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Is there a real social enterprise?


In his new book, Freer Spreckley, who pioneered the concept of social enterprise in the UK in the 1970s, looks back at the short history and ideas of social enterprise. Here he shares the six values ​​that he believes should define social enterprise.

Social enterprise has become a global phenomenon without anyone knowing what it is. I would say it’s because there’s an awareness of how rotten corporations behave, how dangerous they’ve become by degrading the planet, and how they’ve created such appalling inequalities. Modern corporations have become as powerful as governments without accountability or opportunities for stakeholders to change their leadership. Don’t be fooled by the talk of ‘stakeholder capitalism’; stakeholders have no power, vote, influence or voice. Only large shareholders have such authority, which are themselves capitalist companies.

People want a different business structure. A society that behaves with integrity, that is regenerative of the environment by design, and whose purpose is to help facilitate an egalitarian society. But many variations of social enterprise avoid the structural transformation needed to create a real alternative. Without an agreed definition or legal structure, social enterprise cannot progress beyond good intentions.

Social enterprise is about system change. Do not tinker with mission, impact investing, nonprofit versus for-profit, entrepreneurship, social enterprise, or any other interpretation used. Social enterprise is about changing how business is owned, who controls, purpose and accountability to society, people and the environment. It also means changing the way success and failure are measured – from profit maximization alone to broader social and ecological considerations.

For social enterprise to be a functioning and effective alternative, it needs structure, legal independence and operational integrity. Below are what I believe are the key values ​​that need to be enshrined in a social enterprise definition and constitution to affect real system change in business organizations.

Common property

Who owns controls and decides how commerce is managed and how wealth is distributed. A more equitable distribution of ownership, where workers and other important stakeholders have equal share and control, will ensure that interests other than profit influence how and why business enterprises are run. In social enterprise, common ownership by workers and sometimes local residents has always been a fundamental part of the legal structure. Moving from elite shareholders to broad-based stakeholders means moving from private ownership to common ownership. It influences the responsibility and status of co-owners, builds self-esteem and equality, changes control over decision-making, and is more inclusive when considering and deciding on purpose, mission and investment.

Democratic governance

Social enterprises need organizational strategies that align with democratic principles and practices to reflect the common property system and the rights of co-owners. If there are co-owners, they are involved at all levels to some degree, from the governing body to the individual worker on the shop floor.

A democratic, commonly owned enterprise will have three main organizational levels, governance, management and work teams, and individual workers who are self-managed co-owners. These levels create a circular organization rather than a hierarchical organization in the general sense, but each company can have different degrees of hierarchy. These can range from those who pay themselves equal wages and rotate most, if not all, job duties to those who pay deferential wages and practice degrees of hierarchical authority.

Through the governance body, all co-owners can define the mission and long-term plans, policy formulation and salary levels. Being part of senior management allows co-owners not only to participate in decision-making, but also to be fully informed about all aspects of the business. The advantages are numerous and lead to an open and transparent organization.

Workers and managers are responsible for coordinating and implementing the governing body’s plans, day-to-day decision-making, and day-to-day financial and administrative operations. With the democratic level of equality and being fully aware of what is happening, everyone is a self-managed co-owner who controls their business.

Financial viability

For most of economic history, maximization of turnover, sales and profit has been the dominant assumption: in a balanced economic environment this more or less works, but when we move to globalized capitalism, as we see today, profit maximization becomes anti-social and causes untold poverty and environmental stress. There is no rule that says you have to maximize profit; it’s just the default assumption expressed and justified using the bottom line measure alone.

Social enterprise focuses on the triple bottom line and therefore should consider financial sustainability as the fundamental economic assumption, defined as “generating sufficient revenue to meet operating payments and debt and to invest in business benefits, social and environmental. By shifting the focus from profit maximization to financial sustainability as the engine of business, we are also changing the way the economy is measured from GDP to society and ecological well-being.

Environmental responsibility

Since co-owners decide on strategy, policy and investments and work on the ground, their understanding and knowledge of how waste and pollution are generated gives them a more complete understanding of the problem. Therefore, they are in a good position to find practical and achievable solutions to transform their business into an environmental regenerative organization.

There is no greater urgency now than to create financially viable zero-emissions organizations driven by technological innovation and human behavior change.

Commercial and non-commercial organizations emit disproportionate amounts of pollutants compared to individuals, families and communities. While we all need to achieve net zero emissions, organizations are able to achieve substantial reductions with greater impact. Social enterprises are well placed to make strategic decisions in this regard: for example, evaluating every investment, process and material used to eliminate waste and emissions wherever possible. Unfortunately, sustainability is no longer the mission; we cannot sustain a broken system. Organizations must now repair. It’s about being proactive and regenerative in design and implementation.

Measuring and reducing emissions and waste is complex, and for many companies doing something about it rather than being bewildered by the complexities can be very powerful and achieve surprising results. A small intervention is sometimes the tipping point for huge positive change in the future.

Social wealth

Social Wealth is the ability to connect with others to do things you cannot do independently, allowing co-owners to engage and connect to a wide range of initiatives, both internal and external.

Having positive and meaningful human relationships in all spheres of life builds physical and psychological health that helps us live full and successful lives at work, in family and in the community.

Be a co-owner of your business; participate in decision-making – listen and express opinions freely; be responsible for initiating work and be directed by others in rotating these tasks; and connecting with colleagues, partners, suppliers and customers leads to connected individuals improving self-esteem and well-being.

Social accounting and audit

The term social enterprise originated as a description of a business owned and controlled by its workers and/or community stakeholders and measures its performance using the triple bottom line of financial viability, social wealth creation and environmental responsibility.

The social accounting and auditing system is an annual, or biennial, planning and accounting system alongside the annual financial accounting. The system includes three methods: verification against external indices of good social and environmental practices. The second uses a set of questions from internal and external stakeholders. The third is planning and monitoring changes to achieve social and environmental impact. I don’t think they all need to apply every year. This will depend on the status of the previous audit and how the company scored using the external cues.

It is essential, however, that the process is conducted honestly and transparently and would benefit from being enshrined in law as part of a social enterprise law.

Social Enterprise Act

The six values ​​represent a new business model that combines the old practices of the cooperative movement on ownership and control, new ideas on financial viability and recommendations on social and environmental responsibilities. To run a social enterprise, the profit maximization assumption must be replaced with financial viability using social accounting and measurement and accountability auditing methods. I suggest in the book that it is time for an agreed definition of social enterprise, a model legal rule and an Act of Parliament. The Social Enterprise Act would underpin a system change to change the responsibilities and benefits of business enterprises.

Essential Social Enterprise is a new book written by Freer Spreckley, which revisits the short history and ideas of social enterprise. This item is a compound of six articles Sprecley writes for Pioneers Post in the UKrepresenting the six values ​​that underpin the intentional social enterprise model described in his book.