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April 18, 2012

Safeguard the values

When social enterprise was but a distant blip on the radar of national policy no one bothered too much about definitions.  How quickly things change.  There’s a growing sense of urgency that this fragile ‘business model’ should be protected from the predatory instincts of the private sector. When ‘social purpose’ company, A4E, was touted as an example of social enterprise achieving its mission, many wondered whether the battle had already been lost.  Senscot is trying to stem the tide.


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Senscot has created a new code of conduct for social enterprises, claiming previous guidance set the bar too low. The code is designed to be self-regulating, with members deciding whether other members should be signatories.

Each organisation that joins must have two sponsors from the social enterprise community.

Among its guidance, it rules out the payment of profits to shareholders and says that every social enterprise should be set up with a clause that would transfer all its assets to another social enterprise or charity should it be wound up. It also says a social enterprise should be a good employer, with a pay ratio between the highest and lowest paid staff of no more than 5:1.

The code has been launched as an alternative to the Social Enterprise Mark, which is used as an identifier for social enterprises across the UK, but which Senscot feels is not sufficiently rigorous.

Aidan Pia, executive director of Senscot, said organisations in Scotland felt that when the Social Enterprise Mark was introduced in the UK as a means of identifying social enterprises “the bar had been set too low. The mark allows anything up to half of profits to be paid out to shareholders and owners in the form of dividends.”

Senscot had initially supported the mark during its trial period, when only 35 per cent of profits could be distributed, but withdrew when this was increased.

Aidan Pia said: “In England, in particular, there has been a lobby to keep definitions blurred, with the result that essentially private enterprises are masquerading as social enterprises and devaluing our brand. In response to this, the Scottish social enterprise community has set down the values and behaviours by which we recognise each other.”

Lucy Findlay, managing director of the Social Enterprise Mark Company, said her organisation welcomed the code and that it was broadly in line with the mark’s criteria.

“Any social enterprises that adhere to the new code would automatically qualify for the mark,” she said.

Peter Braniff, who manages Social Employers in Ayrshire (SEA), a social enterprise placing people with learning disabilities in paid employment, said the code would strengthen the sector.

“There is too much interpretation of how a social enterprise should operate and this brings it in line,” he said. “Some get too business like, putting profits before motive and that’s just wrong. Hopefully it will be as successful as the Fundraising Standards Board’s voluntary code which has been a proven success. Self-governing codes are always the most successful as it’s basically a democratic consensus instead of prescription.”

The move comes a few weeks after First Minister Alex Salmond pledged Scotland would become an international hub for social enterprise, announcing a new scheme to support global social business.

Salmond said he wanted to “continue to provide the most supportive environment in the world for social enterprise”.