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Exploring the Social Enterprise Potential for Sustainability in the UK
Social enterprise is an active and sustainable business form of choice which is able to bring economic, communal and environmental benefits to the UK. It operates across all sectors of the economy, serving individuals in the private, public and third sectors. Through out this research will identify the increase levels of understanding of the role and value of Social Enterprise, given that a lack of understanding of the role and value of social enterprises was cited as a major barrier to the acceleration of the use of the business model. The purpose of this research will identify the key barriers faced by Social Enterprise and explore how these barriers could potentially be overcome to achieve sustainability.
Chapter 1: Introduction
A brief overview of social enterprise is introduced in the first chapter. Then, the purpose of the study will be next discussed which will end with a specific research question. In the end of this chapter the contribution of this research is also presented.
- A Brief Overview of Social Enterprise
Social enterprise is a business structure that aims to distribute across a range of economic, social and environmental outputs which refer as‘ Triple bottom line'. Within this business structure, anyone can develop a business and considers social and environmental impact as central part objectives. It can bring wealth as well as empowerment to disadvantaged communities which may be otherwise suffering exclusion. Social enterprises are organisations that supply goods and services to communal economy sector. These comprise a collection of organisations that subsist between the traditionally private and public sectors and have a stronger association with the community and non-profit sector. This sector has a key function to take part in achieving many of its goals, including overcoming social injustice and exclusion. Fundamental ethos are most often used by social enterprise organisations themselves, emphasises following three general features:
• Enterprise oriented - like any other business, social enterprise is capable of generating income from production of goods and services to a market. As far as viable trading concerns, they are also able to make surplus from their trading.
• Social aims - they are driven forward by unambiguous social aims. They are capable of creating new employment opportunity, training & skills development and provision of local public services. They are responsible to their members and the larger society to increase its effectiveness and financial sustainability with the ultimate goal of creating social, environmental and economic impact or change.
• Social ownership - they are self-governing organisations with an authority and the ownership structures are based on participation by stakeholder groups for example users or clients and local community groups and by trustees. Profits or surplus are disseminated as profit sharing to stakeholders or are used for the benefit of the community.
In the United Kingdom, social enterprises are gradually becoming a well-known sector of the local and national economy. The organisation which is operating in this sector is conscious about the most important factor that becoming sustainable businesses is the path to independence both financially and in mission. However, this emerging sector is struggling for further growth and eventually it leads to have impact negatively on their sustainability. Social Enterprise should be supported and encouraged to grow both as a sector and as individual organisations so that these will become more sustainable organisations.
- Purpose of the Study
My paper has been developed to explore how the term social enterprise has acquired meaning in the United Kingdom and to demonstrate how practitioners, policymakers and academics influence each other in the development of new sustainable ideas, given that a lack of understanding of the role and significance of social enterprises was cited as a major barrier to the acceleration of the use of this business model.
These challenges come in many forms. Some are the same as those affecting any other business including access to business support and finance, a lack of affordable premises and finding skilled staff. However, social enterprises also face one huge barrier that seriously affects their ability to assume a position within the market. That barrier is a lack of understanding of how social enterprises work and of their potential value. This lack of understanding exists across the public, private and voluntary and community sectors.
Often it's been very difficult to secure contract and mainstream funding support as there are plenty of confusion surrounding the social enterprise business model.
So my dissertation will identify the key barriers faced by Social Enterprise and explore how these barriers could potentially be overcome in order to achieve sustainability. It examines critical incidents that have shaped the meaning of social enterprise in England and reflects on these incidents to draw conclusions about the future sustainable development of social enterprise practice. Through out this paper, I will also study the possible circumstances for the sustainable development of social enterprise. The purpose is to notify both policy-making and the wider argument about social enterprise: what its potential might be and how that potential can be realised in different settings.
- Structure of the Report:
This research is divided into six chapters; the first chapter is an introduction with purpose of the study. In the second chapter, literature based review of definitions of social enterprise, roots of social enterprise, discussion relevant to the sustainability of social enterprise, the nature of their contribution and their sponsors and sources of funding. The third summarises the background information of social enterprise in the UK and the fourth and fifth chapter contain the methodology and the summary of the main findings of the study with implications for policy. Finally, the sixth chapter is giving the idea about possible areas that further research could be conducted with the limitations of the study of this research paper.
Chapter 2: Literature Review
This chapter will give an overview of literature and models that are related to the research problem presented in the previous chapter. This chapter will introduce the roots and concepts of social enterprise in order to give a clear idea about the research area.
2.1 Roots of social enterprise
Scott specified (2006, p.50) mentioned “The roots of social enterprises and community enterprise overall can be found in the mutual, self help and co-operative sector which goes back, in the UK, at least to the Fenwick Weavers in Ayrshire 1769 and Dr William King of Brighton in the 1820s with earlier antecedents.”
