Tag Archives: social enterprises

The importance of ownership in understanding social enterprise

I want to destroy ownership in order that possession and enjoyment may be raised to the highest point in every section of the community.
George Bernard Shaw

Over the years there has been a considerable amount of time and energy spent on discussing social enterprise – what it is, what it could be, what impact it has.  At times this has been quite a creative and stimulating experience, while at other times it has been negative and tiresome.

In all these discussions, I believe, not enough emphasis has been laid on ownership.  Who owns these social enterprises and are they accountable not only to themselves but also to the wider public?  Accountability is going to become more and more important for social enterprises as they take on public and community sector contracts and have to account for their actions to a variety of different stakeholders.

With private corporations, ownership is often a slippery beast.  The ownership of the ‘means of production’ can be difficult to determine as it is, at times, not fully declared – but is often the key to understanding why an organisation acts in the way it does.

Andy Wightman in his recent research and writings illustrates this in the following paragraph which refers to land specifically, but also can be extended to property and the ‘means of production’:

Land is about power.  It is about how power is derived, defined, distributed and exercised.  It always has been and it still is thanks to a legal system that has historically been constructed and adapted to protect the interests of private property.  ‘The Poor Had No Lawyers’ by Andy Wightman

Guy Shrubsole in his recent book, Who Owns England, writes that less than one per cent of the population owns about half of England and Wales.  This cannot be right if we are trying to create a fairer more equal society.

Faced with these glaring inequalities, perhaps the only way to fully understand them is to go back into history and trace the threads that lead us to where we are now.  Thus, indulge my historical and simplistic foraging…

Before capitalism, there was a feudal system in the UK where a reigning monarch could grant whole tracts of land along with a title as a reward to the aristocracy for some form of favour.  This ownership of land meant money could be made and inequality could persist – land being the primary source of wealth.

At the time of the British Empire, European imperialists conquered foreign lands and introduced a form of ownership applying European laws – in effect taking control of whole areas through the ownership of land.  As an aside, many tribes in Africa could not get their heads around the ownership of land as it was a concept that challenged their existing value system – land to grow crops, air to breathe, panoramic beauty where all things that existed for all the people and, prior to colonisation, could not be owned in our sense of the word.

In Victorian times ownership and property became all-important causing increased social and economic inequality as ownership of property would be passed on within families.  In fact, those not owning property were excluded from voting, which reinforces Wightman’s comments cited above.

In the mid-19th century, the co-operative movement emerged as a way that goods and services could be produced for the benefit of the workers and the wider community, not just the factory owners.  Workers co-operatives were created so that they themselves owned the means of production.

In the last two centuries, many voluntary organisations and charities adopted a form of ‘trust’ where ownership was not held by an individual or indeed a group of people.  Rather, those organisations were run and managed by ‘stewards’ operating in the best interests of the organisation to provide maximum benefit to beneficiaries.  A similar structure was adopted by many housing associations.

In the 1970s, Community Co-operatives were established in the Highlands and Islands of Scotland responding to negative economic factors – such as depopulation, dwindling services and a lack of employment opportunities. This model was largely copied by Community Businesses – functioning business enterprises that were owned and controlled by local people for the benefit of those living in local communities.  In these cases, ownership of the business was held by the ‘community’ and not by individuals.

This now brings us to the current situation with social enterprises.  They are not public sector organisations, nor are they part of the private sector where individuals own organisations or companies.  Social enterprises sit somewhere between these two much larger sectors – and this, I would argue, is why ownership of a social enterprise is key to our overall understanding of what is and what is not a social enterprise.

Yvon Poirier, a French-Canadian pioneer within the social economy, explains the origins of the term ‘social enterprise’ stating that its meaning originally…

relates exclusively to the type of ownership. By ‘social’, one means that the ownership is by humans (persons) and not by shareholders
Social Economy and Related Concepts Paper, 2012

He then goes on to explain that in the 1990s the term ‘social enterprise’ – particularly in the English-speaking world, took on a totally different meaning. The term ‘social’ in recent times has come to mean the purpose or sector of activity and not the ownership of the enterprise. 

