WITH turnover, profits and employment all on the rise, social enterprise is coming of age as a financial model. Once a subset of the nebulous “third sector”, social ventures have shot to acclaim as a raft of programmes have sprung up in support of trading activities with a social or environmental mission.
A recent survey suggests there are about 70,000 social enterprises operating in the UK, between them employing more than one million people. Their contribution to the economy has been valued at more than £24 billion.
Closer to home, the latest snapshot from the RBS SE100 – an index of social ventures ranked and scored by growth and social impact – shows those registered in Scotland averaging growth of 21 per cent last year. Their combined turnover tops £138 million, but this excludes many that are not registered with the index. Other surveys have put the total number of Scottish-based social enterprises at more than 3,500, with a total turnover of nearly £7bn.
The sector hit the headlines last week with the announcement that Oscar winner George Clooney will visit Edinburgh in November in support of Social Bite, the sandwich chain that helps the homeless and donates its profits to charity. Clooney will be the main speaker at this year’s Scottish Business Awards, the annual gala organised by Social Bite founder Josh Littlejohn.
Now in its third year of trading, Social Bite opened its fourth shop in Glasgow last year after securing £200,000 from entrepreneur Sir Tom Hunter. The money came via the Hunter Foundation – the philanthropic arm of the Scots tycoon’s operation – which is supported by his West Coast Capital commercial investments. Social Bite gives away about £4,000 each month to causes including Shelter Scotland, an eye-care hospital in Bangladesh and the MicroLoan Foundation of Malawi and Zambia.
Having previously backed the launch of the ESpark business accelerator, Hunter says he was persuaded to invest in Social Bite by Littlejohn’s precision. Details such as the owners’ salary cap and the destination of profits are plainly laid out. “That is so important,” Hunter says. “We need to push all social businesses to be very clear about what they are doing. There is a lot of fudging about in some social enterprises, so I liked Josh’s clarity on that.”
He is adamant that social businesses must compete in the corporate environment. Social Bite takes on the likes of Pret a Manger and Greggs to turn a profit. If the commercial side of the equation does not add up, the social mission goes no further forward. “It is subject to all of the competitive factors of that sector,” Hunter says. “Nobody is going to say, ‘Oh yeah, the coffee is a bit worse, but that’s OK because it’s all going to charity’ – that just does not compute.”
Social Investment Scotland, which has provided debt finance to Social Bite, helps third sector organisations boost their revenues from trading activities. In doing so, these groups become less reliant on the diminishing pool of public funding.
Mainstream corporations are also getting involved through programmes such as Santander’s Social Enterprise Development Awards and The Venture competition sponsored by Chivas Brothers. The latter is a global contest with a prize pot of $1 million available for the best social enterprise ideas. This year’s UK finalists included Bruce Gunn of Delivered Next Day Personally, a courier service based in East Kilbride that supports disabled people.
Littlejohn says corporate Scotland is increasingly embracing social enterprise, as evidenced by the popularity of the Scottish Business Awards. Each year he uses the event to speak to an audience of 2,000 including many of the country’s business leaders.
“I get up pretty late in the evening – usually everyone’s pretty drunk by then – and talk about how business can be about more than making money,” he says. “We can use business for social change. That can be a pretty daunting message in that context, but it’s always very well received, and we get a lot of good feedback and support.”
Social Bite is set to open a shop in Aberdeen by the end of May and another a couple of months later in Dundee. A possibility further down the line is Newcastle, which is on the limit of the three-hour delivery radius from the firm’s kitchen in Livingston.
Littlejohn describes the business as “sustainable”, helped by the launch last year of a corporate catering business that accounts for half of total revenues. From sales of £8,000 in July, the catering business has grown to £57,000 in monthly turnover.
With clients such as Deloitte, JP Morgan and PwC, Littlejohn says it shows social businesses can work hand-in-hand with for-profit companies.
“Normal business is very important for employment and the economy, and that allows people to come into our shops and spend money,” he says. “The corporate opportunities are also huge, as long as you are providing a good product at a competitive price.”