Local community based organisation played vital role within the development of this movement and empowering disadvantaged poor community to move forward labour market. Grass root social worker Harry Cowley campaigned between first and second world war for housing needs and employment opportunity for returning service people and capacity building support for small business. He also advocated “job creation” programme from the local public service authority for unemployed people and eventually had some success.
2.2 General Discussion on Social Enterprise
Social Enterprises combine the requirement of successful businesses with communal aims. They seek to qualify as businesses by setting up a market share and making a profit and draw attention to the long-term benefits for employees, consumers and the community. Today's competitive business world stated that defining the social enterprise is a challenging task. According to OECD (1999, p.9) “there is no universal, commonly accepted definition of social enterprise.” On the other hand, the OECD (1999, p.10) has described social enterprise as:
“any private activity conducted in the public interest, organised
with an entrepreneurial strategy but whose main purpose is not the
maximisation of profit but the accomplishment of certain economic
and social goals, and which has a capacity of bringing innovative
solutions to the problems of social exclusion and unemployment”.
Doherty and Thompson (2006, p.362) mentioned in their article that social enterprises are organizations which are seeking business solutions to social crisis. These are needed to be distinguished from other socially-oriented organizations. These also need to take initiatives that can promote to communities but which are not seeking to be “businesses”. In this esteem, these latter organizations remain dependent on endowments and donations rather than build up true paying customers.
According to DTI report 'A Progress Report on Social Enterprise: A Strategy for Success' (2003, p.6), social enterprise is such kind of business which reinvests its surpluses in the business or in the community rather than increases profit for shareholders or owners.
Drucker (Gendron, 1996, p.37) argued that social entrepreneurs are those who altered the performance capacity of society but Henton et al. (1997, p.1) mentioned that ‘civic entrepreneurs' are a new generation of leaders who built new, powerfully productive connections at the intersection of education, business, community and government.
Somers (2005, p.46) stated “Social enterprise emphasise creating social and environmental value at all stages of their production process, as an intrinsic part of their identity”. Following Figure: 1 describes the production process of social enterprise.
Laville and Nyssens (2001, p.325) argue that when the roots of social enterprises are based in reciprocity and in this way these are part of the third system, their force is based in their ability to valve into all three economic principles and systems. They are different from private and public enterprise. In terms of private enterprise they do not only maximize profit to benefit owners, they also develop market activities and generate profits. With the comparison to public enterprise, they are independent from direct control by public authorities but they benefit to a greater or lesser extent from public subsidy. In this way, they mobilize market relations to sell services or goods and use redistributive relations by utilizing government funding to finance their services. Their long-term sustainability depends on their ability to ‘continuously hybridise the three poles of the economy so as to serve the project'.
2.3 Discussion Relevant to the Sustainability of Social Enterprise
According to Asefa (2005, p.1), “Sustainable development is the concept of a relationship between economic growth and the environment. The term was first used in 1987 by the world Commission on Environment and Development ....Although the term has been around for almost two decades, different interpretation have kept it from being a useful guide for development policy”.
Bornstein (2004, p.3) mentioned that over the last decade there has been unprecedented growth of social enterprise world wide. This business model has been getting attention from both government and corporate sector though sustainability remains the major concern.
According to 2004 Global Entrepreneurship Monitor (GEM) report, a survey was conducted of social entrepreneurship activity in the UK. These data suggested that latest ‘social' activates are emerging at a faster rate than more conventional, commercial endeavours. Within local and global level there are three areas to focus on sustainability in business activity and they are environment, economy and community. (Harding and Cowling, 2004, p.5)
Environment - It ensures that business is engaged in the appropriate and careful use of limited supplies and the management of waste so that it will be able to minimize the negative and maximize the positive impact of human activity.
Economy - It ensures that business is financially viable and it engages in good employment practice. Finally it is beneficial to the whole economy.
Social - It ensures that business is overall of advantage to communities, their customs and does not cause danger to them.
Schulyer (1998, p.3) described that social entrepreneurs are those who have a powerful visualization for social change and who have the strong financial resources to support their ideas. That means they should reveal all the abilities of conquering business people and a compelling aspiration for social change. On the other hand, Catford (1998, p.96) argued that “...social entrepreneurs...will only flourish if they are supported by the right environment, which will be created largely by governments together with the private sector”.
Social Enterprise looks for surplus generation in order to achieve financial sustainability. This is a fundamental need to social enterprises. Emphasizing financial sustainability in addition to profit distribution becomes a way to account for all activities the organization engages in, including advocacy and in support of bono work. Sacrificing one cause and effect chain for another can have significant implications for both the quality of work and social enterprise's financial sustainability. Whilst many may rely on combination of grant and trading income, ultimately, if an organisation is not financially sustainable, it cannot deliver its social and environmental impact. Fig3. Shows how the profit of social organisation is distributed to the organization itself and community.
