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Picture the scene. You’re a fly on the wall at the monthly board meeting of a large company. The directors – executive and non-executive alike – are discussing a memo from the head of procurement who has just added not one, but two social enterprises to the list of approved suppliers. Eyebrows are raised. Does this represent a business decision, or is the procurement chief improvising a departmental corporate social responsibility initiative? Some on the board are even asking if social enterprises can be considered real businesses.
But of course, not only are social enterprises “real businesses” in the sense that they trade, generate revenues and (if successful) make profits, but they are also having an increasingly important economic impact. So much so that more traditional and conventional companies should perhaps take notice of what social purpose companies are doing and how they do it.
Witness a recent report from Social Enterprise U.K., an organization that acts as a trade body and think tank for the sector. Published toward the end of last year, the Hidden Revolution finds that businesses with a social purpose contribute around £60 billion annually to the British economy. It’s a figure that might come as something of a shock – or perhaps a pleasant surprise – to policymakers. Previous data published by the Government’s Office for National Statistics estimated an annual contribution of just £24 billion.
According to the report, there are currently 100,000 businesses that could be described as social enterprises, collectively employing more than two million people across the British economy. When measured in terms of gross domestic product (GDP), they represent 5 percent of the U.K. total. By that measure, the social enterprise sector is bigger than agriculture and on a par with the creative industries. And this is a sector that is consistently creating new businesses. Around 25 percent of the total are startups and less than three years old. This compares to a figure of eight percent of all small and medium-sized companies.
You could, perhaps, make the case that there is really no such thing as a “social enterprise sector” per se. Yes, there are a large number of companies that are focused on a socially beneficial mission but they are a operating in a diverse range of market segments, such as health, the environment, technology, agriculture, social provision, and training. Within those sectors, they will very often be competing with fully commercial business. For instance, a coffee chain that recruits from the ranks of the homeless will probably be competing for business with the nearest Starbucks or Costa coffee.
So does it really matter that Britain’s social enterprise sector is growing? Or to put it another way, as long as shoppers can find a nice place to buy a coffee, does it really matter – economically speaking – if they choose a store that trains up the homeless. The coffee, after all, will taste pretty similar.
Well, let’s leave aside the obvious point that running a sustainable business that also delivers clearly defined social benefits is a good thing to do. Meanwhile, it’s important to remember that a great many social businesses are delivering services that conventional businesses would shy away from.
But the wider economic importance of social enterprise is evidenced by the two million employees and the £60 billion contribution to GDP. What’s more, according to Social Enterprise U.K., more conventional businesses may have a lot to learn from social purpose companies.
A Motivated Workforce
For instance, as Social Enterprise U.K. Communications Officer, Shehan Perera points out, socially focused businesses tend to have highly motivated workforces. “Social Enterprises do very well on employee engagement,” he says. That’s partly down to the fact that – as survey after survey points up – millennials want to do jobs that matter and are thus attracted to companies that have a purpose that extends beyond simply making money for shareholders. However, in some companies at least, salaries are also a factor. “Social enterprises tend to ensure that their workers are paid at least at the level of the U.K. living wage,” says Perera. That’s certainly not always the case in the wider economy and it’s another plus when it comes to attracting good and productive staff.
There is also evidence that social enterprise companies are – by some measures – outperforming their conventional competitors. Perera cites research suggesting that while 37 percent of U.K. businesses grew their turnover in 2018, that figure rose to 47 percent in the social enterprise sector. There is also a huge amount of innovation, with 50 percent of social enterprises coming up with new products in the twelve months prior to the survey compared with 33 percent of SMEs in general.
But there is still a credibility gap. A feeling on the part of many – including potential customers – that social enterprises are charities in disguise. Against this backdrop, Perera says that a key goal for his organization is to encourage more corporate businesses to buy from or partner with social enterprises. “One of our main workstreams is to get companies in the private sector to work with social enterprises as business partners,” he says. So far, major businesses names such as PWC, Johnson & Johnson and Wates have come on board on the “Buy Social Corporate Challenge.”
But as Perera sees it, the U.K.Government has slid back a little in terms of encouraging the growth of social enterprise activity. “It used to be the responsibility of the Cabinet Office,” he says. “That put social enterprise issues very close to the heart of Government. But it has since been moved to the Department of Culture, Media and Sport, which doesn’t seem to be the right ministry.”
Social Enterprise activity is growing in the UK and the sector is producing profitable and sustainable companies. Perhaps it is time for corporate and public sector organizations to pay more attention.
May 13, 2019 at 01:22PM
Forbes – Entrepreneurs