Blog provided by Andrew O’Brien, Director of External Affairs at Social Enterprise UK
Social enterprises are one of the fastest growing forms of business in the United Kingdom and across the world. It is a young sector, with over 40% of social enterprises under 5 years old but also with many well-established businesses. It is also working in some of our toughest local economies – with one in five social enterprises working in the most deprived areas in the UK according to the Index of Multiple Deprivation.
To a large extent it is has never been a better time to be a social entrepreneur in the UK. The model has been proven. Government increasing recognises the importance of different types of businesses within the UK economy. There is a growing world of social investment which wants to invest in social enterprises. But the sector is now facing significant challenges related to its growing maturity.
The first big challenge is achieving scale. Most social enterprises are small businesses, with a handful of staff. To achieve scale, they need to grow significantly. But how is this achieved whilst maintaining the focus on social and environmental mission? Private businesses promise investors big returns in return for taking risk. Social enterprises lack the ability to provide big profits, although scaling them up can produce decent returns and large social and environmental rewards. In many areas, there are already existing significant private sector competitors who are not going to play nice when it comes to growing social enterprises. Breaking the barriers to scale is a huge challenge facing the social enterprise sector.
Social enterprises are also increasingly concerned about talent. Most social enterprises are led by dedicated founders and staffed by early supporters. But as social enterprises mature, they need to make sure that there is a pipeline of talent coming into the business. How do social enterprises compete with more lucrative careers in the private sector? Most young people say that they want to work in places which have strong social and environmental values, but are they aware of social enterprise as a career option? The battle for talent, whether young people enter socially driven businesses or try to change existing private businesses from within, is going to be a big issue for the coming decade.
Finally, there is the role of government. Governments are on paper very supportive of social enterprise. This is particularly true in the devolved nations – Scotland, Wales and Northern Ireland – where politicians see the value of social enterprises in combining economic regeneration with social renewal. For national government, the low hanging fruit has gone. Setting up legal structures, creating research institutes, setting up pilot funds and a social investment wholesaler – these have all been done. They cannot be done again. The real tools that could help social enterprises to thrive – the tax system, the regulatory system, the legal structure of companies – these will require significant political will to change. Does government have the appetite to do this? Or will it fall back on traditional business models and hope for the best?
Universities have a critical role to play across all these issues: supporting government policy making, opening career pathways for students and using their own asset base to incubate the sector. Universities work in researching, connecting and supporting social enterprises will determine the success of the sector over the coming years.
This is why Social Enterprise UK has a dedicated membership offer and network for universities to connect academics and leaders within the university system together. We want institutions to learn from each other and work together. The resources – knowledge, people and financial – at the disposal of this sector have the potential to tip the social enterprise sector over the edge and to really build a new economy which works for people and planet.