2.4 Policy Reform and Good Governance
DTI report ' A Progress Report on Social Enterprise: A Strategy for Success' (2003, p.6) describes the three key goals for government: creating an enabling environment, making social enterprises better businesses and establishing the value of social enterprise.
Thompson et al. (2000, p.328) describe “...people who realize where there is an opportunity to satisfy some unmet need that the state welfare system will not or cannot meet, and who gather together the necessary resources (generally people, often volunteers, money and premises) and use these to ‘make a difference'”.
Brown and Murphy (2003, p.57) mentioned on Bank of England report that “Social enterprises, like all businesses, need access to a range of financial products appropriate to their activity and stage of development”. A HM Treasury report on Enterpriseand Social Exclusion (1999, p.108) came to the conclusion, arguing that social enterprise was “less understood and rarely promoted in a consistent way by the existing infrastructure for business support”.
It is more constructive to judge and expand social enterprise capabilities rather than expertises and capacity building. The fact that social enterprises need to combine commercial objectives with social mission as well as internal governance means that a “capabilities approach” is more comprehensive. This is a useful way of recognising factors additional to individual skills that inter-play to determine the effectiveness and impact of a specific enterprise. It also moves away from limited considerations of a key person or group within the organisation, and their specific skills, towards a more holistic view of what the organisation is capable of doing, irrespective of the location of particular skills.
Catford (1998, p.97) articulated the problems and gave one probable way out: “Traditional welfare-state approaches are in decline globally, and in response new ways of creating healthy and sustainable communities are required. This challenges our social, economic and political systems to respond with new, creative and effective environments that support and reward change. From the evidence available, current examples of social entrepreneurship offer exciting new ways of realizing the potential of individuals and communities...into the 21st century”.
Academic writing about modern social entrepreneurship skills is relatively limited, compared to mainstream business or charities. The concept of ‘social enterprise' has been quickly appearing in the public, private and non-profit sectors over the last few years. Today's increased competitive not for profit sector there is extensive needs for the improvement of organisation effectiveness and sustainability even though securing funding is harder to meet the criteria of funding body. There is a good opportunity to tap in to corporate social responsibility programme by utilising better communication and marketing strategy in order to tackle complex social problems.
Chapter 3: Background Information of Social Enterprise
This chapter will give the idea about the social enterprise in the UK along with the impact, barriers and access to finance.
- Social Enterprise in the UK
The UK government has been at the front position of enabling and encouraging the increase of social enterprises as part of both welfare services delivery and community regeneration at the policy level. The impacts and influence of public, private, and citizen are empirically proven and exhibit that these conventional sectors of society are playing a part in re-evaluating the value creation opportunities offered by market (or quasi-market) mechanisms.
- DTI research suggested that there are at least 55,000 social enterprises in the UK, and combined turnover of £27billion per year. These social enterprises account for 5% of all businesses with employees and the contribution to GDP is approximately £8.4 billion, around 0.7% of the total economy.
- Cabinet Office mentioned on their website that in the year 2004-2005, the charity sector in the UK had a overall income of about £27.6 billion which was raised over £800 million from the previous year. It stand for about 2% of the UK's GDP.
- The data obtained from the Cabinet Office website in social sector showed that, 67% of them expected activity to grow in the next three years compare to 56% in the year 2003-2004 of third sector organisations reported an increase in activity in the previous year.
- Positive aspects of Social Enterprise:
Social enterprise is a diverse activity and can contain a range of organisations working on different extents and at different stages of trading. They can work in commercial markets or in public services. Some work nationally, while others work at community level. They often work in the most deprived areas and work with the most underprivileged groups. Some organisations work only as a social enterprise while in other organisations social enterprise is often a part of their activity. It works in a number of key priority areas for the UK economy- these include:
- employment and training
- adult care services
- childcare and health
- financial enclosure
- rural enhancement
- renewable energy and
- community regeneration
According to Doherty and Thompson (2006, p.362) the common characteristics for a Social Enterprise are:
- They have a social rationale and yields and surpluses are not shared out to shareholders. Reinvested income can be utilized to provide training and improvement opportunities for workers.
- They use assets and capital to generate community benefit. It gives assurance that resources provide value for money where a public-sector agreement is essential for the activity.
- Members or employees can also take part in decision making.
- The SE model could make new structures of entrepreneurship and employment within a society. The enterprise is responsible to both its members and a wider community.
- Social enterprise can propose goods and services to its consumers in an elastic and inventive way. Often the market has failed or the private sector does not want to go in this area.
- The potential of earnings and returns stream could unleash organisations from the oppression of fundraising and grant applications.
- There is either a double or triple-bottom line concept. The assumption is that the most effective social enterprises show signs of healthy financial and social returns rather than high profits in one and lower profits in the other.
