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So, what is a social enterprise?

Despite increased awareness and prominence of the social enterprise sector, there is still some confusion about how to define it. For instance, what separates a social enterprise from a local or small-scale business; or from a large company which emphasises CSR? Indeed, there is still no straightforward answer, with different measures being used by different organisations. In part, this elusiveness is caused by the lack of any legal definition, leaving everyone involved in social enterprise to make their own interpretations, and to impart their own vision of the sector. This makes it difficult to come up with a hard and fast rule for what a social enterprise is, but it also contributes to the flexibility and diversity of the movement.

Even so, there are key principles, represented by different schools of thought, which have guided the thinking on this question. For instance Social Enterprise Mark, a CIC which provides accreditation for social enterprises, has developed a set of criteria which includes measurable progress towards social and or environmental objectives, the locking of residual assets (meaning that gains from assets must be used for the stated aims, not for private gain), the deployment of 51% or more of profits towards social objectives, and commercial viability (50% or more of an organisation’s income must come from trading). But despite this clarity, Social Enterprise Mark also reflects the nuance, offering accreditation to ‘Aspiring Social Enterprises’ and a ‘Gold Mark’, to acknowledge those organisations operating just outside of the checklist, and those who are going above and beyond.

Other organisations also consider this flexibility in their own definitions, demonstrating the heterodoxy of the sector at large. Social Enterprise UK (SEUK), the national membership body for social enterprises, defines a social enterprise as an independent business which earns more than half its income through trading, and which reinvests at least half its profits towards a social and/or environmental goal. Transparency and a proven commitment to the social objectives are also included in SEUK’s five-point definition. But at the same time, SEUK does not insist on asset locking and, within reason, allows organisations to self-assess. Other organisations supporting the UK’s social economy expand their work further still. UnLtdan organisation which finds, funds, and supports social entrepreneurs—accepts SEUK’s description, but locates social enterprises within a wider umbrella of ‘social ventures’ (including cooperatives, and charities). In this way, UnLtd can expand the support it gives to the social sector without denying progressive organisations access to essential resources.

Underlying these descriptions of social enterprise are two imperatives which can sometimes seem at odds: the need to define a movement, and the need to ensure that it remains dynamic and inclusive. At Supply Change, we embrace this challenge by remaining firmly buyer-led. On the one hand, this means that we work hard to celebrate, clarify and promote the defining features of social enterprises and the social sector in general. We review and champion any approach which aims to generate social value, whether it comes from a social enterprise, a B-Corp, localism, a cooperative, or something else. We feel that, while we need good working definitions, we mustn’t allow these to prohibit social entrepreneurs from providing excellent goods and services, or from entering the market in a unique way.

At the same time, being buyer-led, we use this advocacy to consult with buyers, ensuring they are aware of the various advantages and options, whilst encouraging them to make their own decisions based on their needs and aims. Our research and data provides buyers with invaluable information regarding social suppliers, and the kind of criteria that they each meet, but we don’t want to limit social impact, or the choice available to buyers. We appreciate that buyers are best served by a multitude of frameworks and approaches, and by a social economy which offers a diversity of choice.

As well as benefiting buyers, we believe that this approach also helps the sector as a whole. In order to compete with mainstream suppliers, the social enterprise sector has to be able to offer a range of models, price options and products, whilst also remaining attractive to meaningful investment. In some cases, this will mean asset locking to demonstrate a fully committed social model; in others, it will mean a more fluid financial framework, alongside a clear commitment to social goals. The opportunities are almost endless, and at Supply Change, we want our work to represent this exciting horizon. And so, as the sector goes from strength to strength, the most authentic way we feel we can do this is to provide expert clarity on the options, but to ultimately let buyers decide what a social enterprise means to them.


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