Keeping the ‘social economy’ on the right track

I believe that the proportion of our UK economy intended to make a profit for people other than investors or owners is growing.

The concept of a ‘social economy’ is also gaining traction in public policy – the West Midlands Combined Authority proposes a ‘model of economic growth that impacts positively on all our residents and communities’[1]. The Greater Manchester Local Industrial Strategy sets out an objective to ‘create the conditions in which co-operatives and social enterprises can thrive’[2].

This social economy is made up of a rich diversity of enterprises and organisations, including – co-operatives, mutuals, associations, foundations, social enterprises and charities, sharing many common values and features, such as, for example: trading which prioritises the social objective over financial; voluntary and open membership; democratic forms of governance; and reinvestment of most of the profits to carry out social purpose objectives.

However, at the heart of the social economy, there’s a difficult balance to be achieved for social enterprises – too much focus on the ‘social value’ can have a negative effect on the ‘enterprise’ which keeps the business financially sustainable.

Too much focus on the money and the ‘social’ benefit gets lost. The economy isn’t ‘social’ at all.

It’s as if you have to follow a train track – one side gets stuck and the train derails.

Keeping financial accounts is mandatory – so looking after the money is easy.

‘Social’ Accounting and Audit can be the way that social economy organisations revolutionise the way that they work and manage their business[3]. Quite a claim from the Social Audit Network (SAN) but what does it really mean?

Social Accounting and Audit is a process that creates a flexible framework for an organisation to:

Prove – report on its performance

Improve – provide the information essential for planning future action and improving performance.

Account – fully for its social, environmental and economic impact

It enables us to understand the impact an organisation has on its community, and on those people and other organisations who are directly involved with the organisation or who access its services.  At the same time, accountability is promoted and weaved into the process by engaging with the organisation’s key stakeholders.

The main benefit to an organisation is the ability to prove its value and to improve its performance! Proving and Improving has become a popular mantra for social enterprises since the phrase was neatly coined by the Quality and Impact Project of the Social Enterprise Partnership.    However, the ‘Prove and Improve’ mantra can overlook that other essential dimension of the process of social accounting: accountability – being accountable to stakeholders.

I could write more about how valuable the social accounting process is for organisations in the social economy to keep on track; but to find out more, meet organisations who truly do ‘prove, improve and account’, and hear from experts in the sector, join us at the SAN Annual Gathering.

Hosted this year on Wednesday 16^th October at the aptly named Impact Hub Birmingham, the SAN Gathering will bring together a huge range of people with a shared interest in social impact, social accounting or social enterprise.

Starting at 10am, the event will provide an opportunity for connection, reflection, planning and shared learning. It will include:

• Facilitated networking
• Keynote ‘state of the sector’ speakers
• World Café discussion
• Practical workshops and masterclasses facilitated by SAN Directors.

Please book your place at https://www.eventbrite.co.uk/e/gathering-of-the-social-audit-network-2019-tickets-64196148408

SAN will be joined by Liz Tapner of SELNET[4] in Lancashire – the 2018 Most Influential Woman in Social Enterprise, who will be sharing her experiences and tips for running a successful business in the social economy.

Liz knows how to keep social enterprises on the right track!

Anne Lythgoe
SAN Vice Chair

[1] https://www.wmca.org.uk/what-we-do/public-service-reform/

[2] https://www.greatermanchester-ca.gov.uk/what-we-do/economy/greater-manchesters-local-industrial-strategy/

[3] www.socialauditnetwork.org.uk

[4] https://selnet-uk.com/who-we-are/the-team/

 

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-19^th 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

 

 

SAN Presents… understanding poverty

‘Facts alone don’t change how people think… We need to understand how people think about poverty and why… Our society’s shared values can help build support to solve UK poverty’
Joseph Rowntree Foundation[1]

The true purpose of ‘charity’ is to tackle poverty and disadvantage. That’s what charities and other social purpose organisations do – address inequality, help people who are less fortunate, and protect, campaign and lobby on their behalf. Arguably, what is variously referred to as responsible or purposeful business, or even social value, will include actions to tackle poverty.

To truly understand poverty, and the outcomes and impact in terms of how an organisation’s actions are tackling poverty, we need to hear the views of stakeholders who are in poverty… including those in need, but also the people who donate, who invest, who collect intelligence, and who work to tackle poverty in all its forms.

We need to understand the forms of poverty. As the Joseph Rowntree Foundation (JRF) has described, poverty is not only about not having enough money – it’s about not having enough food, poor housing and heating, poor wellbeing, and a poor environment to live in.

We also need to learn from the intelligence available from research, case studies and reports drawn together to inform our planning, decision-making and investment.