Social Enterprise adopted enterprising solutions to deal with social and environmental issues following evidence of the beneficiaries of social enterprise activity is shown in Figure.3 (IFF, 2005). According to IFF (2005, p.28), a survey of social enterprises was conducted in 2004 for the Small Business Service (SBS), the UK Government, is showed on the following figure.4. It shows 19% beneficiaries were people with disabilities; 17% were children and young people; 15% were elderly; 12 % were people on low incomes and the unemployed. Social enterprise has been playing vital role to tackle these targeted disadvantaged group and moving forward them in the labour market, predominantly in poor areas with soaring levels of poverty and joblessness.
- Barriers of social enterprise
According to UK Government, there are mainly four significant barriers to accessing appropriate business support and finance for social enterprises throughout the region.
1. Cultural barriers between those setting up social enterprises and mainstream business advisors. 2. Lack of transparency about where to access business support at the local level, largely due to the huge diversity of routes into starting up social enterprises.
3. Limited numbers of qualified technical specialists in key business advice areas where social enterprises require specialist support, for example on legal structure, potential investors or taxation.
4. Limited sources of affordable equity and loan finance of all sizes.
Bank of England (2003, p.25), took the survey of Social enterprise and it stated that 32% of social enterprises mentioned the problems in obtaining external finance and 25% problems in getting grants as major barriers to expanding their trading activities. However, other problems are lack of qualified staff (14%); lack of appropriate premises (16%); and lack of cash flow (10%)
Low (2006, p.381) cited in his journal according to the source of DTI “…often have boards of directors or trustees who come from a voluntary sector rather than a business background. This can lead to a lack of business focus and prevent social enterprise from truly reaching their potential”
The Progress Report on Social Enterprise: A Strategy for Success(2003, p.68) concluded that there is little hard substantiation to show the impact and added value of social enterprise. According to the report, the main reason is that social enterprises generate a variety of social and environmental impacts, beyond their financial return that are difficult to measure. Policy makers, business support providers and finance providers find it difficult to assess the value of targeting social enterprises or of including them in their activities due to lack of information on their social and environmental, as well as financial impact.
- Access to Finance
The key factor in an enterprise's development is access to appropriate sources of finance. Social enterprises have been rejected more for finance compared to the SMEs. In addition, a large minority of social enterprises perceive access to external finance as a major barrier to expansion, including some of those that have successfully accessed finance in the past. There is no clear reason to account for the higher rejection rates among social enterprises but possible contributory factors are: lack of obtainable security and private financial stake; use of organisational structures and grant funding streams with which lenders may be unfamiliar, and which may result in lengthy arrangement times; low levels of investment readiness among some social enterprises depends on some elements of credit and behavioural scoring and reputational risk to the lender. For example creating “venture philanthropy” organisation will ensure long term financing of charities' infrastructure, proactive management support and capacity building support.
Dees (2004, p.18) mentioned that “Businesses fail all the time and many donor-dependent nonprofits have been around for many decades, even centuries. Social entrepreneurs look for the strategy, structure, and funding mechanisms that are most likely to ensure effective and efficient social performance given specific mission objectives and a particular operating environment”.
Chapter 4: Methodology
This chapter will present detailed idea about the research were conducted. This includes the research design, sample selection methods and data collection methods. At the end of this methodology part validity and reliability issues will be discussed to follow the quality standards of the research.
4.1 Research Design
The present study endeavoured to explore the sustainability of social enterprise for the development of the UK. Exploratory research is selected as research design as little information exists about the social enterprise of the UK. The aim of exploratory research is mainly to gain enough information before doing more thorough research. Cooper & Schindler (2003, p.21) mentioned that we basically start by gathering as much information about the object as possible and with a vague impression of what we should study.
Exploratory studies are a valuable means of finding out what is happening, to seek new insight, to ask questions and to assess phenomena in a new light. It is particularly useful if researcher wish to clarify the understanding of a problem. According to Saunders et.al. (2003, p.360), there are three principle ways of conducting exploratory research and these are: a search of the literature, talking to experts in the subject, conducting focus group interviews.
Qualitative interviews would be best in achieving and addressing the questions that I am looking forward to address in this dissertation paper. The research requires data that is both rich and varied as I am keen to extract the opinions and insight about practices, insights and expectations of leaders and beneficiaries in the social sector. Adopting this methodology, I will extract this data without limiting the responses of the respondents; I am mostly interested in their innate insights, opinions and organisational beliefs.
Anastas (1988, p.19) mentioned that when there are the cases of sensitive subject issue and difficult decision-making procedures, individual in-depth interviews give a far more valuable tool and create a situation where participants would be likely to speak more explicitly and freely.
According to Sokolow (1985, p.28) , there are several other advantages of one-to-one in-depth interviewing which include the support of individual thought, respondent thoughtfulness to questions and the offering the capability of the interviewer to sense non-verbal opinion.
