Writing 20 years ago at Demos, Charles Leadbeater introduced to the mainstream the then-fringe idea of combining business and charitable aims to address social challenges. This included championing the potential for social entrepreneurship to solve modern welfare problems that the state could not.
Using examples of organisations such as Mildmay Mission Hospital (a specialist HIV hospital) and The Eldonian (a cooperative community housing association), Leadbeater argued that social enterprises would be a revolutionary force for marginalised communities. He believed they would ‘discover and build up people’s capacities to help themselves’ and knock down the siloed, one-issue focused thinking of charities and public services.
Twenty years later, social entrepreneurship is no longer a fringe idea. Social enterprises are businesses, usually selling products or services, which reinvest or donate their profits to create a positive social or environmental change. There are currently estimated to be around 70,000 of these organisations in the UK, contributing £24 billion to the economy and employing nearly 1 million people. While some are big names – Divine Chocolate and The Eden Project – the majority are small and relatively young, selling everything from coffee to bottled water to menstrual products.
Social enterprises are currently performing well in the UK economy. Research by Social Enterprise UK has found that social enterprises are outperforming SMEs in nearly every area including; turnover, workforce growth, job creation, innovation, and start-up rates. 41% of social enterprises created jobs in the past 12 months, compared to just 22% of SMEs. In a challenging economic environment, these statistics show that social enterprises are resilient, dynamic businesses.
Social enterprises are also creating the positive impact for marginalised communities Leadbeater envisioned. Again, using research from Social Enterprise UK, it is estimated that 59% of social enterprises employ at least one person who is disadvantaged in the labour market. Some are set up to do just this, with organisations like Blue Sky (who exclusively employ ex-offenders) and Chatterbox (who employ refugees to teach languages) offering job opportunities to people who would otherwise struggle to find employment. Inclusive employment is not limited to specialist social enterprises – 40% of social enterprises have a director with a disability. This is impressive when you consider that people with a disability are more than twice as likely to be unemployed as non-disabled people and often face a number of barriers to employment and career progression.
The social value of these organisations is not limited to employment opportunities. Through donating or reinvesting profits, social enterprises are estimated to have 1.3 million beneficiaries in the UK alone. This ranges from supporting people experiencing homelessness to creating community investment funds.
However, Leadbeater also envisioned that social enterprises would have a strong relationship with the state, and in this respect social enterprises are still very much in their infancy. Only 1 in 4 have the public sector as their main source of income, although 59% do some business with the public sector. The introduction of the 2012 Public Services (Social Value) Act could result in the further growth of these partnerships. The Act requires public authorities to ‘have regard to economic, social and environmental well-being in connection with public services contracts’, meaning preference could be given to social enterprises. However, the Act does not seem to be having a huge impact yet. Research by National Voices, found that only 13% of Clinical Commissioning Groups (CCGs) in the NHS were actively committed to pursuing social value in their procurement and commissioning decisions, often due to a lack of awareness of the Act and its implications. More needs to be done to ensure that public authorities understand their duties in the commissioning process so that social enterprises can make a fuller contribution to public service delivery.
Social enterprises in the UK are growing and achieving both business success and social value. It’s still very early days – the majority of social enterprises in the UK are very young with only 21% over 20 years old and nearly half five years old or less. This may make it challenging for them to bid for large public service contracts and to create competition for larger businesses. But the past 20 years has shown that social enterprises are a dynamic and ambitious section of our economy which should not be underestimated.