…and we really need to give ‘value’ – meaning and worth – to the work that we are doing to tackle poverty.

The Social Audit Network has 8 Principles[2] for social accounting and audit:

• Clarify Purpose
• Define Scope
• Engage Stakeholders
• Determine Materiality
• Make Comparisons (benchmarking)
• Be Transparent
• Verify Accounts
• Embed the process

These principles are all based in creating a logical and consistent approach to collecting and using data as part of an organisation’s arrangements for understanding and reporting on addressing social deprivation and its social impact.

On 17^th October, SAN Presents… an exploration of poverty in the eyes of a range of stakeholders, including Big Lottery, Big Society Capital, WOCAN, the 2030 Hub, the Universities of Huddersfield and Salford, Halton CAB and the Bolton Social Business Collective.

And across 3 aspects of poverty – food, social wellbeing and money.

Taking inspiration from the work of the JRF, and also the United Nations Sustainable Development Goals, we will explore how following the SAN principles and embedding social accounting into your organisation’s work can help your social economy organisation get to grips with robustly reporting on the effort to tackle poverty.

We will also explore an international dimension with the help of WOCAN; Women Organizing for Change in Agriculture and Natural Resource Management, a women-led international membership network of women and men professionals and women’s associations.

The event also coincides with the 26^th anniversary of the UN International Day for the Eradication of Poverty. Book your place now to join in the debate!

SAN presents… Understanding Poverty

The Social Audit Network’s Annual Gathering

Wednesday 17th October 2018

54 St James Street, Liverpool. L1 0AB

https://www.eventbrite.co.uk/e/san-presents-understanding-poverty-tickets-48057029870

Social Accounting and Audit allows social economy organisations to build on existing monitoring, documentation and reporting systems to develop a process to account fully for social, environmental and economic impacts, report on performance and draw up action plans to improve on that performance. Through this process, an organisation can understand its impact on the surrounding community and build a role as a catalyst for tackling poverty.

Anne Lythgoe
www.socialauditnetwork.org.uk

[1] https://www.jrf.org.uk/blog/talking-about-poverty-uk-what-works

[2] http://www.socialauditnetwork.org.uk/getting-started/what-is-social-accounting-and-audit/

Making social accounting relevant for you….

If nothing else, the Social Value Act has led to an explosion in the number of ‘tools’ to measure social value…

Social Value UK offers 36 online tools and software to help people like you and me use in accounting for and reporting on social value. The Social Value Hub, hosted by Social Enterprise UK, includes a vast range of tools, case studies and advice about measuring social value and the Inspiring Impact programme has many similar resources available.

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?

UN’s Sustainable Development Goals ….an answer to social impact reporting?

One of the ‘holy grails’ of impact reporting is a single set of universal measures that can be consistently applied, regardless of an organisations’ activities, size, community, type, and so on.

Finding the ‘holy grail’ has proved rather elusive since early forays into impact reporting by the co-operative movement that date back to the mid-19^th century, although we have seen some harmonisation in recent years around the principles through which we should at least approach our reporting (most visibly and materially through the work of the national Inspiring Impact initiative[1]).

Social accounting should be about good organisational practice, not just a tool for measuring social value…

In his recent blog for the Social Audit Network (SAN), Alan Kay sent out a rallying cry to the social economy:

‘I think that social enterprises should be looking seriously and overtly at the degree to which they contribute to social capital.  This would mean putting in place how they build trust between people and organisations; how they encourage reciprocal working and mutuality; how they state and then live up to their values; how they support a commitment to a community and a sense of belonging; and how they actively create connectedness through informal and formal social networks.

Caught in a spin – can impact unlock a contract?

I have recently had the honour of being involved in the Investment and Commissioning Panel for the Impact Management Programme (IMP). Examining a range of exciting submissions from across the country, I have read how enterprising organisations are seeking funding from the Impact for Growth strand of the IMP to raise investment for their work or write successful tenders, and in many cases to seek contracts with the Public Sector.

A healthy number of these organisations have also secured previous ‘social investment’ to help with their contract readiness.

But experience leads me to query why an ability to manage their impact will make these charities, social enterprises and ‘ventures’ more likely to secure a contract with the Public Sector?

As Adrian Hornsby wrote in an article for the same programme in October 2017:

“ventures and commissioners ‘pass like ships in the night’; and with commissioners showing hesitancy around impact, and social investors inevitably following revenues back to commissioners, the question arises as to where the essential driver for impact management can be found.”

Adrian’s article added to my questioning; what would be the motivation for managing and explaining your social impact if social investors and commissioners pass the buck back and forth between them?

Having been involved in commissioning services from voluntary, community and social enterprise (VCSE) providers for many years, I wonder if the problem for commissioners goes deeper than just a ‘hesitancy around impact’…

Perhaps it is a wilful misunderstanding caused by austerity and the need to make financial savings and efficiencies caused by pressures on the public purse?