Cooper and Schindler, (2003, p.44) stated in their book that selecting some of the elements in a population is the fundamental idea of sampling and researcher may draw conclusions about the entire population. There are a number of convincing reasons for sampling, including: lower cost, greater correctness of result, greater speed of data collection and accessibility of population selection.
The sample would be randomly selected nationally from Social Enterprise and are actively fund raising. It is easier to make some comparison and a fairer analysis of the data because the similar size of organizations most likely to follow related trends and they are also affected by the same factors. Due to the complexity of the sector, the samples would be drawn from the wider UK region; this is to widen the organisation from which to select the qualifying sample.
4.3 Data Collection
The major form of data collection was based on the semi-structured interview process with senior managers, policy officer and research & development officer of the 7 selected Social enterprises operating in the UK. The interviews were designed to gain an understanding of Social Enterprises potential sustainability issues and further research needed to achieve sustainability. Therefore, interview procedures needed semi-structured interview process which is relatively informal; relaxed discussion based around a predetermined topic. Whilst conducting a semi-structured interview first of all I provided the background information regards to the research programme and its objectives to the interviewee. My interview's questions are based on open question where the interviewees had the opportunity to express opinions through its discussion. To keep momentum of discussion with the interview it is important to prepare easy to understand approach when building question with a logical sequence. Interview questions were tested among prior to interviews. Semi-structured interview was highlighted by Leech (2002, p.665) as “……one that can provide detail, depth and insider's perspective, while at the same time allowing hypothesis testing and the quantitative analysis of interview responses”.
For collecting secondary data participant social Enterprise's annual report, various books, websites, newspapers, annual reports, monthly reviews and significant articles were chosen. Also for collection of primary data in-depth interviews with a range of designated professional, related to this field, were taken. I contacted with Business Links and DTI to obtain the list of social enterprise operating in the UK.
Saunders et. al. (2003, p. 109) emphasised validity is concerned with whether the findings are really about what they appear to be about. Validity defined as the extent to which data collection method or methods accurately measure what they were intended to measure. Cooper & Schindler (2003, p.71) believe that validity refers to the extent to which a test measures what we actually wish to measure. There are two major forms: external and internal validity. The external validity of research findings refers to the data's ability to be generalized across persons, settings, and times. Internal validity is the ability of a research instrument to measure what is purposed to measure.
To ensure the validity of the study numbers of different steps were taken:
•Data was collected from the reliable sources, from respondents who are more experienced senior management position within Social Enterprise;
•Survey question were made based on literature review and frame of reference to ensure the validity of the result;
•Questionnaire has been pre-tested by the responded before starting the survey. Questionnaire was tested by at least ten persons;
•Data has been collected through four weeks, within this short period of time no major event has been changed with the related topic.
To ensure the reliability of the study numbers of different steps were taken:
- In order that responders could concentrate more on each question questionnaire was divided into three parts;
- The Ground Theory that has been selected for the study was clearly described and research question has been formulated based on the previous theory. Data has been collected based on the frame of reference that was drawn from the discussed theories. The objective is to make sure that if another investigator will follow the same procedures and used the same questionnaires objects, the same conclusions would be made.
Chapter 5: Data Analysis and Implementing the Recommendations
This chapter brings the analyzed data according to the survey question which tries to implement the remedial action to solve the problem and finally it highlight the further research to fill in gaps in our understanding on this research paper.
5.1 Data Analysis
The semi-structured interview was analysed by applying qualitative data analysis techniques such as Strauss's Grounded Theory, a scheme which attempts to ground all concepts and analysis in the data themselves (Strauss, 1987, p.5). Grounded theory as a qualitative research approach provides with strategies to build theories in areas previously unexplored or under explored. Glaser and Strauss (1967, p.1) mentioned “We believe that the discovery of theory from data -which we call grounded theory-, is a major task confronting sociology today, for, as we shall try to show, such a theory fits empirical situations, and is understandable to sociologists and layman alike. Most important, it works-provide us with relevant predictions, explanations, interpretations and applications”. Corbin & Strauss (1990, p.3) also emphasised that Grounded Theory's method provides structure and gives direction to theresearcher. This is an approach for developing theory that is grounded in data systematically gathered and analyzed.
The semi-structured interviews have transcribed accurately and consecutively have analysed according to the constant comparative method. The first step of the analysis is open coding. Data has examined line by line in order to identify the participants' descriptions of thought patterns, feelings, and actions related to the themes mentioned in the interviews. The codes have formulated in words closely similar to those used by the participants. Codes have compared to verify their descriptive content and to confirm that they have grounded in the data. In the second step, the codes have sorted into categories. This is done by constant comparisons between categories, codes, and interview protocols. The third step has consisted of fitting together the categories using the constant comparative method. This is resulted in an understanding of Social Enterprise Potential for Sustainability in the UK. Data are collected at later stages in the study in order to add, elaborate, and saturate codes and categories. In practice, the steps of analysis are not strictly sequential. Rather, I need to move forward and backward constantly to re-examine the data, codes, categories, and the whole model.
