Frequently asked questions about social enterprise
Q. What are social enterprises?
A. Social enterprises are businesses set up to tackle a social or environmental need. Many commercial businesses would consider themselves to have social objectives, but social enterprises are distinctive because their social and/or environmental purpose is absolutely central to what they do - their profits are reinvested to sustain and further their mission for positive change.Q. What are some examples of social enterprises?
A. The Big Issue, the Eden Project and Jamie Oliver's restaurant Fifteen are examples of social enterprises. So are award-winners Divine Chocolate,a fair trade chocolate company co-owned by the cocoa farmers cooperative Kuapa Kokoo in Ghana and Women like Us, which connects women with flexible employment. The Fold at Bransford, near Worcester, is a Community Interest Company which has an ecoCafé providing local, seasonal food and drinks, a centre of excellence for complementary therapies and a range of designers and makers working and trading on-site. See www.thefold.org.uk for more information.Q. What is the history of social enterprise?
A. The pioneers of social enterprise can be traced at least as far back to 1840s in Rochdale, where a workers' co-operative was set up to provide high quality affordable food in response to factory conditions that were considered to be exploitative. In the UK, a resurgence of social enterprise started in the late 1990s with the coming together of different traditions, including co-operatives, community enterprises, enterprising voluntary organisations and other forms of social business.Q. In which parts of the economy do social enterprises work?
A. Social enterprises are active in a wide range of industries. According to a DTI survey in 2005, health and social care services is the largest category of trading activity for social enterprises as it was the principal trading income source for 33% of respondents, followed by education at 15%. Social enterprises are also extremely active in the energy, transport and recycling markets. However a social enterprise can be successful in any market - from an employee-owned bicycle shop to an IT consultancy firm hiring people with Asperger's syndrome.Q. Is a social enterprise the same as an ethical business?
A. The two are distinct business models. A social enterprise's main purpose of existing is to fulfil its social and/or environmental goals. This is achieved by reinvesting the majority of the profits back into the business. An ethical business tries to achieve its financial goals while minimising any negative impact on society or the environment.Q. Are social enterprises not-for-profit and therefore not intended to make a profit?
A. Social enterprises are businesses. They need to make a profit to compete in the market, to ensure their continued survival and to invest in their social or environmental aims. For many social enterprises, being sustainable - in every sense of the word - enables them to become more independent and to reduce any dependency on public grants. It also ensures they can continue to help provide a solution for a social or environmental problem.Q. What legal structure does a social enterprise have?
A. Social enterprises use a wide variety of legal forms including:Community interest company (CIC) A CIC is a legal form created specifically for social enterprises. It has a social objective that is "regulated" ensuring that the organisation cannot deviate from its social mission and that its assets are protected. For more information on CICs, contact the CIC regulator - www.cicregulator.gov.uk
Industrial and provident society (IPS) This is the usual form for co-operatives and community benefit societies, and is democratically controlled by their members in order to ensure their involvement in the decisions of the business.
Companies limited by guarantee or shares are the most common legal structure for businesses and often considered to be the most flexible. While they can ensure they have a social mission written into their Memorandum and Articles of Association, this is not regulated.
Unincorporated association or company limited by guarantee which is also a registered charity. If a social enterprise has objects which are charitable and registers as a charity, it benefits from a range of tax advantages open only to charities. For more, see the Charity Commission’s website at www.charity-commission.gov.
Q. Is my business a social enterprise?
A. If you are generate the bulk of your income from trading and use the majority of your profits to further social or environmental goals then your business or charity might be classed as a social enterprise.Q. Can social enterprises get grants?
A. Social enterprises, particularly those which are registered charities, may be eligible to apply for some grants, but it is important to realise that social enterprises should be viable businesses which are financially sustainable. Many social entrepreneurs are prepared to take risks to realise their ambitions and this often means taking out loan finance.For more information, see the Social Enterprise Coalition’s website at www.socialenterprise.org.uk