In their desperation to raise income to replace lost government money, public agencies are courting partners who they think will bring in additional funds, and not necessarily giving social impact the proper consideration that it should be given.

Essentially, they see social impact as a means to draw in money without fully understanding what social impact means.

Furthermore, we could be heading for a situation where the Public Sector descends into simply becoming a ‘regulator’, diminishing their commissioning role completely. With the reduced strategic contracting capacity of a local and independent organisation with responsibility for public benefit, who will encourage social impact when all society’s ills have to be addressed purely by free markets?

Back in the days of plenty when I worked for Salford’s New Deal for Communities programme, we could afford to work with our providers to understand their impact and the outcomes that they were generating for us. We could even afford to provide training in the tools and techniques which are now part of the IMP.

Now we live in a vastly different world. With the increasing squeeze on public budgets, I am witnessing an appeal from the Public Sector to charities, social enterprises and ventures to bring in other money – grant funding and social investment – for services and activities which were previously fully funded by the Public Sector.  But why would people with money invest in these services – unless there is something for them in it?

In Salford, the amount of money flowing from the Council to the VCSE sector through contracts and grants has reduced by over 40% in the last 5 years. Our research shows that the middle is falling out of the sector – small community groups which rely on volunteers continue to thrive, their members driven by a shared interest in tackling unfairness, poverty and inequality in today’s society; and the larger ‘enterprises’, many of whom are national organisations or Public Sector spinouts, continue to succeed in contracting.

This leaves small and medium-sized ‘ventures’ caught in a spin between the Public Sector pushing them towards grants and ‘social investment’ as means of enhancing dwindling budgets; and social investment providers offering support for them to be ready to contract with the Public Sector.

I believe that the Public Sector doesn’t really understand that ‘social investment’ must get a return, just like any other form of borrowing, and social investors don’t really understand the state of panic in the Public Sector.

So, should this be where impact management fits in?

Public Sector commissioners want services, and they want outcomes. They want people to have better wellbeing, better lives; and ultimately, they need people not to need public services so much.

Social investors want many of the same things, but these outcomes must be measurable and accountable. They need to understand the financial and the social return, they may need to see financial growth, but ultimately the investment should be repayable in both social, and often also financial, impact one way or another.

So, a better understanding and management of the impact that a charity, social enterprise or venture is creating will help bridge the gap between the investors and commissioners.

And, I believe that it is also essential for their survival.

The NeuroMuscular Centre (NMC) in Cheshire has been part of the GSK Impact programme for several years. Over a 10-year period, NMC has kept social accounts, covering both the impact that the Centre is having for service users, their families and other stakeholders, and how it is managing the organisation in financial terms to maximise that impact.

NMC has a greater understanding of outcomes and impact; continuous dialogue with service users, funders and commissioners which takes places to prepare the social accounts; and the ability to accurately describe their impact in tenders, funding bids, and publicity. All this has helped this organisation triple its turnover and move from a position of uncertainty to one of a secure and rosy future.

By embedding social accounting and audit as a means of impact management, NMC has broadened its financial base, grown in size, and secured its position as the leading provider of services for people with neuromuscular disease in the country.

And who should pay for this impact management? I believe that if commissioners or social investors want evidence of ‘impact’ they should also have to pay for the work evidencing the impact…

In conclusion, there will always be a need for social and community organisations to take the heat out of the public purse – social accounting and impact management are probably the best ways for them to achieve this.

Social investors and Public Sector budgets will come and go, but the people who need support from charities, social enterprises, and other community-based organisations will always be there!

Ultimately, I believe that the essential driver for impact management should, therefore, be to achieve the best possible outcomes for the people (and/or the environment) that an organisation supports, and in doing so making it relevant, investible and successful for the long term.

Anne Lythgoe, Social Audit Network (SAN)
www.socialauditnetwork.org.uk 

Social impact and challenging the ‘sacred cow’ of how financial accounts are presented

Definition: ‘sacred cow’ (noun) – a belief, custom, etc. that people support and do not question or criticise: Example: They did not dare to challenge the sacred cow of parliamentary democracy (Cambridge Dictionary)

Challenging ‘sacred cows’ is a bit of a dodgy business and may get me into hot water.  But I take courage from the work of John Pearce and his life’s work which was always challenging the status quo and trying to approach economic, social and community problems in a different, innovative and often pragmatic way.

I had the privilege of working with John Pearce for most of my working life.  In many ways he was quite a complicated character – forming alliances, charming people, making enemies, challenging the norm… But always taking the side of the dispossessed, those with fewer advantages and the folk that are made to feel like pawns in, the supposedly ‘normal’, economic system.