This shift in meaning is significant as the end result of social enterprise activity has become more important than the type of organisation they are.  This has led to current thinking which stresses the dominance of social impact over how that impact is delivered and crucially linked to this, the ownership of the organisation.

In trying to understand the creation and evolution of social enterprise, we have become too bogged down in what a social enterprise does and what impact it claims. We are guilty of overlooking the issue of ownership and this is a situation I feel needs addressing.

In response to the ownership of a social enterprise, some activists have stressed the need for an ‘asset lock’.  This ensures that individuals do not, and will not, benefit directly from their involvement in the enterprise.  In a way, this skirts around the central issue which is about who owns the enterprise – indeed, who owns and thus controls, the means of production.  Ownership, in my view, should be more central to our understanding.

Many organisations that claim to be social enterprises are up-front about their social impact credentials, hoping that no-one will look too closely at the ownership of their enterprise. Of course, those private sector businesses with strong Corporate Social Responsibility (CSR) statements should be applauded – particularly if they genuinely report on what social benefits they provide and do not only use it as a marketing tool.

However, praising these private businesses for their CSR reporting does not qualify them as a ‘social enterprise’.  In my view, a social or community enterprise is about collective ownership maximising benefit to a wider society.

When thinking about social enterprises, the first questions to ask are, who owns it and what is the ownership structure.  This will help in understanding where that organisation is coming from and why it is acting in that particular way.  The key issue around ownership is whether or not the social enterprise is acting in a way that maximises social or community benefit, or is acting solely in the interest of the owners.

Collective ownership operating on behalf of a wider community ensuring future sustainability to benefit society has to be preferred to privately owned businesses masquerading as social enterprises.

In fact, I would go further.  I believe that all organisations that have a central social or community purpose should keep regular and transparent social accounts.  These ‘accounts’ should affirm the key things about the organisation, including ownership, and at the same time provide an indication of the social and community impact backed up by evidence.

And going even further, I believe that in order to give social reports integrity, they should be subject to an independent audit.  For information on a practical way forward, see www.socialauditnetwork.org.

You will have noticed the George Bernard Shaw quote at the start of this blog.  He used the word ‘destroy’ which indicates fairly drastic action.  What he is arguing for is the destruction of ‘private ownership’ as opposed to ‘collective’ or ‘communal ownership’ so that owning things and living contented lives is not in the hands of the few for their own purposes but is shared by the many for everyone’s benefit.

Alan Kay, April 2019

Alan was one of the original founders of the Social Audit Network (SAN) which encourages social and community organisations to keep regular social accounts and have them independently audited – www.socialauditnetwork.org.
Alan is retired but during his working life, he had more than 35 years of experience in community development and social enterprise sector in the UK and overseas. Alan’s background was in overseas development. Since returning to Scotland in 1988 he mainly worked with community-owned enterprises and social enterprises.  He remains loosely attached to Glasgow Caledonian University as a Senior Visiting Fellow of the Yunus Centre for Social Business and Health.
Email: alan.kay20@gmail.com or alan.kay@gcu.ac.uk

 

 

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Social investment and the eradication of poverty

The Social Metrics Commission recently issued the report on their work to measure poverty in a more meaningful way. They estimate that 14.2 million people in the UK live in poverty, including 4.5 million children. These stats are shocking and underline the vital role of so much of the charity sector and social economy, working in many ways to address the root causes or the effects of poverty.

Big Society Capital (BSC) believe that social investment (i.e. repayable finance used to create impact) can be (a small) part of the solution alongside the social economy sector’s other funding sources. Money provided upfront by social investors is used by social enterprises and charities to finance income-generating models so that they are able to make a greater difference in addressing poverty.

Continue reading Social investment and the eradication of poverty

Reflections on Social Enterprise: has it lost its way?

The role of a retired person is no longer to possess one. Simone de Beauvoir

I have been thinking about retiring but with the above quote in mind, I do not want to lose my ‘role’ in society.  I recognise that my role will change and, perhaps because of this, I have been reflecting on the changes that have happened within the social and community enterprise sector – an area I have worked in since 1988.  The essence of this ‘area’ is how organisations can trade in goods and service to maximise social and community benefit.

