The Importance of a Definition for Social Enterprise

(As usual, from the outset, Huckfield declares an interest in all this as a Member of the Board of the Social Entrepreneurs’ Network Scotland and a firm supporter of Social Enterprise. However, views expressed in this posting are Huckfield’s own.)

In seeking to clarify a definition for ‘Social Enterprise’, this posting in no way aspires to argue against other Third Sector colleagues. Most mutuals, cooperatives, Social Firms, Development Trusts and many others are on the same side of this argument.

This posting argues to keep the private sector and the corporates out of ‘Social Enterprise’. This is why, like many others, Huckfield encourages continuing alignment and adherence to the Senscot Code for Social Enterprises.

The contribution from Social Enterprise UK to the Guardian’s “Tax Break Treatment for Health Firms” Monday 14 January 2013 doesn’t really help.

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Previous Attempts to Define Social Enterprise

Since many people don’t understand Social Enterprise, despite several previous definitions, there remains a need for clarity to exclude the private sector. Here are some examples:

Social Enterprise: a Strategy for Success. July 2002. Department of Trade and Industry

    Section 1 Social Enterprise Explained. 1.1 Definitions and Characteristics on page 13:

    “A Social Enterprise is, first and foremost, a business. That means it is engaged in some form of trading, but it trades primarily to support a social purpose. Like any business, it aims to generate surpluses, but it seeks to reinvest those surpluses principally in the business or in the community to enable it to deliver on its social objectives. It is, therefore, not simply a business driven by the need to maximise profit to shareholders or owners.

    “Social Enterprises are diverse and operate at many levels. They include local community enterprises, social firms, mutual organisations such as co-operatives, and large-scale organisations operating nationally or internationally. What they have in common is a commitment to meeting the social and financial double bottom line, with some adding a third – environmental.

    “While some Social Enterprises start off as businesses, most are in transition from their beginnings as voluntary sector organisations, dependent largely on grants and volunteers, and working to increase traded income. A recent National Council for Voluntary Organisations (NCVO) report said that up to 35% of general registered charity income is derived from trading activities”.

The Role of the Voluntary and Community Sector in Service Delivery: A Cross Cutting Review, September 2002: HM Treasury.

    Chapter 5, Social and Community Enterprise on page 23:

    “5.1 Social Enterprises are not for profit businesses driven by social objectives. They are an expanding part of the wider voluntary sector. And, in reality, there are a substantial number of VCOs that share some of the characteristics of social enterprises. A Social Enterprise is defined by DTI’s Social Enterprise Unit as:

    “a business with primarily social objectives whose surpluses are principally reinvested for that purpose in the business or in the community. (Social Enterprises) include local community enterprises, social firms, mutual organisations… and large-scale organisations operating nationally or internationally.”

Our Health Our Say: a New Direction for Community Services. January 2006. Department of Health

    Glossary on page 220 defined ‘Social Enterprise’ as:

    “Businesses involved in social enterprise have primarily social objectives. Their surpluses are reinvested principally in the business or community”

Welcoming Social Enterprise into Health and Social Care: A Resource Pack for Social Enterprise Providers and Commissioners. January 24 2007. Department of Health

    i. What is a Social Enterprise? on page 4

    “Social Enterprises are business-like entrepreneurial organisations with primarily social objectives. Their surpluses are mostly reinvested back into their business or the community to help achieve these objectives and change people’s lives for the better. Social Enterprises are not driven by the need to maximise profit for shareholders and owners.

    “In essence, social enterprises use business solutions to achieve public good. They tackle a wide range of social and environmental issues and operate in all parts of the economy, helping make it stronger, more sustainable and socially inclusive”.

The Future Role of the Third Sector in Social and Economic Regeneration: Final Report July 2007. HM Treasury and Cabinet Office:

    Introduction on page 6 in Box 1.1 Diversity in the Third Sector recognised a continuing definitional dilemma:

    “Social Enterprises – in 2005 there were over 55,000 Social Enterprises, some of which also come into the categories of VCOs or cooperatives. The annual turnover of social enterprises is around £27 billion and they contribute about £8.4 billion to GDP. Social Enterprises are active in a wide range of economic activity, in sectors such as training, social care, housing, leisure and childcare. They include organisations such as those selling fair trade goods such as Café Direct, organisations established to provide employment opportunities for people facing disadvantage (Social Firms) and development trusts”.

