Social Enterprise is a verb not a Noun… | Social Enterprise

Following a significant level of response to my post that included some commentary, blatantly stolen from Paul Cheng at Venturesome, on definitions of social enterprise I think it’s worthwhile continuing in the same vein.  Plagiarising from Paul and digging a little further into the definitions debate – with the view, at least in my own mind, to slay the issue once and for all.

Venturesome really do rock you know!  Their volume of deal flow and the quality of the thinking they put out in periodic papers sets them apart from the rest of the social finance intermediary crowd.

Hopefully this flagrant heaping of compliments onto Paul, John and the team will mean they forgive me for the following act of verbatim theft…

So, what’s the deal with this ongoing debate about definitions?

Well back in 1995 some of us in the cooperative movement identified an opportunity to push forward in policy terms with the shortly to be in power Labour Party.  This drive was led by people like Jonathan Bland, first CEO of the Social Enterprise Coalition, and Malcolm Corbett, founder of PopTel.  They found that they were pushing at a relatively open door into Blair’s kitchen cabinet.  However, in the interests of staying at the table and, quite rightly, opening out the debate, the definition of what exactly was this new shiny thing called ‘social enterprise’ was kept broad and pushed onto the backburner.  Since then, despite the best efforts of SEC, the DTI, OTS (now OCS) and others a clear and broadly agreed definition has yet to be arrived at.

Fast forward some years and beyond the last government’s showering of the sector with finance, funding, praise and contracting opportunities.  Fast forward to just a few years ago.  With such abundance on display we find many individuals from the private sector entering our world.  And what a fantastic thing this is.  With one (well at least one) exception – the bringing to the table of private benefit in what was previously a public benefit focused debate.  The introduction and blending of public and private benefit and the implications this has for investment, governance, management, indeed every aspect of our sector, is essential to the success of social enterprise.  However, such private benefit views brought into a yet to be settled definitions debate has further opened up the space for disagreement and a widening of what people consider to be a social enterprise.

Not nailing a definition down in the early years has come back to bite us in the bum!  The very people who founded the social enterprise movement have lost the definitions debate!  And that hurts…

Unless we take social enterprise from the status of a noun to that of a verb…

Which is what Venturesome argue for in their paper titled Financing Civil Society.

And so to begin the plagiarism and to quote the ever so eloquent Venturesome team…

“We take the view that social enterprise is an activity… rather than an organisational form, “a verb rather than a noun”, and therefore that most civil society organisations have some social entrepreneurs conducting some form of social enterprise.  Social enterprise has become a ‘catch-all’ term, but does not distinguish between organisational models. Those investing in ‘social enterprises’ are not always asking the appropriate questions to cut through this term and facilitate adequate understanding of the detail of the different organisational structures and how they have an impact on financing needs.

For the purpose of defining the demand side of the social investment market, and disentangling financial risk from expected levels of social impact, we need to specify the different organisational models that exist under the umbrella ‘social enterprise’ term”[1].

So let’s revisit the diagram, stolen from Paul in my last post.  On the left we have realisation of public benefit.  Over on the right it’s all about private benefit.  In the middle we find all kinds of ‘blended return’.

And let’s plagiarise some more from Paul and the Venturesome team and start on the left hand side of this diagram…

• “Charity with fundraised/grant income: Charities operating with income/cash flow funded predominantly by grants and fundraised income.
• Charity with ‘on mission’ trading/contracting: Charities engaged in on mission trading, ie the trading activity directly furthers its charitable mission, or contracting. The activity may (or may not) generate surplus revenue, which is transferred to fund some other part of the charity’s work.
• Social benefit enterprise: Organisations that operate with a social purpose and where profits are recycled back into the enterprise, with limited distribution to outside (private) investors. They do not, therefore, release financial return or trading surplus to investors in the same way as a commercial business.
• Social purpose business: Structured as a profit-generating business, the operating model replicates that of a commercial business. However, the operations deliver a product or service that has high social impact which is at the core of their mission – the model can be either ‘trade-off’ or ‘lock-step’. (For more detailed explanations of the trade-off model and the lock-step model see The 3 Models of Social Enterprises: Creating social impact through trading activities[2].)
• Socially responsible business: Profit-making commercial businesses which do not operate with a social purpose as their mission, but conduct their operations in a socially responsible manner taking into consideration the social impact of their operations. The traditional view of a socially responsible company is that the ability to maximise profits may be tempered by the social or environmental return so they are profit-making but not profit-maximising. However the term socially responsible can mean different things to different people and activities such as ‘greenwash’ – when a company adopts one environmental policy to cover up for a greater environmental evil – have mired the term in controversy.
• Business generating profits for charitable spend: Businesses which operate in commercial trading markets but aim to generate profits where all or a significant proportion of profits are given to charity. Profits have to be earned and then spent effectively (on the charity’s mission) to achieve any social impact. Businesses that are members of The Per Cent Club (one per cent or more of pre-tax profits are given to charity) would not fall into this category.
• Commercial enterprise: Profit-maximising commercial businesses that do not primarily have a social purpose. These fall outside the organisational models that would receive financial support from a social investment organisation.”[3]

So, to close I’d say there is a distinct lack of sophistication in debates that are seeking to define what a social enterprise is.  Social enterprise is a term that has evolved to describe what many folk do.  It no longer describes the legal form they deploy.  A more specific description of the governance and legal form is needed, along with a more refined categorisation of organisational form such as the Venturesome one described above.  Without this as a sector we are ill-equipped to articulate our position and needs and therefore grow to affect increased public benefit impact.

I for one won’t be using the term social enterprise to describe legal forms any more…

[1] http://www.cafonline.org/PDF/Venturesome_FinancingCivilSociety_1806091.pdf

[2] http://www.cafonline.org/default.aspx?page=18956 and http://www.cafonline.org/default.aspx?page=18950

[3] http://www.cafonline.org/PDF/Venturesome_FinancingCivilSociety_1806091.pdf

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