THE late economist Milton Friedman famously dismissed the idea of corporate and social responsibility by saying that the only social responsibility of business was to increase its profits.
However, Britain’s social enterprises — businesses set up to contribute to society as well as their own bottom lines — would beg to differ. Well-known social enterprises include the likes of the Big Issue, Café Direct, Jamie Oliver’s Fifteen restaurant and the Eden Project.
An estimated 55,000 now exist in Britain and the number is growing as people turn to enterprise as a way of making a difference to the world.
The profusion of social enterprise makes Friedman’s rejection of it look distinctly outdated, according to James Baderman of What If, an innovation company that employs 300 people and devotes 10% of its profits to helping social enterprises develop and grow.
He said: “People increasingly want to have their values fulfilled in their work and are rejecting the political process, the voluntary sector or the idea of joining a large organisation as a way to make a difference. They see enterprise as a much more flexible and effective way to achieve results.”
Social aims and the profit motive need not be incompatible, said Baderman. “There’s lots of money to be made here. There are huge opportunities; just look at the double-digit growth in fair trade and organic goods over the past decade. Consumers are increasingly making choices based on the ethical nature of products.”
Malagasy, a gourmet food firm, is a good example of a business that is seeking to make profits while also trying to tackle poverty. It calls itself an “equitrade” company and has launched an accreditation scheme for other firms that offer the developing world a chance to benefit from higher-value goods.
Malagasy helps its partners in Madagascar to produce and package the chocolate, nuts, spices and honey that it sells in supermarkets such as Waitrose. This enables them to earn a greater proportion of the end value of the goods than typical fair-trade businesses offer.
Breaking the cycle of poverty and economic stagnation requires more than charity, it requires the creation of sustainable businesses that will pay local taxes and employ local people, according to Malagasy’s managing director, Neil Kelsall.
“About 95% of the value of the average chocolate bar is created outside the country the chocolate originated from. We want to work with producers in Madagascar that can make world-class products and so increase the value of their business,” he said.
Setting up a social enterprise can do more than highlight development issues — it can be a good way of influencing big retailers and their supply chains, according to Reed Paget, co-founder of Belu, a firm that produces bottled water. As well as donating its profits to clean-water schemes in the developing world, Belu minimises its waste and energy impact through carbon offsetting and by using biodegradable bottles, said Paget. “Having a consumer-goods brand gives us the ability to affect the sustainability of manufacturing and raise awareness of just what you can achieve here.”
Social enterprise can also serve as an efficient and sustainable way to deliver public services. Ealing Community Transport was founded in 1979 to offer transport in the west London borough. Its chief executive, Stephen Sears, said: “We did not think the transport being provided in Ealing for elderly people was good enough. We thought we could do better and the business grew from there.”
Ealing Community Transport is now a £50m group offering transport, waste management and recycling services, competing in the open market to win business from local councils in Britain. Registered as a Community Interest Company, it continues to plough profits back into the Ealing community.
Being a social enterprise that is not entirely focused on short-term profitability enables the business to take a longer view, approaching contracts in a different way and enabling it to be more socially and environmentally responsible, said Sears.
“Economic motivation is important, but it is not the only motivation. We try to keep commercial objectives in balance with social and environmental objectives. There’s no point pursuing one of three if it’s at the expense of the others. A purely profit-orientated model is outdated. Social enterprise is the model for the 21st century.”
In some cases the social-enterprise model is the only way to make certain socially important causes viable, according to Colin Crooks, chief executive of the charity Green-Works, which last year saved 12,000 tonnes of office furniture from going to landfill sites.
It charges companies such as Hewlett-Packard, Barclays and IBM to remove furniture during office moves. Green-Works sells some of it, but most is donated to charities and other deserving causes. It employs disadvantaged people and ploughs all profits back into the enterprise, said Crooks.
“Despite the fact it costs companies about 20% more to use us, there’s considerable buy-in to the idea of this business — but only because of our social- enterprise status. The corporate world is ahead of the curve here.”
The good news for anyone considering launching a social enterprise is that help, advice and even funding are available. Unltd (pronounced Unlimited), a charity supporting social entrepreneurs, has helped 3,500 people to set up their own social enterprises and initiatives, contributing advice, mentoring and a total of £10m in the past three years.
A typical grant for eligible applicants is up to £5,000.
There is a groundswell of desire to make a difference through social enterprise, according to Unltd’s chief executive, Cliff Prior. “Many people believe they can best deliver social value through a business. The people we work with are incredibly resourceful and often have to be because they are delivering a double or triple bottom line. Their achievements often beggar belief.”
What is a social enterprise?
THERE are many types of social enterprise but no single legal definition. All share the idea that profit is not the only aim of the business and that they should contribute to a second social “bottom line” and sometimes a third environmental one.
Some have charitable status. Some are for-profit businesses but plough profits back into their local community or cause. Others are more like classic businesses in which individuals take profits from the business but aim to serve the community or the environment along the way.
In 2005, the government created Community Interest Companies (CICs), a new type of company status for enterprises operating for community benefit and not purely for private advantage.
CIC status is granted by meeting a community-interest test.
An asset lock is built into the business, ensuring that assets and profits are dedicated to these purposes. About 500 CICs operate in Britain.
www.unltd.org.uk
www.equitrade.org
www.cicregulator.gov.uk
