Since the launch of the Big Issue in the early nineties, there has been a steady rise in the number of social enterprises starting up in the UK, a trend which has really gathered pace in recent years.
Increasingly, consumers and businesses alike are intrigued by social enterprises as they are not simply charitable organisations, they are organisations that have a business ethos but also address some of the societal challenges we face.
This growing interest perhaps falls in line with a wider trend that Michael Porter, a professor from Harvard University, has noted. He explains that the capitalist system is under siege and that consumers see businesses as being a major cause of societal and economic problems. Put simply, there is a feeling that companies have been putting the greater good of society at the expense of the pursuit of ever increasing profit margins. This is despite the fact that the business community is increasingly engaging with the idea of CSR, he adds.
The growing prominence of social enterprise was further highlighted by results from The State of Social Enterprise Survey 2011 by Social Enterprise UK. It found that the economic frailty of recent years did little to hinder the growth of the social enterprise sector and it showed a modestly robust performance during the recession.
Over half (58%) of social enterprises said they experienced growth in the previous year and almost the same amount again (57%) predicted growth for the year ahead. Furthermore, median annual turnover of social enterprises grew from £175,000 in the 2009 survey to £240,000 in the 2011 survey. Encouragingly, the recession also did not dampen the number of people setting up a social enterprise as the survey discovered that 14% of social enterprises are start-ups, having been established for less than two years.
However, despite growing interest and positive growth figures over recent years, I don't believe we have seen the explosion in social entrepreneurs and the scaling up of successful social enterprise business models during the past 10 years that we should have done. This is where the private sector can play a major role over the coming decade and beyond.
Challenges
It's fantastic that we have so many start-up social enterprises in the UK and the success of many of them lies in their very local focus and small size. However, for others, achieving scale is the only way they will reach their full potential and ensure we can really get to the heart of societal issues in this country and tackle them effectively.
The challenge of scale-ability, and indeed 'replicate-ability', for these enterprises will be a key focus of the sector over the next decade as it continues to evolve and achieve growing success and prominence. Encouraging this growth is a responsibility that lies with all of us in the business community, but particularly banks, professional advisers and the government.
Another way to accelerate the impact of social enterprise is to encourage large companies to move towards a social enterprise business model. Whilst this would likely be a very difficult process, Michael Porter is one voice that is encouraging large corporations to consider this strategic direction. His view is that businesses must reconnect company success with societal progress and that they should be providing societal value as well as economic value.
It is my view that big companies can learn a lot from social enterprises and vice versa. The closer they work together, the better the outcome for everyone.
The most important learning by large firms should be that social problems aren't at the fringe of the business world and they can't simply be addressed by setting up a CSR department, but rather that providing societal value should be at the heart of their business strategies and at the core of everything they do.
Moreover, many businesses can lose sight of their overall business objective as they grow, which is an issue that social entrepreneurs rarely suffer. Social entrepreneurs are also great innovators, something which many businesses struggle to achieve, and they are extremely diverse; there is a broad spectrum of ground-breaking business models ranging from charities to those that are more like traditional SMEs.
However they can lack the commercial nous and financial rigour that is often the backbone of private sector firms. This is where banks and businesses can help. They have the knowledge and expertise to ensure that a social enterprise continues to make money whilst it is heading towards its long-term plan.
Building strong connections and encouraging knowledge share between community groups, social enterprises and traditional businesses to create a thriving society is the direction in which we all need to be heading.
In fact, this need for greater cohesion between the private sector and the third sector has also been recognised by Business in the Community. Through its Business Connectors programme, organisations such as Lloyds Banking Group, Sainsbury's and Greggs have committed to the long-term secondments of a number of senior staff to work alongside community organisations and local businesses, and to use their skills to help local and national businesses to work more closely with local community enterprises and charities, and vice versa.
Time to act
Traditional business models – such as money lenders or banks – have existed for thousands of years and will continue to do so as they play a vital role in facilitating major life changes for consumers, like buying a house, and by assisting necessary business and economic growth through business loans and working capital facilities.
However, it's time for businesses to question their core purpose and values, re-adjust the indicators by which they measure success and take their legacy forward by helping those operating in the third sector to leverage long-term success.
Just as banks and professional advisers support traditional business models, we need to extend the same level of business guidance to social entrepreneurs and ensure they know how to secure the funding and guidance they require so that they can become more streamlined and efficient without losing their core values. This will ensure they have the resource and investment to address inequalities and social exclusion on an increasingly bigger scale.
In recent years there has certainly been a huge shift in the perception of how we should support social entrepreneurs and the good news is that there are more support networks, sources of information and schemes out there than there has ever been before.
For example, the School for Social Entrepreneurs (SSE), which was founded in 1997 and has schools throughout the UK, supports social entrepreneurs through the use of action-learning based programmes of personal and organisational development.
There is growing desire from large corporates to demonstrate effective CSR programmes and give something back to the communities in which they operate. Whilst this can only be a good thing and has undoubtedly led to the creation of numerous new initiatives, the important thing is that there is valuable support and guidance behind these schemes, and that traditional businesses work towards a significant change in mindset where societal value has an increasing prevalence in their overall business aims alongside economic value.
Supporting social enterprise shouldn't be a short-term goal or a badge of honour; it needs to be part of everyone's long-term business plans, because with the right support and funding, social entrepreneurs have the passion, foresight and drive to become a powerful force for change and make a visible and long-lasting difference in their local area.
The Lloyds Banking Group Social Entrepreneurs programme will support 750 social entrepreneurs across the UK, as they start-up and grow social and community enterprises. Launching today at an event at The House of Lords, the scheme will see 150 social entrepreneurs each year receive comprehensive support from the SSE through its innovative learning programmes, as well as a grant ranging from between £4,000 and £25,000. A sizeable donation to the SSE from Lloyds Banking Group and additional funding from Nominet Trust has made the programme possible. To find out more, click here.
Paul Turner is the group community and sustainable business director at Lloyds Banking Group
This content is brought to you by Guardian Professional. To join the social enterprise network, click here.