John and the work that he did was ways ahead of his time.  I recognise that this is a cliché but it is on record that he started and developed initiatives that were only appreciated much later by the established mainstream.  Here are some examples:

• in the 1970/80s, he proposed that community development had to include local economic development in a much more tangible way. Money, earning power, ‘good’ work was integral to social change within communities – and he believed that local folk could take control of their own economic activity for the wider benefit.  John, along with others, started the community business movement in Scotland;
• he thought that acting locally but thinking globally was crucial to avoid community and national introversion. John, again along with other like-thinking people, established COMMACT (an international network dedicated to sharing community development practices);
• in 1990 he pushed for the establishment of a fund owned and controlled by the community business movement to enable community businesses to have access to capital which was not being provided by high street banks or traditional investors. John led on the formation of the Scottish Community Enterprise Investment Fund which was active for 10 years before it was incorporated into the Charity Bank;
• he recognised that organisations with a central core purpose of social and community change had to get better at explaining and reporting regularly on their social and community impacts as well as their values, approach, and credentials. John initiated the process of social accounting and audit running alongside financial accounting and audit.  This moved him (alongside others) to found the Social Audit Network (SAN).

I could go on explaining some other aspects of John Pearce’s approach and work but they have been documented elsewhere and re-surface annually in the John Pearce Memorial Lecture.

Essentially, John’s work often challenged the ‘sacred cows’ of traditional economic community development.  He believed that social and community enterprises/businesses should do things differently and not ‘ape’ traditional business.  He pushed for business planning to become a more relevant form of social enterprise planning; for social capital to be part of a local community enterprise strategy; and for social benefits to be recognised as having an integral and tangible value.

And this latter point brings me to an area that John worked on but never really followed through.  It has remained an idea, I believe, that is yet to come.  It is about changing the way financial accounts are presented to show the amount of time, money and resources that have been used by social and community enterprises in furthering their social and community aims.

Back in 2004, he referred to this in a short paper included in the Social Accounting and Audit Manual and called it the ‘Social and Economic Impact Accounts’.

What John was trying to show was that financial accounts could be presented in a way that separated out the Trading Costs from the Social Benefit Costs.

Please bear with me and I shall try to explain using an example of a community-owned shop and cafe.  In the interests of illustration, I have used a table – which is rarely normal, and the figures are made up…

John reckoned that this simplified but traditional accounting of profit and loss could be recast.  The re-cast shows Revenue Costs divided between Trading Costs and Social Benefit Costs.  By illustration, as follows:

The ‘sacred cow’ of financial accounting presentation has, of course, been subject to examination and change before.  Academics, in particular, often re-do traditional financial accounts to take account of environmental and social change.  They refer to this as ‘shadow accounting’.

Similarly, the Office of the Scottish Charities Regulator (OSCR) asks for charitable financial accounts to separate out Governance from Charitable Activities.  I seem to remember that the new economics foundation presented their accounts in their annual report some years ago, applying a similar principle to the example I outlined above the one above.

I realise that thinking along the lines John outlined, will require a lot more work by qualified accountants and their respective bodies – but hopefully, the principle could still be applied.

If social and community enterprises adopted this as a regular practice there are a number of clear benefits, namely:

• there is an openness in understanding the social and community enterprise priority towards social and community benefit;
• it can help a Board of Directors make more transparent decisions over resource allocation;
• it can, to a degree, help in our collective understanding of what a ‘social enterprise’ is actually doing; as opposed to what it says it is doing;
• it can lead to better management of a social or community enterprise as it can assist a social enterprise to assess just how much social benefit it can afford to engage in without compromising its financial sustainability;
• it might help when an enterprise asks for funding for its social and community aims as opposed to requesting funding for the overall expansion of its business;
• it can counter the argument for Social Return on Investment (SROI) that has received considerable support in recent years. This alternative approach requires a focus on the real costs of providing social impact rather than trying to monetise all the outcomes into an impact score;
• it is especially useful for a social enterprise whose audited accounts show that it is only marginally viable (or even loss-making) whereas the true picture is that it is fundamentally profitable but devoting (perhaps too much) surplus to social benefit.

I admit that the Social and Economic Impact Accounts are based, to a degree, on assumptions and allocative decision-making within the enterprise.  But at least there would be greater clarity and more understanding of the type of organisation it is, and how much it focusses on social aims.

Back to John Pearce.  I mentioned at the start of this piece that he was ‘complicated’.  True. but he was someone with a clarity of vision and a clear idea of how we, through working collectively together, can change things for the better.  He believed that the way to do this is within your own community – and if along the way you take a poke at a sacred cow or two, so much the better…

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

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