Time for the new socio-economic revolution
Time for the new socio-economic revolution?
It is natural that when things go
wrong, efforts at finding a ‘better way’ begin. One theme
that has emerged from this recession clearer than perhaps any other
is that the business world needs to reconsider reckless pursuits of
profit. It is time we considered alternative approaches to economic
development. Social Enterprises are not a new concept, but the
appetite for them is growing. Yet, only a small proportion of
the population of Wales, or the UK generally, has any idea what a
social enterprise is, let alone that they count for a significant
proportion of the national GDP.
So what is a social
enterprise?
Social enterprises are
businesses established to further social or environmental goals
within an economic structure. They can take various forms including
companies, associations, and charitable organisations. Their
key characteristic, however, is that they operate entirely to drive
forward their social and environmental goals.
To do this most
effectively, social enterprises are geared towards traditional
business objectives of efficiency and value for money, whilst
encouraging sustainability and embracing ethical ambitions.
In accordance with the
strong tradition of social ideals in Wales, it will come as no
surprise that the Welsh Assembly Government has become the
Principal Sponsor for Voice 10, the UK Social Enterprise Conference
2010, to be held on 1-2 February at the Cardiff International
Arena.
With Social Enterprises
gaining such strong political support, the business sector isn’t
far behind. Social Enterprises are suitable vehicles for a
huge range of projects and should not be seen as the reserve of
those dealing with health care or other social issues. Fields
such as energy, transport, housing and finance are all feeling the
effects of the social enterprise revolution, with new businesses
and organisations being established to deal with micro-generation,
cultural events, employment matters, and community real estate and
infrastructure regeneration.
Social Enterprise is also particularly
attractive to banks, some of which have chosen to specialise in the
sector. Jon Field, Development Manager for Unity Trust Bank who has
worked alongside Hugh James assisting Social Enterprises explained
their interest in the sector:
“Unity was attracted to
Social enterprises because they embrace, ground-braking,
inspirational, and socially focused business models which show what
can be achieved when social values are placed at the heart of
business practices.
There is a growing
appetite for socially responsible businesses, particularly in the
current economic climate and we recognise that social enterprises
have a fundamental and key role to play in the development of a
more accountable and socially responsible society. We are
proud to be associated with the sector and to provide them with the
funds they need to enable them to find solutions to some of the
local communities most difficult social problems.”
Examples of existing
social enterprises include the Welsh National Opera, RCT Homes,
West Housing Association, Jamie Oliver’s Fifteen project and The
Big Issue. The potential of the model, however, is much more
far reaching than these examples would illustrate.
The Legal side of Social
Enterprise
In legal terms, social
enterprises may take one of a number of forms, including:
- Community Interest Companies – known as CICs, these are a
special type of company that are regulated to ensure that they are
run for ‘community interest’ purposes. Although, not
charitable, they have similar objectives and can therefore enjoy
beneficial tax treatment.
- Industrial and Provident Societies – they tend to be smaller
scale. The traditional model of I+Ps being social clubs in the
community but can also be large housing associations. Such
enterprises are run and managed by members, and may also raise
funds from the public
- Companies limited by guarantee or shares – flexible company
structures, which can have social or environmental goals written
into their constitution, but which are not as regulated as
CICs.
- Group structures and charitable status – this includes trusts,
like development trusts. Charitable status confers tax
advantages to a social enterprise, but trading conditions can be
restrictive
Starting up a social
enterprise
Before starting the
process of entering the social enterprise sector, there are a few
points to bear in mind:
- Does your business generate income, profits which are used to
further social and or environmental goals?
- What legal structure will best suit your business
objectives? Specialist legal advice is vital.
- What tax structure would be most efficient?
However the recession
resolves itself, as it surely will, one thing is for certain.
Recovery will be slow and painful, but by supporting and
recognizing the benefits of the social enterprise business model,
we will certainly be taking a step in the right direction. If
there is one lesson to learn from the economic maelstrom of the
last few months, it must be that businesses, whether for profit or
not, endeavor to act in a sustainable and responsible way for the
benefit of society as well as the economy.
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