Friday, 12 February 2010

"Are you a charity or a social enterprise?"

“Are you a charity or a social enterprise?” This question was asked by a consultant to an ACEVO member at a meeting this morning. I think our member was a little surprised and wasn’t quite sure how to answer.

I feel his pain. Social enterprise as a distinct concept has rocketed up the consciousness of policy makers in recent years and many (including Francis Maude at the SOLACE annual dinner last week) refer obliquely to “the third sector and social enterprise”. How useful is this distinction in terms of promoting the role of the broader non profit sector?

There is no clear definition of social enterprise as a noun. There are of course some specific legal forms which social enterprises can take (CICs for example) but to restrict the social enterprise movement to only those organisations would exclude many which are trading for a social purpose.

A better question to our member might have been “do you do charity or social enterprise?”. The term makes more sense as a verb. Trading is a vital part of the funding mix for many organisations in the sector. According to the NCVO almanac earned income was responsible for 51.2% of the sector’s total income in 2006-7. ACEVO’s income generation team supports organisations in diversifying their income streams and the development of trading is key.

But as a verb social enterprise is nothing new. Charities have been trading for centuries and earned income has been a major source of income for particularly smaller organisations.

So if it is not a noun, and as an activity it is nothing new, what is the relevance of the distinction? I suspect in asking the question our consultant friend was trying to gauge the mindset of the organisation in question. Social enterprise can be associated with being professional and innovative, operating in complex markets and delivering products and services which compete with providers from any sector. This is distinct therefore from traditional charity based on voluntary principles, donations and non marketable interventions.

This is an interesting distinction but many organisations which would never think of themselves as social enterprises would tick all the boxes of being professional, innovative and delivering market based products or services. These qualities are not unique to social enterprises.

This matters because many of the challenges which the sector faces are common to those organisations which class themselves as social enterprises and those which don’t. The quality of the interventions which we can bring are equally high.

There is a spectrum on which third sector organisations sit – some which do a lot of trading may have more social-enterprise-like characteristics - but it is not a polarity. Categorising social enterprise as something other than the rest of the third sector is unhelpful because with common challenges to meet we are best placed meeting them with a shared voice.

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