Social enterprises are businesses created to further a social purpose in a financially sustainable way. We had a chance to speak to Jamie Palmer, Head of Social Enterprise Services at the EY Foundation, and Founder of Social Supermarket. Jamie sheds light on social enterprises in the UK, and the climate in which they operate, the meaningful contribution they make to the economy as well as his experience as a social entrepreneur and a mentor of Accelerate – EY Foundation’s Programme aimed at developing social enterprises across the UK.
Marta Kozielska (MK), UK Consultant for Social Impact Alliance for Central & Eastern Europe:
Can you comment on emergence and importance of social enterprises in the UK?
Jamie Palmer (JP), Head of Social Enterprise Services at the EY Foundation:
The growth of social enterprises in the UK is an exciting trend, catalysed by a frustration with traditional ways of doing business and a sole focus on profit. A recent Social Enterprise UK survey reveals there are 100,000 social enterprises in the UK, contributing £60bn to the economy and employing over two million people. Despite these figures, there are still huge growth opportunities driven by consumer demand for business to recognise their role in not only mitigating damage to society but also being a net positive contributor.
MK: What role should the government play in facilitating growth of social entrepreneurship? Should we be lobbying the government more to introduce regulatory measures enabling growth of social enterprises?
JP: The challenge with regulation often comes back to the challenge that social enterprise is not a legal form and there are many different definitions making it particularly tricky to introduce tax or regulatory benefits for the sector [a commonly agreed definition would be an organisation which makes most of its money through trade and reinvests a good proportion back into their social mission].
One of the biggest area’s government can support is opening more procurement opportunities for social enterprise and including requirements for government contractors to procure from more social enterprise, something the Social Value Act has gone some way to introduce.
MK: What’s the current biggest challenge for a social entrepreneur?
JP: Patient capital. On average it takes a social enterprise 15 years to reach half a million pounds revenue. Running a social enterprise isn’t easy, you have to build a successful and scalable business model whilst also thinking about the social and environmental impact of your product or service. Despite a growing number of impact investors it has not matched the need of the growing sector. The sector requires finance that expects returns but understands these may take longer to mature than traditional business models.
MK: Would you say CSR is reactive, whilst social enterprises aim to be more proactive in inciting social change?
JP: I’ve spent the last nine years advising or working with companies to understand and address social and environmental challenges most relevant to their business. CSR can certainly be reactive to pressures like consumer pressure, for example the use of single use plastic or palm oil but they can also be proactive to social innovation. One of my favourite examples is the way Vodafone through their Mpesa project enabled millions of people in the developed world access to banking through their phone. Social enterprises are often formed out of a frustration with the status quo and using innovative commercial models to address that problem. For example, Crackedit was created to provide employment for ex-offenders whilst also solving a very commercial issue of easy access to phone repair.
MK: What prompted you to set up your own social enterprise?
JP: I was inspired by a group of social enterprise products I came across when I was working at Business in the Community. Having dug into the sector a little I was frustrated by the lack of a central marketplace for great products that were also solving some of societies biggest challenges. Secondly, I love working with social entrepreneurs – they are the perfect mix of commercially driven and purpose led.
MK: What does your work as Head of Social Enterprise Services at EYF teach you, overall and what does it teach you for running your own enterprise, and vice versa?
JP: Having worked full time setting up Social Supermarket and benefiting from a range of support across the sector from leading organisations like Cambridge Social Ventures, Allia Serious Impact, Hogan Lovells and JP Morgan Foundation I appreciated the practical ways companies could use their technical skills (like financial modelling to pitching) to support the growth of social enterprise. EY is a huge organisation with more employees globally than McDonalds. EY supports clients with a range of business challenges from legal, people development, tax and consultancy.
I have learnt about the breadth of support global organisations like EY can offer and not only the impact this has on the social entrepreneurs but also the employees who buy into the vision of social enterprise, aligned to EY’s own value of ‘building a better working world’.
Author: Marta Kozielska, UK Consultant for Social Impact Alliance for Central & Eastern Europe
As an alternative to traditional commercial businesses and with a different – more complex yet holistic – take on the meanings of ‘(social) responsibility’, social enterprises are changing the previously dismissive approach of economic activities toward social impact, and, in fact, integrating the two.
Social enterprises are designed to have intentional, positive and measurable impact. They translate their social/environmental purpose – which is positioned at the core of its activities – onto customer brand and how consumers perceive and actively engage with its mission-driven services or products. Effectively integrated in the social fabric, rather than operating as a separate entity, social enterprises are catching the attention of investors, harnessing the power of entrepreneurship, and innovating ways in which both profit and social impact can be delivered, in synergy – not competition with one another.
Deloitte Human Capital Trends 2019 shows a significant rise in social enterprises in 2019 and exposes shifting values from customer and employee satisfaction to external societal impact (e.g. diversity, inequality, environment) as “top factor used to measure success when evaluating annual performance”. Utilising the services ‘at hand’ the big 4 play an active part in developing innovative entrepreneurship ideas and empowering social entrepreneurs across the country, who deliver impact locally and globally, through their training schemes.
The Nominet Trust Rankings 100 prove “that you don’t need to wait for governments to introduce policies or big business to provide the backing but that, with some enthusiasm and access to basic technology, it is possible to make a significant social impact”.
Yet, with the increasingly tense political climate, there is a limit to individual good will, determination and financial capabilities to turn profit into social good. The Social Enterprise Global Poll 2019 (by Thomson Reuters Foundation and Deutsche Bank’s ‘Made for Good’ initiative) positions the UK 13th on the list of countries in which social entrepreneurs thrive – encouraged by: government support; attracting skilled staff; public understanding and changing attitudes towards social businesses; making a living; gaining momentum at the launch and growth stage; access to investments.
Peter Holbrook, CEO, Social Enterprise UK commented on UK’s performance; “the nature of social entrepreneurs is that they are focused and determined about resolving an issue – and they won’t let the lack of political capital or economic uncertainty distract them from their purpose“. Expert’s views substantiate that social enterprises work for the social, environmental and economic betterment without blindly awaiting legislative changes. However, the regulatory environment ought to welcome their growth and actively prevent from lingering outside its frameworks.
Social Investment Tax Relief (SITR) was set up in 2014 to bridge the funding gap for social enterprises, enable organisations to offer their investors tax relief, and ultimately increase availability of capital. Since it launched, for 3 tax years, ‘only 50 social enterprises have raised funds of £5.1m through the scheme’. This is a disappointing result to all in the social investment sphere and not nearly enough from the government to incentivise constructive social change, with SITR waning in strength, importance and influence.
The upward trend of social enterprises, increasingly favoured by variety of stakeholders and the civil society, calls for further engagement of the public and private sector to enable them to scale the impact they deliver and profitably succeed in the business sphere.