5.2 Summary outline of the Seven Organisational Case Studies
During the research, seven organisations were randomly selected from Social Enterprise Coalition Directory and Social Enterprise London (SEL) which represent broad range of social enterprise with diverse activities. Birmingham Settlement (Company ID: A) is a care service provider which is located in Birmingham. Computer Aid International (Company ID: B) generates their revenue from low cost computer sale, based in London. DHIVERSE (Company ID: C) is involved with health care and it is based in Cambridge. Orient Regeneration (Company ID: D) is a London based social enterprise that generates income through training and rental. Sustainable Wales (Company ID: E) was established in 1997, based in Wales and their core income comes from consultancy, training & facilitation service. Training For Life (Company ID: F) is another London based social enterprise which provide training and employment support toward disadvantaged community. Community Innovation (Company ID: G) provides low cost IT infrastructure services and work placement for Black Ethnic Minority to IT industry.
Between these organizations, one of the categories named Human Resource Operation and number of employee allocated as a code. Study shows from the following table that al together participant organisation directly employed about 557 numbers of employees in 2007 compare to in year 2006 was 341 numbers of employees and in year 2005 was 267 numbers of employees. Total numbers of employees shows the gradual increment which indicates the sign of growth of relevant social enterprise organisation. Another category named Income & Expenditures and total income and total expenditure was allocated as a code. Study shows from the following table that in year 2005 participant organisation's al together total income was £8,747,995 in compare to 2006 was £9,316729 and in year was £9,719919. Their expenditure was in year 2005 was £8274945 in compare to year 2006 was £9,232,753 and £8860748 in year 2007. These social enterprise income generation has diverse range of sources, for example ongoing trading, local authorities' service delivery contracts or engagement with public procurement as well as funding stream from central government and its associate agencies, UK and European regeneration funds, grants from charitable trust, commercial banks' loan and income from other public and charitable finance providers. Access to finance is vital for organisation development and sustainability and independence.
5.3 Highlights of the Interviewee's Comments:
Whilst highlighting on organisation's experience on access to finance issue, Mr. (H), Project development manager of Company (A), a care service provider social enterprise which is located in Birmingham mentioned his idea for setting up more Venture Capital fund. In his opinion, there is a shortage of long-term financial strategy for social enterprise. Lack of finance makes it difficult to grow and develop new ideas. He recommended an organisation with a viable business plan may apply to Venture Capital fund for £200,000 to £500,000 to grow their business and increased activities. This capital will help to train more staff and better infrastructure development to provide new services with extra resources.
Mr. (I), Policy Development Officer of Company (B), generates their revenue from low cost computer sale, based in London, mentioned that they operate nationally and internationally, on day to day basis they had to operate within the legislation process in the UK and whilst abroad according to the relevant country's rules and regulation. It often makes obstacle when delivering computers to development country as there are massive complex administrative barriers. Social Enterprises are still mistakenly seen as a Non Government Aid Agency only, rather than viable community business in developing country. But in the UK, they are still struggling to maintain financial steady growth. Lack of skilled employee and not having continuous funding stream make it difficult to run specific project in certain local area for long run and force them to make the project short like yearly basis rather than the long term basis.
Ms. (J), Senior Development Manager of Company (C), is involved with health care and it is based in Cambridge, elaborated the impact of social enterprises but also reminded that social enterprise itself will not able to reduce social problem locally or nationally unless it develop new meaning full partnership and searching for partners that match their company objective and values. Instead of just acting as low cost compliant, there need to develop long-term partnership in delivering public services.
Mr. (K), Project Officer of Company (D) is a London based social enterprise that generates income through Training and rental highlighted that there has been a lack of tailor made enterprise solution. He complained about duplication of services from the supporting agencies. Tailor made enterprise solution is such a helpful guide line that smaller organisations do not necessary need to compile business strategy like a large scale social enterprise. Every social enterprise organisation has its unique business needs and similarly deserves the solution it requires to become sustainable. Organisation can grow with right leadership skills among senior management as they are the decision maker. He also mentioned the sustainable term which is still complex within this not for profit sector, depending on funding or subsidy will not make the organisation sustainable. Income generation is lot harder than regular business.
Mr. (L), Business Development manger of Company (E) was established in 1997, based in Wales and their core income comes from consultancy, training & facilitation service. He mentioned sustainability awareness is not as satisfactory as it should be within the sector. He evidenced sustainability is nice terminology whilst making project report or funding application, but actually it's hard to predict and hard to measure. There need a further guideline from academics or government agency to clear out the misconception on sustainability. He mentioned that his colleagues only know the general definition and still unaware of its practical implementation of it. Additionally he illustrated that only financial access would not be the remedial approach to achieve sustainability.
