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February 17, 2010

For common good or personal gain

Social enterprise has been touted as the business model for the 21st century. Business with a social purpose where profits are invested for the common good rather than personal gain. But the lines can become blurred at the edges and it is sometimes difficult to distinguish a social enterprise from parts of the private or public sector. A new Social Enterprise Mark has been introduced to provide greater clarity.  Initial reactions seem mixed

Regeneration and Renewal

The founders of the Social Enterprise Mark (SEM) have faced a good deal of criticism since the mark’s launch at the Voice 10 conference last week. As reported in Regeneration & Renewal last week, any social enterprise can apply to purchase the mark for £99, provided they can demonstrate that they reinvest at least 50 per cent of their profits in activities to support social or environmental goals.

This has been loosened from last year: the SEM pilot in the South-West required 65 per cent of profits to be reinvested in social or environmental goals but RISE, the organisation behind the mark, changed it to ensure faster take-up of the mark (it’s aiming for 2,000 mark holders in the first year).

Now Senscot, the voice of social entrepreneurs in Scotland, has refused to act as the Scottish partner for the mark, saying that the relaxation of this asset lock “doesn’t feel right” and that the “broad church” approach could blur the boundaries between social enterprise and other sectors. “We believe that the Scottish social enterprise community would rather be regulated by tighter criteria,” Senscot founder Laurence DeMarco says in an email bulletin last week.

Business author and social entrepreneur, Robert Ashton, agrees: “As with any so-called ‘quality mark’, once you achieve it there’s less incentive to follow it.”

Other sector representatives have argued the opposite case in the lengthy, online debate that questions whether the SEM is a valuable “quality mark” at all. The main thrust of the argument is that simply awarding a social enterprise recognition based on profit distribution is not enough – many organisations are achieving huge social and environmental impact but have not yet reached a point where they can reinvest that much profit in these goals. They might also be vehicles structured in a different way to formal social enterprises or community interest companies (CICs) that are set up specifically for profit reinvestment.

It’s an interesting point. RISE and the Social Enterprise Coalition’s defence is that the SEM is intended largely to boost the profile of the social enterprise sector, which it no doubt will. But many feel that this shouldn’t be its raison d’etre.

Take this extract from Rob Greenland’s blog, The Social Business: “The mark [is supposed to] represent businesses working for social and environmental aims. Except it doesn’t. It represents businesses working for social and environmental aims that spend at least half their profits on these purposes. There’s a [negative] value judgement there about profit, which rules a lot of us out.” He goes on to say: “I’d be right behind a Social Business Mark which was awarded to businesses that have clear social aims and can provide externally verified evidence of their impact…But given that it’s not, I’m finding it hard to get enthusiastic about the mark.”

Another blogger highlighted the fact that The Phone Co-op, which was named 2008 Social Enterprise of the Year by the Social Enterprise Coalition, did not meet the criteria for the mark.

It seems to me that the SEM risks inviting Government and the public to judge the value of social interprise in monetary terms rather than on the ‘softer’ outcomes that social enterprises seek to achieve in the first place – albeit by doing good business. But at the same time, at least this is one solution to the eternal problem facing all social/community-facing organisations: how do they demonstrate their value to the wider world?