Tag Archives: social enterprise definition

How many ‘lords a leaping’?

'Lords a leaping'

Source: Wikipedia, The Twelve Days of Christmas song

I hadn’t noticed before, but there are any number of ‘lords a leaping’ in the well-known Christmas song, the Twelve days of Christmas – anything from 10 to 12, in fact! (Source: Wikipedia, Twelve Days of Christmas)

I wonder how many lords are ‘a leaping’ today, following the Chancellor’s Autumn Statement yesterday?  I’m sure there are not that many social enterprises ‘a leaping’, that’s for sure!

As you may know, I was a member of the working group that consulted on the Social Investment Tax Relief (SITR) that was highlighted in the Autumn Statement yesterday.  The outcome is disappointing at best.

Despite pointing out a clear solution to HM Treasury, in the form of the Social Enterprise Mark criteria to identify social enterprises, the Treasury have limited the impact of SITR to a small set of legal structures, where few organisations will benefit.

I’m clearly concerned that around 30% of Mark holders are potentially excluded from being eligible.  However, if this is the chosen method of applying social investment, we have yet to see if it will really address the resource needs of Mark holders anyway.

The Government  will publish its response to the consultation alongside draft legislation next week and I’ll be attending the next HM Treasury consultation in January, but I don’t expect to see a u-turn.

I doubt you’ll see ‘1 Lucy leaping’, thats for certain!


Are you being served?

The recent state of social enterprise research, by SEUK, The People’s Business has reported that more than ever social enterprises are needing appropriate investment ‘Twice as many social enterprises (48%) as SMEs sought finance in the past 12 months and 39% cited access to finance as the single largest barrier to their growth and sustainability – the most common barrier experienced.’

This mirrors the findings of our work with Social Enterprise Mark holders who cannot access the right resource level for their growth – ‘The median amount of finance sought by social enterprise was £58,000’ – below the minimum thresholds of many specialist social investment vehicles. This supports other research identifying the need for smaller-scale, patient, risky and unsecured lending for social enterprises. David Floyd in ‘That Shrinking Feeling’ provides good commentary on this issue, although he argues that what social enterprises need most is more customers, but I would say it’s chicken and egg, without investment a social enterprise can’t grow to reach its full potential and access new customers.

At last the penny is dropping that social enterprises cannot access the finance they need through social investment channels – but where are the solutions? Indeed, small scale lending where it does exist, is so risky that it has to be backed up by very high interest rates to justify that risk, which puts social enterprises at a double disadvantage – not only do they have to demonstrate social impact, but also, this is not taken into account on the bottom line by the social investment sector, which in turn charges high interest rates to make its own business model work. The social enterprises then become financially uncompetitive with the private sector which can access cheaper equity and do not have to demonstrate social value. This unlevel playing field and to represent certified social enterprises are two of the factors that led me to volunteer for the HM Treasury Working Group on tax relief for social investment in social enterprise and the argument that I put forward for lower than commercial rate of return for investors. I urge all social enterprises to respond to the consultation and share responses with me.

Another investment channel is the banks. The ‘Banks and social enterprise’ article by Claudia Cahalane shows how much banks are courting social enterprises for current accounts but the unsecured lending offers are very thin on the ground. Why is it not possible to look at some kind of blended product from the banks? I know that there are banking rules that have become more onerous, but why can’t banks’ CSR programmes look at working with others to develop a CSR stream that provides such patient capital which does take into account social value and mission? We seem to be looking into a very small box with everyone saying why it can’t be done. Could this be a great publicity opportunity and chance for the banks to put their house in order and demonstrate their social credentials?

Meanwhile the social enterprises will struggle on with no investment and certainly no grants (now a dirty word). The upshot, as David Floyd says, is that we may not be shrinking in numbers, but we are shrinking in size (turnover). Isn’t it time to do some re-thinking? Who will dare to take this challenge on?

Tax relief and social investment – the golden egg?


“Social enterprises play an important role in growing the economy, reforming public services and promoting social justice. The Government will introduce a new tax relief to encourage private investment in social enterprise. The tax relief will complement the Government’s other recent measures to help social enterprises access the capital they need, such as the launch in 2012 of Big Society Capital. The Government will consult formally on the details of the relief by summer 2013 and the relief will be introduced in Finance Bill 2014.”

An excerpt from the HM Treasury, Budget 2013.

Last week’s budget speech was regarded as a welcome boost to the sector, for many have been lobbying for tax breaks for a long time. As the only UK body to independently certify social enterprise, the Social Enterprise Mark Company generally welcomes anything that helps companies increase their investment potential in this exciting and innovative sector.

However, we would also caution that social investment should not come at the expense of a degradation of social mission because this is a central plank of any genuine social enterprise. The social mission at the heart of these businesses gives import to the asset lock which limits the amount of profits and assets that shareholders (if there are any) can take out of a business (see my January blog post on definitions). The asset lock is there to protect the very values and mission which make social enterprise different from other businesses.
The question, therefore, is not so much about how we attract individuals and organisations to invest in social enterprise (by this I mean equity), but more about how we attract the right investment into social enterprise that builds and enhances social mission. This is what will boost the real needs of the sector and most importantly its customers. Currently the debate is more focused on what the investor wants than the demand from social enterprises, hence the pressures to dilute the asset lock and open social investment up to the wider ethical business world, as outlined in Civil Society.

Social enterprises need a whole range of products that take into account the long and difficult game that they are applying their business model to. Very often, when it comes to investment they have had to come up with a raft of different solutions and be incredibly creative in order to meet their social mission. As we know those options are becoming increasingly limited, further exacerbated by the risk aversion of the banks and the still limited breaks being given to SMEs, which by far form the largest group of businesses certified with the Social Enterprise Mark (Mark holders).