Mrs. (M), Project Co-ordinator of Company (F) which provides training and employment support toward disadvantaged community, mentioned that there are lot of frustrations among social enterprise senior management. She felt that there is plenty of talk from the government but actual proper help are not provided by them. She also mentioned “the bigger the organisation, the more survival ratio for the sustainability”. Smaller organisation like her, struggle to survive due to recent credit crunch and higher risk associate with smaller new organisation even though possession with innovative ideas to deliver better services. She said that they have to deal with it and also mentioned still there is a huge lack of awareness what actually social enterprises dose for the economy.
Mr.(N), Project Director of Company (G) which provides low cost IT infrastructure services and work placement for Black Ethnic Minority to IT industry, explained sustainability awareness encouraged their team to grow further. They are blessed by the local business support agencies that are provided through local authority regeneration scheme. In recent year there has been local £6 billion regeneration in white city area; managed by Westfield. They had the opportunity to develop employment supporting partnership and eventually they have been helping 129 local Black Ethnic Minority unemployed to move them forward to labour market. The sustainable development plan made their organisation more optimistic to engage with other public service deliver agency in order to develop long term partnership.
- Remedial Action to Solve the Problem
After conducting semi structured interview session with seven separate social enterprise based in thorough out the UK region, I have summarised the remedial action to achieve sustainability. During the survey, the following recommended remedial actions were discussed with the senior management and the policy development officers who were involved in those selected social enterprises.
- Awareness on sustainability and skills development
During this research, it was identified that awareness on sustainability is the key issue among senior managers and policy or strategy makers. Survey showed encouraging staff to learn more about sustainability made significant difference within the organisation. So it would be remedial strategy for any new and established social enterprise to engage its human resources to know more about the impact of sustainability development and involve them in the sustainability strategy development.
It was identified through face to face semi structured interview session is that raising the skills standard of its existence staff member is the vital key to move forward and securing growth. There are growing number of demand for skills development and lack of resources and finance act as major obstructed barrier. More resources and financial support required to develop marketing, financial management and the effective implementation of ICT.
It was discussed among managers and policy maker during this research that still there are lack of public awareness as well as public governing body and financial institution. It is tremendous difficult situation for a start-up social enterprise to get the message across in regards to the benefit of social enterprise. They need the right campaign to increase the understanding level of public awareness. Social enterprise support agency may play vital role in order to promote better networking and providing skilled advice through increased number of skilful experienced adviser.
5.4.2 Infrastructural support and legislation support:
Social enterprise needed business infrastructure development support and further assessment needed to continue it's trading. It has been experienced through out the report that small start up social enterprises are operating in uncertain business where basic requirements having affordable business premises is really essential and they are struggling finding premises. Local authority or private sector may help out by creating more purpose built premises and workspace to house social enterprises.
Social enterprises also have support needs that are distinctive from small privately owned firms, associated with their ownership and decision making structures. They face all the regulatory issues that affect other small firms; for example working time, minimum wage legislation, as well as additional ones that are associated with their status, such as legal issues associated with specific forms of incorporation.
5.4.3Better Access to finance
Access to finance is an essential element for any Social enterprise. Social Enterprise requires better access to finance to fulfil long-term sustainability. Corporate and Government body need to create a business environment for social enterprises so that they can achieve financial access. Specifically start-up social enterprises require further assistance to survive for long term and they also require long-term funding strategies. Multi agency's business development support needed to establish long-term financial strategy to nurture the growth development social enterprise.
Whilst conducting face to face semi structured survey of this report there were numbers of proposal in terms of better access to finance. It was pointed that there is substantial need for wider range of understanding and standardization of social return on investment where investor can receive the true measurable added social value from investing in a social enterprise
Future research needed to bring the mew changes in the financial market for social enterprise. Equity or quasi-equity finance can be developed for both the supply and demand for risk capital. Also creating social investment bank to capitalise intermediaries, and leveraging private finance. Creating a social stock exchange, to provide an exit strategy for social investors
5.4.4Measuring social return
Measuring specific social return is a challenging task for social enterprise. It's complex issue and needed further research to measure social return through social outcome audit approach. In order to convince social investor and venture philanthropy it is very essential to define social outcome on social enterprise's annual report or progress report. There are numbers of ways to illustrate social out come for example specific case studies might show how their activities made empowered disadvantaged group living in deprived area, achievement stories to encourage other's to follow though. Social audit can be done by independent governing body to endorse the organisation's fulfilment of social objective. Funders often allocate grant to achieve certain target driven project. There needs to be developed realistic social outcome measurement tool to define social objective of the organisation.
