Social Business in Europe: The UK Experience

By Andrea Paniagua Borrego - Responsible Business – London

 

During the last decades, we’ve seen an increase in society’s concern about the impact of large corporations in the communities and the environment that surrounds them and in consuming in a more responsible way. Alongside we’ve experienced the rise of Corporate Social Responsibility together with an army of entrepreneurs who are coming up with innovative solutions to address social and environmental problems through Social Entrepreneurship. These two fields hence share the same concern of good business and positive impact, and whereas the former embeds these principles in its operations, the latter makes of the social change its main objective rather than maximizing profits.

When tackling specific problems, social enterprises may or may not have a for–profit aim. Some entrepreneurs believe that the financial and operational discipline of a for-profit model is needed in order to scale up their social impact and operate in a more efficient way. Other businesses start as a non-profit and only after reaching a scalable level they reach out to impact investors and become a for-profit venture. Finally, other entrepreneurs decide to remain as a non-profit and they see this mechanism a better way to overcome societal challenges. Whatever the path they decide to go, social entrepreneurs are always innovating solutions to mitigate social and environmental problems in a more efficient and measurable way.

In the for-profit scheme, the enterprise’s revenue model may be directly linked to its social goals or not. In some cases we see a direct link between the revenue flow and the recipients of aid, ie. low cost private schools; in some others the relationship is less direct as in the case of Toms shoes were profits coming from one customer segment are used to donate shoes to other  social segments; finally in many others the link between the operations of the business and its social impact is not strictly related as is the case of EaKO who donates 50% of its luxury apparel sales, which are made from waste, to waste-related charities. Therefore, the revenue model used does not interfere with the entrepreneur’s social mission, as long as it remains the main objective of its business and the model allows him to scale it up.

 

Social Intrapreneurship

While social entrepreneurs keep growing in different fields, CSR also continues to lead and innovate in the way it undertakes social issues, more recently through the emergence of Intrapreneurship. This concept has been used by the Ashoka foundation and other organizations to address the work of social innovators who are tackling social and environmental challenges from within a large business. Hewlett Packard, Shell and Novartis are some examples of multinationals embracing social intrapreneurship. As drafted by Paul Ellingstad, Partner and Program Development Director of HP Sustainability and Social Innovation during the past emerge conference organized in Oxford University’s Said Business School, social intrapreneurship goes one step beyond CSR and innovates solutions to align multinational business objectives with societal needs.

 

 

In the UK

According to the European Commission, in the European Union social enterprises represented 10% of all business and employed over 11 million people. In the United Kingdom in particular, this movement has taken of in the past years and London in particular has been leading the social entrepreneurship movement in the continent. The city now serves as a hub with an increasing number of social businesses incubators. It has developed unique post-graduate programs on Social Entrepreneurship and government funds to support social investments within the city and the country.

To start measuring the impact, growth, and scalability of many of these businesses in the UK, the Royal Bank of Scotland has been releasing its SE100Index for the past three years. This index recognizes the top 100 achievers in the UK and portrays the financial and social impact of these companies. Moreover the index allows investors, consumers and entrepreneurs to have a more measurable and concrete way to evaluate the impact of these companies.

According to the RBS index, in 2012, the enterprises listed in the index achieved a combined turnover of £778 million and generated a combined profit of £19 million in the UK. Although the growth rate for the listed companies dropped from 91% in 2011 to 60% in 2012 it is a rate worth to consider when doing a financial analysis of the sector.

The index also identifies and awards the single top performers on Growth and Impact sectors and among the Newcomers. During 2012, Social adVentures, who promotes happier and healthier lives, was the Growth champion for its acquisition of new public and private contracts in the UK and its growing innovation and entrepreneurial culture. Five Lamps, an enterprise that helps people get jobs and start businesses, was awarded with the Impact prize. Finally, Argonaut Enterprises, a British cleaning company, which opened in 2010 and creates employment opportunities for disabled people won the trailblazing Newcomer award in 2012 after achieving a 727% growth from 2011 to 2012.

 

Social Impact Business

 Social impact funds are an example of the flexibility of social businesses. They can promote themselves as an investment fund, where investors money is going to be devoted to certain companies and industries; or they can advertise themselves as a social impact fund that invests in fast growing companies in the developing world and through its investments help to create new economic sectors in less developed countries.

The same RSB SE100index shows that 58% of the interviewed companies agreed that advertising themselves as a social business gave them a competitive advantage. Of those companies not measuring their impact, 63% started doing so, and 34% of them gained new contracts after being able to demonstrate their social impact. Some enterprises changed the way they do business after measuring the impact they make and the advantage that gives them in front of consumers. Therefore weather a company considers itself a regular business with a strong CSR or a social enterprise, its worth to look and measure its positive social impacts and perhaps start using the “Social Business tag”.

 

SourceResponsible Business Magazine

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All, 2013

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