The Future of Social Enterprise

In recent years, a new term - social enterprise - has started to develop throughout the world (Borzaga and Defourny, 2001). This article attempts to answer some key questions for four specific interest groups:

1) Those in the private sector wondering if social enterprises are a threat or an opportunity for them (and how they might alter their own practice to remain competitive).

2) Those in the voluntary / community sector trying to work out their medium/long-term future (whether they should engage or resist the notion of social enterprise).

3) Those in the public sector being asked to develop, support or commission work from social enterprises.

4) Those who self-define as social enterprise, wondering how to understand themselves and describe the value of their approach to others.

The problems surrounding the definition of social enterprise can be explored by reviewing the contexts in which the term is now being used. A country's economy can been conceptualised as having three sectors (Billis, 1993; Pearce, 2003): a public sector (state institutions and publicly owned and funded organisations); a private sector (businesses established by individuals for purposes other than the development of the state, principally to earn money and make a living); a voluntary sector (organisations established by people on a voluntary basis to pursue a social or community goal).

The problem with the above definition is that it tends to exclude organisations that transgress the boundaries of these definitions. For example, co-operative enterprises (owned by employees, producers or consumers) cross the boundary between the private and voluntary sectors (Oakeshott, 1990). They often have a social or community goal, but are usually set up to distribute financial benefits equitably to all parties involved in an enterprise rather than prioritise the needs and financial goals of the founders (Ridley-Duff, 2002). While the term co-operative has varying degrees of salience, many household names provide good examples of this organisation form: The London Symphony Orchestra, PA News (the world's largest news agency), John Lewis (with nearly 70,000 partners) and the Mondragon Co-operative Corporation (with over 60,000 members in nearly 200 organisations across 45 countries) are all enduring examples.

The continued growth and development of co-operative forms of enterprise, and 'mutual help' as a commercial principle led to the emergence of the a new term in the early 1990s - The Third Sector. This terms covers more than voluntary bodies and charities and includes mutual organisations (e.g. building societies) and producer, marketing and consumer co-operatives (see OFT, 2008). One social value that pervades the entire Third Sector is a concern that contemporary private and public sector management principles have contributed to the social exclusion of disadvantaged groups and vulnerable individuals. For some in the sector, the goal is to address (and find alternatives to) powerful political and financial interests that disempower many citizens (Morrison, 1991; EAO, 2008). Many Third Sector organisations, therefore, share an orientation that specifically attempts to reduce social exclusion. They may do this in a variety of ways: by providing services more cheaply to disadvantaged groups; using collective bargaining power to negotiate access to scarce or expensive resources; organising themselves in a way that enfranchises and empowers individual members (and gives them a political voice); traditional approaches by attempting to redistribute surplus wealth to disadvantaged groups through charitable practices and organisations.

The identification and growth of the Third Sector has been accelerated by changes in the public sector. Since the early 1980s, there has been a shift away from welfare through state institutions and a greater use of agencies and contractors. New Public Management is a concept that has underpinned a new commercialisation agenda (attempts by government to make greater use of markets and private sector thinking in public service delivery to 'save' money). Accompanying this is a belief that business practices and managerial solutions will improve the 'performance' of the public sector and create a more efficient and fair society (Paton, 2006; Chandler, 2008). It is this thinking that is now driving changes in the UK National Health Service (NHS): the UK, as in other parts of the world, is switching to a 'contracting culture' in which grants (or statutory funding) are replaced by contracts for service delivery. So, in recent years, the boundaries between the private sector (in term of market thinking and managerial practices) have impacted the public and voluntary sectors and started to blur traditional distinctions between them (Bull, 2006, 2007). Secondly, the emergence of radical business alternatives with a strong social orientation, democratic organisation, and positive attitude to 'profitable' trading has led to formal recognition and academic scrutiny (Seanor, Bull and Ridley-Duff, 2007).

