What is social enterprise?
Social enterprise is a fairly new form of business and its definition is still evolving. Conclusions from the academic literature include:
- “beyond the notion of trading for a social purpose, there is little consensus as to what a social enterprise is or does”. (ref 1)
- “The language of social enterprise is used by around half of third sector organisations, and a large number of private businesses” (ref 2).
- “The only distinguishing characteristics of social enterprise are trading to achieve income, and the importance of social purpose” (ref 3).
Most definitions of social enterprise emphasise (ref 4):
- business solutions to social problems
- financial viability from trading goods and services (not just grant funding)
- a business with primarily social objectives
- surpluses principally reinvested in the business or community.
What I mean by social enterprise
Given the wide range of views on what social enterprise is, it is important to define what I mean by “social enterprise” for So Local Ltd. So Local Ltd is a private company limited by shares – which limits liability and is simple to administer. So Local was set up in October 2011 and currently employs one person who is also the director. It will both pay salary to its one employee and may issue dividends to its director who is the sole shareholder.
From among the many definitions of social enterprise that I have seen, So Local Ltd best fits a “community enterprise” model (ref 1 table1). It is working to create wealth in the local community and keep it there, trades on a ‘not-for-personal-profit’ basis, re-invests surplus back into the community and aims to achieve social, economic and environmental outcomes.
So Local’s social purpose
So Local’s social mission is to build local community, with a strong emphasis on environmental sustainability as well. Any profit (turnover less overheads) will be used for this social purpose by:
- doing pro bono consultancy for local third sector organisations who are doing community building work;
- donating to local community building activities or charities (eg Barracks lane Community Garden); or by
- investing in community building activities directly (eg funding a local timebanking initiative).
Footnote 1: legal forms, membership bodies, and kite mark for social enterprise
Social enterprises can take any legal form (DTI, 2002, Lyon et al., 2010). The Community Interest Company (CIC) legal form was defined specifically for social enterprises in 2005/06 but there is no requirement to use this.
There are membership bodies for social enterprises. SE2 www.se2partnership.co.uk is a regional network dedicated to the development and growth of the social enterprise sector in the south east, but membership is not a requirement.
There is also a social enterprise kite mark (Social Enterprise Mark, 2010) which sets standards for those wishing to use the mark (eg at least 50% income to be earned from trading, and not paying more than half profits as dividend). The kite mark is not obligatory for any entity wishing to trade as a social enterprise and is too expensive for So Local Ltd in its first year.
Footnote 2: References
- “What’s in a name? The construction of social enterprise” (Teasdale, S.) 2010 Third Sector Research Centre Working Paper 46
- “Approaches to measuring the scale of the social enterprise sector: the case of the UK.” (Lyon, F. Teasdale, S. and Baldock, R.) 2010 Third Sector Research Centre Working Paper 43.
- “Social Enterprises: Diversity and Dynamics, Contexts and Contributions” (Peattie, K., and Morley, A) 2008 London: Social Enterprise Coalition.
- “A Strategy for Success” (Department for Business, Innovation and Skills, Social Enterprise Unit) 2002
