The challenge of big business in the social enterprise sector

In 2013, social enterprises are facing numerous challenges. For those working in public sector markets, there is a growing fear that the services they deliver across the UK will shrink, and many forced to considerably scale back their businesses. Social enterprise and charities are being squeezed out of schemes like the work programme and the introduction of the payment by results model is tipping the scales in favour of a small number of large private companies. The ways in which contracts are designed are leaving more modestly sized providers out in the cold.

But it isn’t just the big outsourcing firms adding to the sector’s concerns. More private companies are taking social responsibility in-house and increasingly moving into the social enterprise space, with the likes of Starbucks recently committing to support more than 1,000 new apprentices in the next two years.

Indeed, competing with mega-corporations with pools of cash to invest means social enterprises will need to up their game and become better at demonstrating why small can be better and why they are still best placed to deliver social good through business. It also presents an opportunity for more collaboration between big business and the social sector, giving social enterprises the chance to show CSR managers what it really takes to create truly socially responsible businesses. Social enterprises are guided by a social mission, not a money mission, and profits are reinvested into communities and services, so pound for pound they offer better value for money, with none of it disappearing into dividends. This type of added social benefit is difficult to create through CSR policy alone.

To get this message across, social enterprises must use every tool available. In January, a ground breaking new law came into force: the Social Value Act. It means that public bodies, including local councils, are now required to factor in the social value created in an area when choosing who delivers public services.  Social enterprises have a strong track record of doing this.

Some companies have already cottoned-on to what social enterprises are capable of. Social Enterprise UK is working with PWC, RBS, O2 and Wates to help them get more social enterprises into their supply chains. This is a good example of the trend towards big business looking to deliver social value through their core business (in this instance procurement) rather than CSR programmes.

While there are challenges, there is also a great deal of opportunity on the horizon for social enterprise. Governments have heavily invested in them, new laws support them, and mainstream businesses increasingly want to work and trade with them. But social enterprises must be prepared – they need to exert themselves in the business world, be ready to deliver more public services, be open to working in partnership with big business, and be able to constantly prove the vast social and financial value they bring to the table.

Peter Holbrook is ceo of Social Enterprise UK