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The futility of trying to pin down social enterprise 21 November 2012

Posted by cooperatoby in EU, social economy, Social enterprise.
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Interreg capitalisation
On Friday I was at the INTERREG capitalisation seminar on entrepreneurship, where 8 partnerships met to share what they’d leant about this topic. The quality of the facilitation made it an entertaining day, and I ended up on the panel judging the pitches on why public authorities should promote entrepreneurship. I was impressed by the non-nonsense way in which INTERREG counts up how many good practices have been transferred between partners (202 in fact, among the 204 projects). I wondered why we didn’t apply a similar metric to EQUAL, but then realised we were dealing there with 3,500 development partnerships and 1,100 transnational partnerships, with a much more bottom-up methodology. INTERREG takes a somewhat more professional approach. They commissioned some great real-time cartoons of the event too (from Drawnalism).
The deceptive lure of definitions
Midway though I admit I was totally distracted by a comment from Michael Guttmann from Hannover, who took part in the PASE project. He concluded by saying that social enterprise needs to have a common definition.
Now this is the sort of question that makes me freeze in my tracks. It’s not that it’s a stupid question but it is a Pandora’s box of a question. it’s the sort of question that once you start on it destroys any chance of making substantive progress, because you end up going round in circles debating definitions – and that is not what social enterprise is about.
Part of this is to do with principles. People who are keen on social enterprises hold their principles dear, so it’s natural they should want to defend them. Social enterprises do business with a higher purpose, so the business vehicle they choose has not just to be efficient at the mechanics of corporate governance but also to be coherent with the ethics of the business it encloses.
Yet as the world evolves, the identity of social movements has to evolve too, so it is right that they devote effort to defining how much change they will tolerate – how permissive or how restrictive they are and where their boundaries lie. The pace of evolution is particularly fast in social enterprises, because they are juggling so many different environmental factors: not only changes in consumer markets and macroeconomic conditions like most businesses, but also social transformations and the social policies that react to them. For instance demographic ageing and medical advance have created a vast demand for care, but budgetary pressure on the welfare state is reducing the resources available to meet that demand.
The notion of social enterprise is already a hybrid – it uses economic means to achieve social goals (and that is part of the difficulty that policy-makers have in giving it a fair crack of the whip). And it goes through constant cycles of hybridisation. If we combine a worker’s co-operative with a voluntary association we get a social co-operative; if we combine a workers’ co-op with an employment agency we get an activity co-operative etc.
This protean shape-shifting behaviour may be a bit confusing, but it’s a strength, because it is the result of inventive minds addressing social problems. I feel it would be a mistake to try to tie social enterprise down and define it once and for all.
Creative tension
Like all good ideas, everyone wants to have a part of social enterprise. There are essentially two underlying ideological views:
• that SE should be essentially non-profit-distributing (but allowing the payment of small amounts of interest on co-operative shares) – i.e. it has the lofty ideals of a charity but gets its hands dirty in the marketplace to achieve them;
• that SE should offer a ‘blended return’ – i.e. it is normal business but with some demonstrable social value on top (not just meeting a solvent market demand, which all businesses do).
I feel the term ‘social business’ is indicative of this latter tendency, because if you put ‘business’ first then you inevitably end up with money taking pride of place in the discussions – as indeed seems to be the case with the Social Business Initiative.
The massed ranks of the social economy, supported by the EESC, think that a more articulated definition is a good idea – presumably because they fear that their thunder is being stolen. But I think that so long as we are clear what we are talking about, there is room for a collective noun to describe a broader church.
In this respect I think that the Commission trod the tightrope of definition very deftly when it devised its loose definition, which insists that:
• the social objective must be primary
• surpluses are largely reinvested
• governance is participative
These are the key elements. I don’t think it will be productive to try to be more restrictive. However much you try to write principles into rules, with enough bad will they can be circumvented. Asset locks for instance are there to be used where public assts are concerned, but there are types of social enterprises that do not require them.
Social innovation begins with the social economy
However policy-makers should not go on to make the mistake of confusing product with process. Even if we should not be too prescriptive in laying down what a social enterprise is, we should pay due attention to its social nature and its social origins. We should not expect to be able to extract the social added value that they create without investing in the social capital that makes it possible. A ‘social clause’ in a procurement contract can deliver the product – jobs for unemployed people – but the process of inclusion is much deeper and depends on long-term social networks and trust. This is the great value of the organised social economy. Social enterprises normally grow up through processes of networking among value-led individuals who are members of broader social movements, such as charities, co-operatives, associations and trade unions. These are the ‘incubators of social innovation’ that are so much in demand. If policy-makers want social innovation, then they should start by encouraging those organisations where these innovators are already coming together.

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