Social enterprise: Wake up to a new way doing business

Jan 6, 2016

Change is brewing in 2016. Out with the old model and in with social enterprise, says Dan Gregory

Back at the beginning of 2015, the French economist Thomas Piketty left Paris to tour the world and explain his grand ideas about capitalism and inequality. What his Excel spreadsheets had told him was that the rich almost always got richer faster than the world got richer. Plus ça change.

Then at the end of 2015, the world looked back to Paris. First with horror, when the terrorist attacks sought to tear us apart, and second with hope, when the climate change talks aimed to bring us together.

As it happens, most people in the UK seem to think capitalism is probably the least worst economic system going. You may well agree. But you probably also admit that our system creates quite a few problems on the side. When these spill over as significantly as endangering our entire environment or passing by the poorest people on the planet, then maybe we need a few changes.

Yet also this year we turned down the change promised by Labour and stuck with the Tories at the polls. The PM’s triumph over Ed Miliband was founded on three things that voters were looking for – economic security, leadership and a convincing narrative.

So perhaps it’s true that while we need change, we don’t want it. Or perhaps we want other people to change but don’t want to change ourselves. Maybe, as the cliché runs, we’re not stuck in traffic – we are the traffic.

But our economy is changing. The sharing economy is disrupting old models. Airbnb and Uber are now household names, and peer-to-peer lender Funding Circle is the UK’s third-biggest small business lender – although the sharing economy lives up to its name about as much as a festive sharing platter I recently ordered in a London gastropub: a yellow-brown plate of floppy fish fingers and dejected chicken nuggets you might expect at a five-year-old’s birthday party in a third-rate provincial soft play centre.

Eighty-nine per cent of Airbnb turnover is generated not by ordinary folk but by professional landlords and agencies. Uber faces protests about the exploitation of drivers and perceived tax avoidance. Sharing or otherwise, these new businesses are changing our economy.

This year Assemble won the Turner Prize, which recognised their work in Liverpool built around the Community Land Trust idea that homes should be affordable, owned and developed by communities; not an asset class with which to speculate. Assemble were worthy winners in the year in which we reportedly also passed peak hipster.

At first glance, this architect collective might appear to be very much a bunch of hipsters. But instead of ludicrous facial hair, pretentious accessories and pop-up owl cafés, Assemble have a genuine and quite serious commitment to improving the world around us. This Turner Prize award perhaps hinted at the end of an era of playful pastiche and postmodernism, and a desire for something more meaningful.

So what does this mean for 2016? It means we need more businesses that don’t destroy the planet and only enrich the already wealthy. It means for change to catch on, it has to be both sexy and safe, not worthy and woolly. It means that some emergent new business models need to change if we are to truly share the benefits. And it means that we’re growing tired of detached ironic cool, and perhaps crave something more authentic.

This means social enterprise. Social enterprises like The Big Issue are businesses with a mission to help society or the environment. They really do share – profits are principally reinvested in the cause. In 2015, these social enterprises have become increasingly sexy, not because they adopt fashionable trends but because they set out to do something meaningful.

They are also safe, as they offer business models based not on speculation and shifting sands but the creation of real value – producing goods and services that people want, and relieving pressure on the public finances.

These social enterprises are thriving – their turnover is growing faster than other SMEs, they are creating jobs faster, working more often in poorer areas, and exporting more. They are more commonly led by women, they have more diverse boards and less extreme pay ratios than the FTSE 100. There’s an explosion of start-up social enterprises across the country.

This year we saw the launch of Change Please’s coffee carts (pictured), with homeless people trained as baristas, backed by The Big Issue, Big Issue Invest and the Old Spike Roastery. Two Fingers Brewing has also taken off – the beer brand that gives away all its profits to Prostate Cancer UK.

Elsewhere, community-owned energy has gone through the roof, with ordinary people investing millions of pounds in clean energy, despite the UK Government’s preference for big energy companies, dirty energy production and the new Hinkley Point C nuclear station – reportedly the single most expensive object in history. Our economy is changing, and you can vote social enterprise with your spending power.

These enterprises offer economic security, inspirational leadership, a good story AND change!

Dan Gregory is head of policy at Social Enterprise UK @CommonCapital

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