Michelle Rodger: Social enterprises allow you to have your cake and eat it

Published on Saturday 11 July 2009 15:02

WE ALL make grand, philanthropic statements about making a difference or giving something back, but we tend to associate it with doing something for nothing. Someone says not-for-profit and you hear "for free", you read about Fair Trade and you think about the Co-Op and coffee, and social enterprise sounds like a charity.

The terminology may be woolly and confusing but the opportunity is crystal clear. There's profit and reputation to be made from working with social enterprises. You can make a difference and grow your business at the same time.

The size of the market and the opportunity in Scotland is significant. Scottish government statistics are conservative, showing that in 2008 the social economy turnover in Scotland stood at 2.8 billion while the Scottish Council for Voluntary Organisations' (SCVO) total turnover figure is 4.1bn. Either way, it's huge.

The financial – and moral – importance to the economy has been recognised by the powers that be. Just like President Obama, who last week announced $50 million (31m) to help charities expand innovative social projects in the States, the Scottish government has committed 43m in direct grants and loans for frontline social enterprises (SEs) across Scotland.

The Scottish Social Enterprise Coalition (SSEC) says SEs want to be treated like any other business. They need to make money to survive too, and they compete regularly against the private sector for public and private contracts. The only difference is what they do with their profits.

For example, Forth Sector, an Edinburgh-based SE, won the current contract with the Scottish Rugby Union for washing, drying and pressing kit for all the country's representative sides. It reinvests its money in supporting people with mental health problems.

And, like any other private sector organisation, SEs are facing the same recession-driven challenges – cost-cutting measures and staff redundancies – but the SSEC says the discipline this imposes will focus attention on excellence in commercial management and sound financial planning, ensuring they will be well placed to grow out of the recession. But SEs face additional challenges that the private sector doesn't, such as the financial and compliance restrictions of increased accountability and bureaucracy. More importantly, a lack of understanding about what SE, or not-for-profit, actually means is a problem.

SEs are simply businesses with social and environmental principles at the heart of what they do. As a business they need to make a profit, then these profits are reinvested or used for grants or charitable work. They are a growing market opportunity just waiting to be tapped.

There are two key methods of doing business from not-for-profit (NFP) work. The first is to develop a social enterprise out of your own business, such as David Sibbald's Sumerian Foundation, but that tends to be for the medium-sized rather than very small businesses.

Another approach is to work with a SE trading or selling skills and services for cash or as a benefit in kind. This is an opportunity open to all businesses, regardless of size.

Street League is a charity that aims to change the lives of disadvantaged young people through sport. Based in Glasgow and London, the organisation has recognised the need to think strategically about how it can work with business.

Dougie Stevenson, Street League's head of operations, explains: "Very often charities do not have the resources that are so readily available to the private sector and as a result the process of managing the organisation can suffer. We work with Merchant Soul who act as our creative marketing department, which changes our starting point dramatically.

"Creative advice and marketing support in exchange for new business introductions provide a sustainable foundation for both organisations to prosper."

Merchant Soul's Stephen Halpin agrees. Yes, he says, there is the feelgood factor about being involved in work that is socially responsible, but that doesn't pay the wages. His working relationship with Street League has had a direct impact on the bottom line.

Clearly, in many cases, NFPs are not necessarily in a position to pay the market rate for services. But often businesses can bring value to business through other means: for example, being introduced to and then developing commercial relationships with their other partners or investors.

"Like any successful business transaction, both parties need to get something out of it," says Halpin.

There have also been a range of strategic initiatives launched to remove the barriers that until now have prevented SEs accessing market opportunities.

Quite simply, it's about bringing a business perspective to the achievement of social objectives, and a social perspective to business.

Making a difference whilst generating profits and creating jobs? You can have your cake and eat it.