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Back to busyness: 9 interesting reads on innovation, Brexit and social enterprise

12 Feb

2c5888300bc91e05b7053ce1d8bc53adIt’s been an extremely busy start to the year. I know that saying “I’m busy” is often code for saying “I’m important” but I’m using it in the literal rather than the self-puffery sense. We just had one of our flagship events, the Social Value Summit, with 340 people from across sectors, and have our health conference coming up in early March. Both gone/going well, but logistically stretching. Along with some interesting work with members like HCT and SASC and with councils like Staffordshire and Cheshire & Warrington, a new chair, business planning, Buy Social training with companies, the next State of Social Enterprise (& international versions), advocacy with a (new-ish) government, and the core work of membership recruitment and retention. It definitely feels like we are doing more for less (or more with less people, certainly – I’m thinking of including ‘how many people do you think work at Social Enterprise UK?‘ in our membership survey as a proxy indicator for ‘punching above our weight’). And it’s enjoyable as well as hard work.

It’s also been a very non-London January and February, which is great. So far this year, I’ve been to Birmingham (x2), Bolton, Leatherhead, Liverpool (x2), Oxford, Stafford, and Wolverhampton. Cardiff, Leeds, Middlewich, Plymouth and Totnes all follow before the end of the month. As ever, the benefit of racking up the rail miles is a chance to listen and read interesting material, as well as try and catch up on the emails. So here’s a few things I’ve read recently that I found interesting – well worth making time / train trips for.

  1. Dominic Cummings: How the Brexit referendum was won – Amongst the infuriation you may feel if you voted Remain, there is much of interest in this (long) article from one of the architects of the successful Vote Leave campaign – on the use of digital, on the bubble of Westminster / media, and much more besides
  2. A new paradigm – towards a user-centred social sector – interesting provocation from Tris Lumley at NPC on increasing ownership, engagement and accountability with those normally called ‘beneficiaries’ or ‘service users’ in the social sector. I think it goes a bit far towards the end on the potential of investment to scale specific solutions (language we have heard for years without any evidence any of the approaches has worked), but the point about the disruptive nature and potential of tech is well-made and important.
  3. The Year In Social Enterprise – a 2016 Legislative Review – just as scanning the recruitment pages is often the best way to find out what an organisation is doing / planning, so looking at the realities of what is being brought in in different countries can help document progress of social enterprise. For example, ‘renewed interest in L3C’ isn’t something you hear over here from the US. Likewise, a look at the European Social Enterprise Law Association‘s updates reveals new legislation in Greece, with Bulgaria, Slovakia, Malta, Netherlands, Czech Republic and Estonia also in the process of enacting laws to support social enterprise.
  4. Making Technology Work for the Most Vulnerable – the headline says it all really, and although the article outlines the beginning of thinking rather than any concrete conclusions, this will be one of the key debates of our time. I’ve been thinking a lot about how we define productivity particularly ‘labour productivity’ – it strikes me that we need to invert our thinking on this in the same way that Greyston Bakery does in its famous social enterprise strapline: We don’t hire people to bake cookies; we bake cookies to hire people. Might outputs:outcomes be a more sensible way forward, rather than inputs:outputs?
  5. Why Collaboration Does Not Equal Innovation – a nice piece from Paul Taylor who works at Bromford, a Midlands-based housing association. Although the headline should probably be ‘why short-term collaboration does not equal innovation’ as that is the primary thrust of what he’s saying here. I agree with everything else here. [On which note, you could check out the 2012 SSIR article on how Innovation Is Not the Holy Grail in the social sector]
  6. Why Being Results-Oriented is Actually Bad – I’m not sure about using poker as a benchmark for business, but I like the contrarian view here, and the focus on making good decisions and trusting the process.
  7. Faulty by Design – the state of public sector commissioning (pdf) – not cheery reading, but some good detailed analysis of the fragmentation and barriers to getting more from public services. Unfortunately, it is just an analysis of everything that’s wrong….presumably a follow-up with some solutions is coming!
  8. Reflecting on Millions Learning: Lessons from Teach First’s scaling story – Teach First isn’t everyone’s cup of tea, and I have some doubts about the transfer of the model to social work and policing. But there’s no doubting the scale of its achievement – to become one of the largest graduate recruiters in the UK in 15 years and support over 1 million people. There’s some interesting lessons here from their outgoing CEO Brett Wigdortz on scale: timing, luck, being ready, thinking system-wide, have the right mindset and more.
  9. Industrial strategy and the challenge of inclusive growth – two phrases bandied around a hell of a lot at the moment (in policy wonky, political and media circles): industrial strategy and inclusive growth. For me, this starts to tentatively put some ideas forward on how the two can be sensibly linked, but it’s very tentative and framed within current confines of thinking. There is a lot of think-tank action on these topics, and a lot of analysis – but few looking at those organisations (including social enterprises) which have developed inclusive, growing business models. I find that odd – work to do.