Mulling over the progress made by the sector in the last 30 years has got me wondering whether or not the world of social enterprise has lost its way.

Since the 1980s when I first started to work with community-owned businesses in Scotland, there have been huge and undoubtedly positive developments.  The idea of enterprises and trading businesses having a central social purpose has become much more acceptable – the proverbial person on the top of the No. 33 bus is now more aware of the term ‘social enterprise’.

Furthermore, governments now see the potential of enterprises delivering a care-bound service and are trying to support them with policies, strategies and the offer of funded contracts.  The prevailing infrastructure (sometimes called ‘eco-system’) within social enterprises is more developed than ever before, and encouragingly, more and more young people want to work within, and startup, companies that create a better and fairer society.

Many of the winds of change in the sector have been positive.  So, why am I left with a nagging negative feeling that the social enterprise ‘movement’, if that is what it is, has lost its way? There are three areas that cause concern.

Firstly, there is no widely agreed definition for a social enterprise.  Instead, there are many slightly different definitions – some are loosely defined and ‘broad church’; while others are very specific.

Without a widely acceptable and recognised definition, it is difficult to say what is a social enterprise and what is not.  This means that some private businesses can self-declare themselves as social enterprises while their trading surplus finds its way eventually into the pockets of its owners.  At the same time, there is a push to encourage organisations that are patently charitable and dependent on volunteer work to make money when there is little or no money to be made.

In my view, this lack of a clear definition has hampered the expansion of the social enterprise sector.

In Scotland, there has been an awareness of this problem and many social enterprises and support organisations have signed up to the Voluntary Code which provides a helpful definition. The Code recognises five basic criteria for social enterprise, and in a short appendix, identifies some less ‘defined’ values/behaviours/influences familiar to the social enterprise movement. Although this has helped, the Code is constantly coming under attack from those that want ‘social enterprise’ to include a wider range of companies – many of which are patently privately owned.

This tug o’ war over definitions is really a political battle – with those on the ‘right’ pushing for privatisation of services, and those on the ‘left’ wanting to retain the benefits from trading entirely for the wider social good.

Secondly, there is an issue about whether or not a social enterprise exists to primarily benefit the individual or the community.

Over the last 40 years or so, there has been a switch in thinking in society in a collective way where there is a concern for the common good, to one where the individual is paramount.  This focus on the individual is so pervasive that it is often considered it to be the norm.  It manifests itself in everything from commercial marketing with a focus on the individual needs of consumers, to psychological profiling of individual persons.

Society is now increasingly more structured these days on the individual and less on the relationships between people.

Mutuality, reciprocal working and looking out for the less fortunate has not disappeared – but it has been given less importance.  We are a society more obsessed with the Self; and less with the Group.

Thirdly, there is a danger that the social enterprise sector is losing its purpose and overall essence.  I think there are three sub-areas of concern here, namely:

  • adoption of neo-liberal economics: Funding is no longer trustingly given to organisations in the third sector.  They have to compete for it causing divisions between similar organisations which due to their often, precarious financial existence should be collaborating and working together for the common good. Added to this is an expectation that growing an organisation is the only way to survive – biggest is best.  This is often not the case as smaller, locally based organisations with strong collective bonds are often more effective as they understand, and work within, the local context.

 

  • overemphasis on management: In the 1980s there was a root and branch re-organisation of the public sector with the introduction of overt marketisation. This encouraged an emphasis on management, reflected in ambitious workers doing MBAs and learning how to manage departments and, indeed, voluntary organisations. The methods of traditional business were swallowed wholesale and not sufficiently adapted to the delivery of social needs. These days it has become entirely acceptable that numbers and finance became the currency of tracking qualitative social change.

 

  • focussing too much on ‘innovative’ technology: This is a tricky one as the technology itself is not a concern – but rather it is how it is applied. Computers have had a huge influence on how we work and how we organise what we do.  There has been, in my view, too much focus on how we deliver what we do and not enough emphasis on why we are doing it.  In effect, there is a danger that the technology dictates the delivery and our sense of caring is subsumed in overly concentrating on method.

I am not sure if I have any answers to any of these concerns about the future direction of social enterprise.