While these examples are not an exhaustive list of all occasions on which ‘Social Enterprise’ has been mentioned in various Government documents, they do show that because previous definitions lacked clarity, the door to the private sector and corporates remained ajar.

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A Requiem for Social Enterprise

The big risk is that every time some Social Enterprise organisations seek to clarify or define “Social Enterprise” more precisely, it may sound like a Requiem for Social Enterprise.

For example, on Monday 14 January 2014 on the Beanbags and Bullshit site, Social Enterprise UK commented:

    “It’s also worth noting that it’s not the first time the DH (Department of Health) has done this – see Health and Social Care Act 2008 where in order to establish the Social Enterprise Investment Fund the Government Department had to determine some legal parameters on the form that organisations needed to take in order to qualify – it’s this experience too that helps inform our view on this. If we believed this posed a threat to the Social Enterprise movement, we would tell the DH, and we’ll continue to monitor this and speak out if we feel the need to.”

So what about the threat from the Department of Health’s December 2012 Regulations for new Local Healthwatch Bodies, which many believe open the door to private providers? The NHS Bodies and Local Authorities (Partnership Arrangements, Care Trusts, Public Health and Local Healthwatch) Regulations 2012, is Statutory Instrument 2012 (No 3094) under the Health and Social Care Act 2012.

As shown in detail in 2013 – a Defining Year for Social Enterprise, many organisations, including Social Enterprise UK, were consulted about these Regulations, and either aquiesced or did nothing about it.

It’s also notable that a range of other organisations from Though Cowards Flinch to Venturesome: Charities Aid Foundation have raised concerns about these Regulations.

The reference above to ‘Health and Social Care Act 2008‘ by Social Enterprise UK presumably means guidance issued by the Department of Health Social Enterprise – Making a Difference. A Guide to the ‘Right to Request’. November 2008. NHS Directorate of Commissioning and System Management and Social Enterprise Coalition, which reads:

    ‘Section 2: What is Social Enterprise’ on page 6

    “All Social Enterprises have social or environmental objectives or both. While many private businesses also consider themselves to have social objectives, Social Enterprises are distinctive because their social or environmental goals are central to what they do”

    “…..Likewise, any Social Enterprises created under the ‘right to request’ would reinvest the profits they generate back into improving health services for NHS patients and local communities”

But Social Enterprise UK has itself undermined its support for this definition through its Criteria for the Social Enterprise Badge, under which 50% of profits can be distributed elsewhere for a “return on investment”:

    “Reinvests or gives away at least half of its profits towards its social purpose

    “What a Social Enterprise does with its profits can be critical to how its social mission is delivered. We believe the majority (more than 50%) of an organisation’s profits should be reinvested to further the social or environmental mission. We believe this leaves sufficient scope to allow a return on investment when required while retaining clear commitment that the core purpose of the organisation is social”.

So despite Social Enterprise UK’s apparent intercession with Department of Health about the Social Enterprise Investment Fund in 2008, this definitional confusion lingers. This is reported in a recent evaluation in: Start-up and Growth: National Evaluation of the Social Enterprise Investment Fund (SEIF). December 2012. Third Sector Research Centre:

    7.3 Organisational Characteristics on page 42:

    “Whilst the Social Enterprise Investment Fund (SEIF) set out no prescription of legal format for investees, they are expected to have not for profit status. However, our survey also suggests some evidence of companies limited by shares which may enable members to receive profits (although this could be an indication of CICs which can issue shares that pay capped levels of dividends)”

So the reference above to “If we believed this posed a threat to the Social Enterprise movement, we would tell the DH ,” sounds like ’empty vessels’!

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Conclusion – ‘Social Enterprise’ after the Local Healthwatch Definition

Huckfield is among many who continue to believe that the ‘Social Enterprise’ doorway is being pushed open ever more widely to the private sector and corporates – as shown in detail in 2013 – A Defining Year for Social Enterprise:

Each time this happens, it increases the risk that for many in the media and wider public, ‘Social Enterprise’ continues as a euphemism encompassing structures ranging from private companies and multinationals with a progressive Corporate Social Responsibility policy to local community structures whose main purpose is changing lifestyles and communities. That surely doesn’t help Social Enterprise?

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