5.4.5Human Resource Development
Human resource development through training and skills build up is essential to survive in a long term period. Knowledge base training material will guide through existence and prospective staff members. Funders need to allocate budget for innovative skills development in order to effectiveness operation of the organisation. Existing experienced social enterprise skilled business adviser has a key role to guide any start up social enterprise. There are many skilled marginalised communities such as refugee and asylum communities, local economy can utilise their skills to develop local enterprise. During the survey, there two specific social enterprise who particularly provide training and skills development for disadvantaged people living in deprived area and raise concern on sustainable financial strategy due to lack of skilled senior business development manager. Senior skilled business development managers are not attracted to work for social enterprise due to numbers of reason: low salary, high risk, job uncertainty and career progression. There needs to be external support from the government body or supporting agency to deal with high risk assessment of business progression as well as training need analysis strategy to implement right set of skills to be allocated in right organisational operation.
5.4.6New Models for Sustainability
Social enterprise has been going through enormous challenges to survive in a long period of time. Enthusiastic social entrepreneur are looking forward to work on new dimension for sustainability. A new social enterprise business models could be built upon a size where it is possible to generate sufficient surplus to cover both direct and indirect business operation costs and on the top of the incremental charges that are rationale of the social mission. Currently the vast numbers of existing social enterprises are struggling to generate adequate net income. In addition to this, it is also complicated for them to develop steady, ongoing funding sources to subsidize the deficit. As most of the social enterprise is tackling social or environmental issue at the same time empowering local disadvantaged living in deprived areas, it is challenging to keep going the organisation within its own income generation often lead to deficit. In order to provide ongoing funding support to make the organisation sustainable, further consideration is needed from donor agency and government. It requires better communication and education process between funders and social enterprise as there is financial risk may disrupt the operation of the social enterprise.
Chapter Six: Conclusion
This chapter summarizes the whole dissertation with giving the idea about possible areas that further research could be conducted and it concludes with the limitation of the study.
The core of this report is to identify the social enterprise's sustainability refer as capability to continue its social, economical and environmental objective related performance for a comparatively extended time period. This research paper present a comprehensive study in regards to social enterprise that takes many forms and serves a variety of prepossesses. Different hypothetical and appropriate sustainable study would help to grasp a fuller understanding of social enterprise. Organisational identity theory is one framework that can be helpful for understanding the different types of social enterprise and their implications for organisational form, financing of services, management practices such as outsourcing and strategic collaborations, and framing of public policy issues. Studying the variants of social enterprise can put into perspective how social objectives can be achieved in different ways, through the market place and non-profit and for profit organisations. Future research should be more precise about sustainable social enterprise and help clarify how different forms of each, operating in different cultural and economic contexts, can contribute to the solution of social issues and problems. Social enterprises help those traditionally disadvantaged people in the labour market, by providing opportunities and delivering better services to deprived or excluded communities. Therefore, support for social enterprises is the key element of sustainable approach towards creating opportunities for economically excluded individuals and communities.
Sustainability will progress through market experience, policy for future, extensive research, economic analysis and technological advancements. However there is a significant need for further research; there needs to be framework where engaging government body, social enterprise organisations and academics to continue the development work of the social enterprise's sustainability. Eventually this teamwork will contribute through advising on the development of analytical sustainability indicators for measurement of growth, monitoring & evaluation and also providing recommendations for improvement of the sustainability principles and its implementation framework.
During conducting the research, I came across certain limitations and among them the foremost one is time constrain. The interviewed person could not provide all necessary information due to lack of time. The research timeline also reveals that time constrain was actually a barrier as there was plenty to find about this research topic. A huge portion of the report is based on primary data collected through interviews which is very lengthy process. Becker & Bryman (2004, p.273) mentioned that semi structure interviews are very challenging. There are number of factors are very important whilst conducting the semi structured interviews, it require good listening, well communication, realistic approach with social analytical skills. These interview processes are very time consuming to conduct.
I would also like to recommend a specific focus based study on assessment of sustainability. Therefore a more focused approach is necessary that a large scale study of all social enterprises would be unmanageable and costly. As such any assessments of sustainability of social enterprise will necessarily involve estimates. During this research, I was unconvinced that it is possible or necessary even to estimate impacts according to different types of social enterprise. In practice, there is a considerable range of social enterprise with different legal model that identify their specific objectives. Some social enterprises are multi-dimensional in their activities, making comparison across different types of enterprise problematic.
At the end, I would like to refer Soule (1952, p.42) who emphasised on Adam Smith's perception on social gain issue by using an interesting example when a business man offers a product in a competitive market place- “he intends only his own gain, ….led by an invisible hand to promote an end which is no part of his intention…By pursuing his own interest he frequently promotes that of society more effectually than when he really intends to promote it”. This paper shows there is a good motivation to be enthusiastic about the future of social enterprise. Social Enterprise model is still in its very early stages of development and further research will bring sustained innovation and increasingly optimistic social and financial outcomes to achieve potential sustainability.
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