Happy reading.



Current (social enterprise) reading…

30 Aug

It’s been a Gaping-Void-Start-A-Blogwhile since the last post, so I thought I’d cheat a bit and do an update with some links that I hope are of interest (I now use Pocket for this bookmarking, after a recommendation from Toby Blume). I’ve grouped them into arbitrary random themes….happy reading.

Brexit signs:


Technophilia & phobia:


Random miscellany (or ‘other’):

Till next time…




The Future of Doing Good: 7 thoughts

3 Jun

besogoodA couple of weeks back, I attended the Big Lottery Fund’s ‘Future of Doing Good’ event. If you haven’t come across this yet, they are convening and ‘catalysing’ a conversation which aims to step back and think about what the future of doing good looks like – this is important for their own work, but also for the whole of civil society or, even more broadly, society in its entirety. Or as Dawn Austwick, Big Lottery Fund’s CEO puts it on her introductory blog, it’s a chance to think about how we might achieve “a radical rethink of the way people and communities can shape and improve their lives“. They also commissioned a journalist, Sonia Sodha, to do an overview report on the Future of Doing Good as part provocation, part summary, part mapping of some of the main things to think about. I found it a very interesting, if occasionally frustrating read: which may be inevitable when you are trying to cover such a lot of ground in a relatively short report.

 The event itself aimed to continue, expand and grow that conversation. Below are a few of my reflections both on what we heard, and on what I think should be one of the main focuses of work going forward.

Firstly, I should be honest and say it felt incredibly indulgent for me to spend a day away from work just having a conversation – with no clear remit, plan of where it will go, what it might lead to, or whether it would (ultimately) benefit our members. I was glad I was there, but plagued by a constant nagging awareness of the to-do list and the operational realities in what is now a very lean and busy team. I don’t know if others felt the same: what I do know is that this itself demonstrates one of the challenges we currently have – my internal reaction was a microcosm of the current reality: strained (human) resources, an urgent mindset and an increasing divide between those with money and those without: more parochially in this sector as well as in society at large.

Secondly, there was lots of the discussion of relevance to social enterprise – we were given cards with some of the main trends / areas to think about, and these included: creating opportunity from austerity, blurring of organisational boundaries, people driving change, new ways of resourcing, , environmental change, cross-sector working and so on. If this is the future, then social enterprise and entrepreneurship will continue have a significant role – and should be at the centre of people’s thinking, not in the margins or afterthoughts. And that this needs to not be all about individuals – but about networks, about teams, about recruiting great people (millennials, yes, but also those ‘finishing’ their first set of careers at 65 or 70), about investing in better systems, about incentives to collaboration and more.

Thirdly, there was a lot of ‘the future is sector-less‘ chat. As long as we’re ‘mission-led’ it will be OK. Which I go with to a point, but as I said on the day, that blurring of boundaries is being matched by a growth in transparency and actually a growing interest in ownership (and who owns what). It’s fine to say you are mission-led and (plan to) reinvest your profits, as one of the speakers did, but when you can look up their accounts & governing documents before they finish speaking and (if one wished) share that with the world…well, we are operating in a different time: good intentions aren’t good enough. And anyone reading the papers about, to take two topical examples, BHS or Land Registry, might actually think that who owns assets and how they treat them has never been a hotter topic.

Fourthly, I think new technology (is it new anymore?) rightly featured highly: there is little doubt that increasing digitalisation is having a really significant effect on many organisations and programmes (my example above about transparency being one). It’s hugely significant for membership bodies such as SEUK where I work – we now convene, facilitate, broker, advocate, campaign, use data, communicate and promote in totally different ways. But there still seems to be a lot of superficial jargon being lauded over more reasoned, complex thinking. In the last week alone, I’ve read about ‘impact derivatives’ and a ‘refugee impact bond’ – I may not understand either and both may prove wonderful, but I can’t help feeling that, at times, the product name or intervention is coming before any recognised need for it or clear sense of how it will work. Collateralised debt obligations for social value can’t be far away. Karl Wilding and I started the day joking about proposing an ‘uber for charity’ only for ‘uber’ to be the most used word of the day (without any notable reference to the fact that Uber-type platforms arguably entrench inequality, for all that they bring us in convenience & excellent technology).

