obsessed the whole sector has become with government contracts.  We are constantly urged to ‘influence commissioners’ and ‘prove social value/impact’.  We hang on the words of government and the civil service to predict our futures.   But to what end?  To replace one dependency with another?

If we look back, the track record of successive governments have not been good in this area.  It is about to get a whole lot worse.  Commissioner loyalties are fragile and fickle especially in the light of more austerity.

Our collective memory seems to have been removed from us.  We need to spread our risks, focus on how we become less dependent on government and get back to the reason we exist in the first place – to deliver a social/environmental solution through an ethical business approach.

SE_Business_Identifier_RGBThe Social Enterprise Mark certification can help to prove your social credentials, as it encourages our Markholders to reflect on their social mission, value, and their independence, in order to differentiate and promote themselves, in order to achieve a sustainability that best serves the people they are in business for.  Government contracts do count as trading income, but  an overdependence on one source of income that is subject to the vagaries of political pressure never makes good business sense.