The Social Economy

What is a Social Enterprise?

Social enterprises, also known as community enterprises, are businesses (or similar organisations) which operate for the benefit of the community. Like any other businesses, social enterprises generate income through commercial activity, generating income through trading in goods and services. But the difference is that they reinvest their profits to maximise social, community or environmental benefits, and are not driven by the need to maximise profit for owners or shareholders.

A social enterprise is not, strictly speaking, a not-for-profit organisation; rather, it is an organisation which has social benefits as the foundation of its activities, and uses the surplus it generates to further these ends.

The social enterprise sector is a developing and dynamic one. More and more organisations are discovering that taking this route can be a strategy to ensure long-term sustainability in a competitive market economy, as well as a way to deliver their core aims more effectively.

To sum up, the characteristics of a social enterprise are:

Social, community or environmental purpose.

Delivery of social purpose mainly through trading, whether through direct sales to the public or under contract to public or private organisations.

Profit-making, but this is primarily invested in the business or the community, not distributed to shareholders.

Benefits to the Sector

Defines and promotes the needs of local communities
Enables a high proportion of income to circulate within the local community
Creates income, employment and services for disadvantaged people, groups and areas
Contributes to social capital
Draws on volunteers - increasing active citizenship and voluntary donations

Recent local and national studies suggest there are now over 3,000 social enterprises active in Scotland.

(source: SSEC website).

Social Enterprise and the Third Sector

Social enterprises vary greatly. Some work at community level, while others work nationally. Some work in public services, some in commercial markets. Some organisations work only as a social enterprise; in other cases social enterprise is a part of wider activity.

A charity or other voluntary organisation can become a social enterprise. Indeed, new government policy directives have made it essential for voluntary organisations to re-assess the way they fund their activities in terms of long-term sustainability.

Traditional reliance on donations, grants etc. may no longer be enough to secure an organisation’s finances into the future. It is time for Third Sector organisations to leave the ‘comfort zone’ of existing fundraising strategies. For many, social enterprise may be the way forward.

Running a social enterprise involves trading in goods and/or services, and charities and voluntary groups may be unaware they have these to offer. But when an organisation begins to quantify its assets, whether in terms of facilities, buildings, hardware & software, the skills and expertise of staff and volunteers, and many others, it becomes apparent that it does, in fact, have much to offer that can be traded and used to generate income and profit.

CVS Stirling and Social Enterprise

CVS Stirling is developing its information and advice resources to meet the challenges of The Social Economy, and to help members who are considering starting up a social enterprise. Interested organisations should contact us for more on this topic.

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What is The Social Economy?

There are a number of definitions of The Social Economy flying around. The following two are the ones that CVS Stirling find most relevant.

1. In the UK The Social Economy is also called the Third Sector, to distinguish it from the other two sectors of the economy: the public and private sectors.

The Social Economy is composed of:

Social Enterprises
Charities
Voluntary Organisations
Community Groups
Other Not-For-Profit Organisations

Although each type of organisation has a distinct identity, it can overlap with the other types. For instance, the majority of voluntary organisations, so called because of their use of volunteer workforces, are registered charities. Many community groups are charities and also use volunteers. Some social enterprises are community-based, use volunteers and are registered charities.

Source:Understanding social enterprise SEP (GB) ltd 2005. - Gulbenkian Foundation)

2. What is Social Economy?

The whole range of organisations that buy & sell goods and services or compete for contracts, but which do not primarily distribute their profits to shareholders. Their trading activities are undertaken with a clear social aim, and assets are held for the benefit of the community (from Communities Scotland FAQ sheets 2 Social Economy)

Is that the same as ‘social enterprise’

This is difficult to answer since different people use the terms ‘social enterprise’ in different ways. Some people say that all activities that are neither in the private sector nor supported mainly by the public sector add up to a Third ‘social economy’ Sector. This would include both social enterprises that carry out trading activities and wider voluntary sector activities that are supported by fundraising or the work of volunteers. (from Communities Scotland FAQ sheets 2 Social Economy).