Social and community enterprises can try and keep a grip on what they do by building into their structure time for reflection.  Social Accounting and Audit (SAA) is an integral way of keeping track on what an organisation is doing, how it is doing what it does, who it works with, and most importantly why it is doing what it does.  SAA is not complex.  It is a process which reports on the approach of an organisation, its values and procedures, as well as expecting regular reporting on the positive (and negative) change that happens as a result of the organisation’s actions.

It is about being accountable – not just to a funder or to an owner, but to all the key stakeholders.  It is about helping to hold on to the essence of what they are as a social or community enterprise – and to keep focussed and not drift from their core mission.

Returning to the original quote at the start of this blog.  I think at every age we should build in time for reflection on what has worked and what has not.  The term ‘social enterprise’ is often overused, becoming more diluted and in danger of becoming a meaningless term. The social enterprise ‘movement’, behind the term, is, I think, beginning to lose its way.

But we still have time to address this… well, you do!   I am off to retire.

Alan Kay – Social Audit Network (SAN)
www.socialauditnetwork.org.uk

Social Impact and Inequality

“As long as poverty, injustice and gross inequality persist in our
world, 
none of us can truly rest.” 
Nelson Mandela

Inequality is a difficult topic to understand and tackle but it seems to be increasing in a relative sense and surely has to be addressed by all those working for a fairer society – that includes those pushing for a wider and more effective social economy.

According to the OECD, the average income of the richest 10% of the population is about nine times that of the poorest 10% across the OECD, up from seven times 25 years ago. (OECD).

There has always been income inequality but as the world becomes more and more interconnected, the divisions between those that ‘have’ and those that ‘have-not’ is increasingly widening.  And this has a knock-on effect where the disparities in income translate into disparities in wealth – raising the question, who owns our world?

Continue reading Social Impact and Inequality

Resurrecting a positive role for the much-maligned notion of ‘social capital’

‘Social capital describes the networks together with shared norms, values and understandings that facilitate cooperation within or among groups’ (OECD, 2001)

I want to put out a call for the rehabilitation of what we understand by ‘social capital’.

Recent criticism of the essential concept of social capital has caused people to cast it aside – considering it a redundant approach.  Several influential academics on the left of the political spectrum have written books and articles criticising social capital. Their criticism became particularly virulent at a time when the World Bank formed a social capital strategy in their assistance to developing countries.

In short, the main thrust of the criticism was that the notion of social capital was being used as a substitute for not materially helping populations.  Communities were being told that…we know you are poor, downtrodden and disadvantaged but you have ‘social capital’ and you should be using that more.

Continue reading Resurrecting a positive role for the much-maligned notion of ‘social capital’

Social impact and the argument against unqualified ‘growth’

In connection with business and the economy, we hear a lot about ‘growth’.

Economists argue that the economy has to grow year on year.  Investors claim that businesses have to continually grow as the alternative is for them to stagnate and get overtaken in an increasingly competitive market.  Even social enterprises are being pressed into ‘growing their business’ – usually in business terms such as increasing turnover, improving profits, increasing staff and, generally, expanding market share.  It would appear that the winners in the pervading and traditional economy are the enterprises that are growing and, if you are not growing, you join the losers.

I want to challenge that idea when it is applied to ‘social and community enterprises’.  I shall argue that social economy organisations are different from mainstream businesses as their core ‘business’ is achieving an essentially social or community goal.  Therefore, they should operate differently – making different decisions for different reasons – and ultimately judging their success or failure, not in terms of growth, but in terms of positive, qualitative social change.

I suppose what I want to say about ‘growth’ is not particularly new.  Barack Obama has said…

Trade has been a cornerstone of our growth and global development. But we will not be able to sustain this growth if it favors the few and not the many.
[Speech in Berlin, 24 July 2008.]

He was talking fundamentally about sustainability.  Interestingly, this contrasts significantly with Benjamin Franklin one of the Founders of the USA, who several centuries previously, stated…

Without continual growth and progress, such words as improvement, achievement, and success have no meaning.

Indeed, the context was quite different in Franklin’s time and the world was not hurtling towards climate change and potential environmental Armageddon.  Thus, the historical context matters in how we consider concepts such as ‘growth’.