In the late 1990s, I participated in discussions to establish a new business support agency. Around the table were support and trading organisations from the co-operative sector (Computercraft Ltd, Poptel, ICOM London) and representatives from public sector training and enterprise councils (TECs) that supported skill development in the voluntary and community sectors. All of us were looking for an idea (and name) that captured the goals for a new support agency. We decided on the name Social Enterprise London and established a new organisation. Members of Computercraft and Poptel (a phone co-operative) provided political support and organisational know-how. The TEC and ICOM provided assets and funding streams that enabled Social Enterprise London to establish itself (SEL, 2008). Whether this is the first organisation to use and promote the term social enterprise throughout the UK is unclear, but the role of Social Enterprise London in helping to bring the concept (and language) to public consciousness is not in doubt. It helped to establish the first Social Enterprise degree courses at the University of East London (UEL, 2008) as well as the first Social Enterprise Journal that is now owned and published by Emerald Publishing (JMU, 2008).

With their help (as well as many others) the term social enterprise has started to spread throughout our culture. By 2008, it had been appropriated by four distinct groups to describe their approach to organisation:

A - Charities and voluntary groups that are embracing a ‘contracting culture' by tendering for public sector contracts.
B - Charities and voluntary groups that establish trading operations to generate income for their social missions.
C - Co-operatives or stakeholder businesses that tackle social exclusion by adopting democratic governance and human resource practices. 
D - Businesses that deliberately re-invest or share their surpluses in a ‘public interest' or ‘fair trade' enterprise.

Three of these contexts (A, B and C) are typically linked to developments in the Third Sector (community businesses, social firms, voluntary groups, charities, co-operatives, credit unions and mutual societies). The last of these are increasingly linked to the agenda of ‘New Public Management' that seeks to reverse the post-WW2 policy regarding the state's role in the delivery of education, health and social services.

As a result, the term ‘social enterprise' has become highly contested. Advocates from each of these groups may, or may not, recognise the other parties as legitimate social enterprises. This is experienced most sharply when organisations trading for a social purpose are rejected by social enterprise support agencies on the grounds that they do not organise themselves in a sufficiently transparent way, or are trading with commercial organisations for 'private' gain. As a way through these conceptual difficulties, it is helpful to examine how theories of social enterprise are grouped into two competing perspectives. Firstly, there are those that conceive social enterprises as trading organisations sitting in the middle of a continuum between the pursuit of a social mission (charitable) and trading in a market (private). The issue here, for those supporting their development, is whether they are sufficiently social in their organisation and trading purposes.

Another perspective, however, breaks out of this linear mode of thinking and views social enterprise as a trading organisation capable of rebuilding and developing social capital where this has been destroyed / depleted by contemporary political / economic business thinking (Laville and Nyssens, 2001). As such it emerges in the boundaries between the public, private and voluntary sectors to address the shortcomings of each (Nyssens, 2006; Ridley-Duff, 2008). In its ideal form (a multi-stakeholder co-operative or business) it has a social mission, an inclusive system of governance that erodes the distinction between 'governors' and 'governed' (or 'directors' and 'employees').  At the same time, there is a renewed emphasis on sufficient trading strength to impact positively on the lives of all parties to the enterprise. In this guise, social enterprise moves beyond another form of charity in which wealthy philanthropists use their wealth and business logic to solve social problems (Nicholls, 2006) and becomes an alternative way of understanding wealth creation that echews the thinking that creates socially excluded individuals and groups in the first place (Ridley-Duff, 2008).  This broader based understanding is embraced by the Social Enterprise Coalition (SEC, 2008).

In short, social enterprise can be applied to any of the following:

1) Enterprises that bridge the boundaries between the private and voluntary sectors (e.g. trading charities and mutual societies).

2) Enterprises that bridge the boundaries between the private and government sectors (e.g. housing associations and public/private partnerships in the Health Sector).

3) Enterprises that bridge the boundaries between government and voluntary sectors (e.g. enterprise / employment support services provided under contract).

4) Enterprises that internalise a social orientation, democratic governance and entrepreneurial trading (e.g. co-operatives / employee-owned / co-owned businesses).

The future is bright, and - ironically - it increasingly looks as if it may be orange.

Acknowledgement

This article has been written by one of the authors for a forthcoming book by Sage Publications. Understanding Social Enterprise: Theory and Practice will be marketed by Sage Publications from early 2010 onwards. This article draws on material submitted for the book proposal and approved by the Sage editorial board in March 2008. The authors of the book will be Rory Ridley-Duff, Mike Bull and Pam Seanor.

References

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