Hence, the ideal scenario for Social Investment Tax Relief would be that the principle of social mission is at its core, rather than fixating on a prescribed investor model, which has yet to be proved. Tax relief is a good incentive and the government should let the genuine social enterprise market work out how to best apply it to increase their own social value.

So let’s stop talking about getting investment ready and instead think about getting investors in all their shapes and forms ready for the challenge ahead – offering opportunities for social enterprises to join up the products and fill the gaps.

Why independent certification is important for social enterprises

Why certify in the first place?
If it looks like a duck, quacks like a duck – is it a duck? Or does it matter if it’s a duck or a Christmas turkey disguised as a duck when it tastes nice and lays good eggs? (not that I’ve ever tried turkey eggs!)

Social enterprise is a term that has been around for a number of years now, but there are many people who are confused partly because there is no legal definition and partly because the term seems to have been adopted by so many different people, all having their own ideas about what it is. There’s also been a culture which ignored the integrity of such businesses, as long as it got the right results and demonstrated social impact.

Have customers really thought about the type of business that they are buying from though and if they knew, would they make different choices?

Witness the high-street banks. We all thought they were doing a great job, until the short term shareholder profit motivation and bonus culture was exposed along with the associated behaviours. Then there are the ethics – why should a company that is set up to support some of the most vulnerable in our society, then take individual profit for doing this?

In addition, how can you protect the integrity of something if you don’t know what it is that you are protecting?

Certification is necessary as it places boundaries and criteria which develop common understanding of the product, what it does and what it stands for.

So why not self-certify after all it’s quicker, cheaper and potentially more accessible?

Easy accessibility is its key downfall. It does not protect integrity, it is inconsistent and is open to self-interpretation and in the worst cases, abuse.

Having run the Social Enterprise Mark since the beginning, we have developed the criteria in partnership with the sector and have protected and owned these criteria fiercely. It is our experience that interpretation of the criteria is a technical job and not easily carried out by anyone. We are constantly learning about new forms of social enterprise and the way that they operate. Our Assessment Manual has taken years of work to develop and our certification panel has taken its job very seriously in developing those precedents which have been set.

This might all sound really boring and techy but it’s important for the future of social enterprise if we are not just to be subsumed into the wider corporate responsibility camp.

We stand for so much more and our Mark proves that this is the case.

For a more indepth understanding, have a look at Social Enterprise Mark’s criteria

At the cutting edge….

The news that the Ministry of Justice through the National Offender Management Management Service (NOMS) is adopting the Social Enterprise Mark’s criteria in its social enterprise contract is very welcome.  Recognition that clarity is needed by government and contractors is long overdue.

How can government be confident that it has really supported genuine social enterprises without some form of certification and understanding of what it has bought?

This logic has been mirrored by our experiences with the private sector in our 50in250 campaign.  Big companies are also looking for reassurance that what they are buying into is genuinely ‘doing what it says on the tin’.  This week Telereal Trillium has also made the commitment to buy from at least 5 certified social enterprises over the next few months.

Those innovative social enterprises already certified with the Mark are the early adopters at the cutting edge of social enterprise developments both internationally and in the UK (a world leader in the social enterprise field).  The European Commission, for instance, has prioritised the labelling of social enterprises that it supports.  That trend will continue to grow.


The government is over-counting social enterprises

Lucy is guest blogger on Third Sector’s blog this week.  Follow the link for the full blog.

The government is over-counting social enterprises

Excerpt from Lucy’s latest blog (on Third Sector mag):
“My suspicion is that we should probably cut the numbers in half given (a) the original DTI mapping figure of 15,000 in 2005, (b) the growth of the sector and (c) the experiences we have had in registrations to the Mark. But I doubt we will ever really know. What we should be concentrating on is measuring the quality, impact and sustainability of social enterprises that we do know about and help new ones get the best possible start.”

50 in 250 campaign launches…..

Today we launched our first campaign in the City of London – it seems to have hit the Mark, if you’ll indulge the pun.  Mark holders from all over, came to tout their wares to City businesses – and there were some big name city businesses there, as well as being high in number.  KPMG and Wates Group both talked with passion about why they thought that Social Enterprise Mark holders can make a difference in their supply chains along with strong support from the City of London Corporation.  There was also strong interest in understanding the criteria and rigorous assessment process from City businesses – to remove the risk of engaging with organisations masquerading as social enterprises.  This all  goes to prove there is a definite need for certification which is robust and actually means something.

Chris White MP gave a barnstorming address – not something you often associate with a back-bencher, but his words were inspiring and really set the global context that we now find ourselves in.  Crucially, he linked the Mark to the paradigm shift of the changing business world and demonstrated his strong support.

The dialogue between social enterprises was firmly one of business – I don’t think you would have seen that a couple of years ago nor would you have seen such numbers.  Questions ranged from issues of quality and price to top tips.  My top tip for corporates is to start small and develop the relationship – business relationships in my experience  are fundamentally about trust and ability to deliver what you say you will.

I have to say, being a supporter of the Occupy movement, I was slightly worried about how all this might go down – might we have been better going out to join the protesters?  I discussed this dilemma with some friends (who know nothing about what I do or about social enterprise) over the weekend .  Interestingly, they had been in London and talked to the protesters and their independent conclusion was that they had sympathy for the messages but where were the solutions?  I felt really proud to say that we were in the thick of it; helping to provide some solutions and the means to action them!

It was an inspirational and rewarding event, with some new definite supplier relationships underway. Thanks to all those supporting it including Sensevents, Cafe Sunlight, City of London Corporation. We look forward to meeting many more Mark holders and businesses around the country as the campaign grows.

For more information on the campaign see www.50in250.org.