In 2009 Tim Jackson wrote Prosperity Without Growth: the transition to a sustainable economy. The second edition, Prosperity Without Growth: foundations for the economy of tomorrow was published last year (2017).  In it, Jackson sees enterprise as a ‘form of social organisation’ with work representing participation in society where money should be used for the ‘social good’ – reducing inequality and supporting ecological stability.

This appears to me to be very close to what the pioneers in the social enterprise movement talked about.   There has to be an alternative way of looking at the economy which is inextricably linked to notions around creating zero waste through recycling and working towards a more ‘circular economy’.

I know of a number of social and community enterprises that responded to the urge to grow.  They have tended to assess their success in increased turnover, improved surplus or profit, and in recruiting more staff.  These are ways in which a traditional business measures their success and quantifies their achievements.   But what of improving the quality of the social change that happens as a result of what they do?  Is that to be sidelined in the drive for business success?

With community enterprises, in particular, growth can be difficult.  They are community-based, often operating within a particular locality, and with no intention of growing through domination or expanding into other areas.  They are often owned by the community to create community benefit on behalf of that very same community.  They want to get better at what they do and make a difference to local people by working closely with local residents.

The Scottish Government published its Social Enterprise Strategy earlier this year.  I was interested to see that it recognises the wide community-based nature of social enterprise in Scotland – often operating in financially perilous waters.  To its credit, it does not bang on about ‘growth’ and in terms of ‘scaling up’ social enterprises.  It states…

In increasingly competitive and uncertain markets, scale can be a weakness as well as a strength. For social enterprises, it may become increasingly preferable to scale capacity and impact through partnership rather than pursuing an organisational growth strategy. Collaboration, franchising, and replication will all come into sharper focus.

The last sentence of this quote is crucial.  It highlights the need for collaboration – implicitly in place of competition; and the role of looking to replicate practices in another place.

However, there lies a danger in both of these: collaboration is difficult to foster when funding and investment are usually distributed through highly competitive structures.  Similarly, replication is problematic due to varying contexts – what works in one place will not necessarily work in another, or certainly not in the same way.

Within the social economy, I believe, we should be doing enterprise differently and one example of this is that collaboration should be encouraged to replace overt competition.  Admittedly, this is a controversial notion and difficult to achieve but it is central to working together for the common good.

Another area where we should be doing things differently in the disputed arena of ‘social impact’.

Social and community enterprises trade in exchanging goods and services.  They do this to achieve a central aim of improving people’s lives; not adversely harming the environment; in changing behaviours or influencing cultural norms for the betterment and well-being of all.

So how do they know whether or not they are successful?

The Social Audit Network (SAN) has been working in this area of impact and subsequent accountability for a long time.  It believes that social enterprises should report on their social and community achievements on a regular basis.  At the same time, social enterprises should check on their internal aspects or social enterprise credentials.

In summary, these credentials are: being good to their staff and volunteers; being accountable through appropriate governance; not making individuals wealthy at the expense of the wider society; ‘washing their face’ financially; being environmentally responsible, and helping the local economy along…

SAN also believes that social reports should not be used primarily for marketing and that they should be subjected to some form of audit that checks facts and interpretations made in these reports.

Some form of social accounting and audit (SAA) is required urgently by the social enterprise movement.  SAA is an alternative way of doing things – recognising that working towards social change is a different aim, and cannot be measured in financial terms or in terms of business growth.

Social accounting is not about money.  It is, crucially, about how a social or community enterprise can be accountable – and importantly – held to account for what it is trying to do and what it is trying to be, in social, environmental and cultural terms.

In conclusion, I have always believed that in the end, the future of social and community enterprise will come down to how accurately they gauge their success and how they report this differently, but not entirely different, from traditional business.

We have to not only create a new way of seeing the world’s economy (as referenced in Prosperity Without Growth), by getting in place more appropriate mechanisms that suit an alternative way of doing business.  That includes social funding, social management, social accounting, social capital, social enterprise planning and so on…

So, ditch unqualified growth and get busy at doing things differently.  A possible New Year’s resolution?

Alan Kay
Social Audit Network (SAN)
www.socialauditnetwork.org.uk