In the UK alone there are approximately 68,000 social enterprises contributing at least £24 billion to the economy.
Last week we launched a guide for charities interested in social enterprise, in collaboration with SEUK. Increasingly, charities approaching Pilotlight are keen to get on board with social enterprise. This seems to be driven by funding cuts in the sector – social enterprise is seen as an alternative way to secure funds. It is certainly no coincidence that we are seeing more demand for information about social enterprise at a time when there are key changes to the commissioning process, social investment is taking off and charities providing public services are questioning what impact the Public Services (Social Value) Act will have when it comes into play in January.
Our response was to develop the guide, called Why Social Enterprise?. The title is significant because although charities are looking at this model as a solution to their funding problems, we feel they need to be clear about what it means for their organisation. Will adopting a social enterprise approach really deliver a more sustainable future?
The recent article by NPC ‘Are you ready for social investment?’ highlights the disparity between the funds available and the investment readiness of charities. Although social enterprise has been on the scene since the millennium, Pilotlight’s experience of charities (the majority we work with have a turnover of around £500k) suggests there are also significant barriers to be overcome in this area as well. Organisations providing an important service to their communities need to get to grips with diversifying their income through selling products or services and plan accordingly.
At Pilotlight we have encountered examples of charities setting up ‘separate’ social enterprises alongside their charitable organisation, leading to governance and management issues, and others where the ideas were right but the skills and thinking for the business aspect needed to be developed.
Worth Unlimited, a charity working with young people, came to Pilotlight after establishing Worth Enterprises, which gives work experience and skills through a bike repair business and bakery. Chief executive Tim Evans says they ‘knew we had a good idea but we were struggling to really think things through and see how our new social enterprise would fit within our organisation’. Tim added that one challenge was getting staff to buy into the new venture: ‘We needed our youth workers to switch their mindset to running a business, which was a big change for them.’
A social enterprise approach is essentially about finding another income stream to support the activities that a charity undertakes as part of its mission. It doesn’t mean cutting services that don’t make money but it does mean understanding where the surplus will come from to pay for them. Yet the notion of charity as a business, selling services or products to fund a social mission, is still not a mainstream one.
As with social investment there is a need to assess the true cost of providing a service, and ensuring a profit is made may require a new set of skills. It may also require a change in culture or mindset amongst trustees and staff but this can enable charities to demonstrate the true value of what they do – something they’re not always good at.
There are opportunities for charities to understand better their value, to articulate it, and build a more sustainable future. But to do so they need support. The guide is meant to provide context and practical advice, but the fact is that there is no legal definition of social enterprise, or any particular legal structure it must adopt – so the key ingredient is the capacity within the organisation to develop and manage the ‘business’. Big Lottery Fund and Social Investment Business appear to be on board with the idea of investing in capacity building around social investment. We would like funders to consider the same support for charities looking at social enterprise for the very first time. Imagine the social impact and financial sustainability charities like Worth Unlimited will be able to achieve through social enterprise if they are supported to think through new ventures, plan strategically and have the buy-in from all stakeholders.
Gillian Murray is deputy chief executive at Pilotlight.