"The economic downturn and the demise of the financial sector have brought about a new reality: No longer is the private sector the vehicle for wealth creation with government responsible for our social wellbeing. And no longer are people going into workplaces feeling that they have to make a choice between being commercial and being purpose-driven.

Welcome to the era of social enterprises where a new model for 21st century business has emerged. These businesses bind the social and environmental goals of a conventional charity with the commercial rigour you would find in a successful profit-making firm.

Everyone’s heard of Cafédirect and Jamie Oliver’s Fifteen restaurant group, but fewer people realise that these are social enterprises or that they had to face the same challenges as any other business. The UK is brimming with new ideas to address social challenges; ideas that also have the potential to generate steady economic returns and which are making even the most hard-nosed investors take note.

Already there are more than 55,000 social enterprises in the UK, and together they generate an annual turnover of £27 billion and contribute £8.4 billion to the UK economy. With the right investment, these figures can be doubled within a few years, but first we need to remove the barriers that social entrepreneurs face.

Like any growing sector, social enterprises face a number of challenges. First, it requires greater awareness and influential role models to inspire people to get involved. Then, there are the practical obstacles of growing a business. Social enterprise business models and the infrastructure to support them are underdeveloped, so, in the absence of tried and tested tools to guide social enterprises, there is a lot of experimentation going on.

From training, devising business plans, securing finance, attracting and developing talent, through to identifying the right legal structure that balances social and business needs, and it is this experimentation that is building the foundations of what will become one of the UK’s most sustainable, meaningful, and exciting business sectors.

The government - particularly the Office of the Third Sector - already recognise that the social enterprise sector is becoming very powerful. It also sees the benefit of allowing people on the ground, with a better sense of what needs to get done, to do the work that would otherwise fall to central government institutions.

But government, which previously activated a tidal wave of innovation and entrepreneurship to produce some of the world’s greatest companies, now need to do the same for social enterprises. This can take a number of forms, from reviewing the tax code to bringing the treatment of social enterprise in line with traditional businesses, right through to creating a business support network to ensure that the best support is available to social entrepreneurs.

However, the greatest barrier to social entrepreneurship is adequate access to finance and an awareness of available sources of funding. The term social finance has grown up alongside social enterprise, and there are now a number of innovative approaches to grants and lending that have been specially adapted to the needs of this sector. Even so, sources of risk capital remain elusive.

We need to transform investment in the social enterprise sector, and in particular, ensure that there are sufficient pools of risk capital. We’re starting to see change occur as private investors recognise the benefits social enterprises deliver in both social and financial returns.

Public-private social innovation funds have started to emerge, but we have a distance to travel to encourage investment in businesses whose principle goal is to have a social or environmental impact, and some systemic changes need to occur across the sector if this is to happen.

Understanding: There needs to be a focus on improving the appeal and understanding of social enterprises to investors, particularly small-scale investors. This can be achieved by creating investment products and services that give a range of investment options.

Promotion: A number of institutional investors have experimented with social investment but more could be achieved with better awareness, and products that are better adapted to meet their needs. On the other side of the fence, a significant number of social entrepreneurs are unaware of the impact capital investment could make and how to go about getting it.

Skills: Many social entrepreneurs lack high quality training and do not have in-house financial expertise to devise business plans and articulate financial models. We are starting to see progress through academic courses, incubators and business advice, but it needs to be accelerated.

Networks: Social entrepreneurs need opportunities to apply their ideas, test their thinking, and learn from their peers. They also need the chance to meet investors before formal deal negotiations, which investors will also benefit from.

Tax and regulation: There are tax implications both for social enterprises and their investors. There may be tax-related opportunities to unlock more sources of capital, and strengthen the performance of social enterprises.

We are living in extraordinary times where the urgency to find solutions to big social challenges is greater than ever. This recession will be seen as a watershed for a new tier of social enterprise leadership and the UK needs to be ready to respond to this inevitable shift. If the groundswell of successful social enterprises we’ve seen over the past ten years is anything to go by, the next ten will see an even greater movement towards businesses with a conscience."

Jonathan Kestenbaum is the chief executive of NESTA (National Endowment for Science, Technology and the Arts), an independent organisation that works with government to shape policy that will stimulate imaginative solutions to pressing social issues and also provides advice and funding to early-stage social enterprises. Kestenbaum is also a board member of the Design Council, the UK’s Technology Strategy Board and the Royal Shakespeare Company.

www.nesta.org.uk