How is social enterprise helping us meet some of the challenges we face in society today? The British Council's Paula Woodman explains. Paula is participating in the Hong Kong-UK exchange, a discussion with professionals from different sectors in both regions taking place at the British Council's headquarters on 5 September.
What's the difference between social innovation and social enterprise, and how are they linked?
A social innovation often refers to a 'disruptive' solution to a social need -- that is, one that seeks to change the way things are done to meet the challenges facing society. Social enterprise, which is business trading for social purposes, is itself a social innovation as it blurs the traditional boundaries between the private, public and not-for-profit sectors. Social enterprises incorporate the social motivation of the charity sector, the business approach of the private sector and, often, the commitment to deliver outstanding public services.
The 'disruption' doesn't stop there. Those spearheading social enterprises obviously continue their innovative tendencies. According to the latest UK research, 56 per cent of social enterprises developed a new product or service in the last 12 months, compared with 43 per cent of small and medium enterprises (SMEs). And they are also leading the way in creating more equal societies. For example 39 per cent of social enterprises in the UK have a woman leader, compared with only 19 per cent of SMEs and three per cent of the FTSE 100 companies (the biggest firms on the London stock exchange). And social enterprises in the UK are also more than twice as likely as SMEs to have a member of an ethnic minority as a director.
How has social enterprise changed the structures on which the economy is based?
New legal structures in the UK enable social enterprises to trade with the same protections as a company. But social enterprises have their assets ‘locked’ so that they cannot be sold for personal profit, thus enshrining their social mission. The UK’s Community Interest Company (CIC) structure, which passed into law in 2005, is one example of this, and has since been mirrored in other countries, for example by the Community Contribution Company in British Colombia, Canada (here I must give my sympathies to all the family and friends of Stephen Lloyd, widely respected as the creator or the CIC, who died recently).
So is social enterprise one of the most significant social innovations?
Well, maybe not just yet! Social innovation includes a much broader field, with a number of disruptive solutions happening in any sector. A Twitter survey done by our partners at Pioneers Post to find the top ten social innovations of all time includes such transformative inventions as hand soap, antibiotics and the wheel. It's unlikely that any social enterprise to date has had enough of a mainstream impact to warrant inclusion on this list.
But social enterprise may reach scale soon, thanks to pioneering UK initiatives to promote social investment and social value. Social investment is bringing in new forms of private capital, where the investor is looking for both a social and financial return on their money. It also includes Social Impact Bonds which raise capital from private investors for a socially beneficial action, such as a scheme to reduce homelessness. Provided the action is successful, it offers investors both a social and financial return on their money (because the action has saved the government money).
The UK has also sought to grow the market for social enterprises through the Social Value Act. This law requires public bodies that are procuring services from external suppliers to consider not only value for money but also social and environmental impact in evaluating bids, and this could generate a lot more business for social enterprises. It is also worth noting that these ground-breaking initiatives are being closely studied, and in some cases replicated, in other countries.
The speed of all these innovations shows that our societies are capable of immense change.
The British Council's Global Social Enterprise programme frequently convenes international dialogues such as these in order to share examples of best practice and inspire leaders to create policies that support social enterprise. This event is part of a social innovation festival called 'Unusual Suspects' curated by our partners at the Social Innovation Exchange, Collaborate and The Calouste Gulbenkian Foundation.
Read more about our work in social enterprise and social investment.