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The profusion of social enterprise makes Friedman’s rejection of it look distinctly outdated, according to James Baderman of What If, an innovation company that employs 300 people and devotes 10% of its profits to helping social enterprises develop and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 (see adjoining panel), it continues to plough profits back into the Ealing community.