Fifthly, I was struck by the really interesting conversation about anger – how the original drivers of charity and social entrepreneurs were (are?) anger and injustice, but that now they feel increasingly dissipated by a focus on scale, organisational professionalism and managerial effectiveness. I think there’s truth in that, and there is a challenge to us all to maintain and foster our activist and campaigning edge – the balance between working to change the system from within and from outside, perhaps. It also struck me that, when people were talking about truth to power, the Big Lottery Fund itself is arguably at least as powerful than most government departments now.

Sixthly, it was interesting to listen to a lot of the conversation turn to local systems and place-based change (Immy Kaur from Impact Hub Birmingham was spot on with her thoughts about key leaders across sectors driving change, I thought, as was Diane Coyle saying that system change didn’t happen top-down). I entirely agree: it’s increasingly clear that the mayors of big cities have the most interesting jobs and portfolios and power. And that one of the effects of austerity in central government combined with various pieces of devolution is that Whitehall has diminishing relevance. The most important work we do (such as the Social Enterprise Places programme or our Health & Social Value work) is all with and through local partners, trying to change things in local areas.

But it requires infrastructure, particularly because devolution can actually mean aggregation at regional or city level (as things join up into ever bigger bodies…) – and I was amazed (at least in the conversations I was in) on the lack of discussion about local infrastructure. The sector seems, largely, to have spent nigh-on 7 years analysing the problem in as many different ways as possible without genuinely committing to trying new approaches and solutions (NB – of course not true of all!). We are piloting a whole load of different approaches and joint deals with local networks and partners to try and work out what might sustain us all: what does a lean, local, effective, cross-sectoral infrastructure look like? and how is it resourced? Given the huge need for such networks and organisations with the way things are heading, it should be front and centre for foundations and those thinking about where they put investment. And let’s act not analyse on this one: we know what the problems are, and there are solutions and great examples out there.

Finally, I ended the day in a really interesting conversation about money (who pays) with a range of colleagues from a diverse range of backgrounds (charity, infrastructure, youth, foundations, entrepreneurship etc). It was a more tangible, realistic conversation that covered a lot of interesting ground. For me, the main thing I took away was the ongoing need to maximise the opportunities and value from all of the assets we either have already or can influence now and in future: which means everything from the small charity switching to CafeDirect coffee through to how a foundation manages its endowment; from a big social enterprise providing a standby facility to a smaller peer through to big charities and universities buying social in their supply chain; and from a local council applying social value across all its services to a company using its reserves to invest in new innovation.

It is these last two which for me have to be key elements of the Future of Doing Good. Place-based plans and approaches will only work with significant investment and innovation (in the real, rather than novelty sense) over the long-term in (new) infrastructure. And we will only be able to tackle the problems of the future if we mobilise all our collective assets and resources and skills towards them. That is a future worth trying for, and to start building now.

The First £1.5 billion – and what it tells us

10 Apr

Gritty with quote_1As one (tough) financial year passes, and another (as tough) begins, it feels like a useful time to delve into the sector’s finances more broadly. More specifically, to take a look at Big Society Capital’s report on the Size and Composition of Social Investment in the UK, released a couple of weeks back. (NB – the report was Matt Robinson’s swansong at BSC, as he leaves for international development pastures – he’ll be missed as a clear, reasoned, and principled voice).

The headlines are impressive: £1.5bn worth of social investment (that’s the total value at the end of 2015, not deals done in the past year). Dealflow in the year c. £430m (which is up from the £200m figure reported two or three years back) demonstrating 20% growth or thereabouts. And some evidence of a shift from secured lending to more unsecured lending and different types of products.

[in passing, it is worth mentioning that I enjoyed the “We are confident to a reasonable degree of accuracy (+/- £tens of millions)”, which rather illustrates that the data is still not great. Oh for that margin of error….]

There is much else of interest in the report, not least the fact that this total is dwarfed by about £9bn in bonds and bank loans to charities and social enterprises, not to mention a further £59bn or so if housing associations are taken into account. An alternative version of the report could be titled “Social investment: putting it in perspective”, as some have argued for some time. Nevertheless, there are some signs of progress, and they should be welcomed.

I liked the definitional / segmentation approach too, as best demonstrated by these two diagrams:

BSC Segmentation 1 BSC Segmentation 2

This approach to thinking more clearly about social investment and the terms we use (impact investment, ethical investment, positive investment) is a useful contribution; it also came up recently at the release of some new analysis of social investment research by Jess Daggers and Alex Nicholls – also well worth a look – as well as in the Alternative Commission report. This segmentation of what we mean when we talk about different things seems increasingly important to me where social investment is concerned: so much of the heat and light and baby-bathwater debate flows from misunderstandings, often between (potential) investors and investees.

The percentages table on page 9 is where it gets very interesting: this is a breakdown of social investments by proportion / type. Here it is:

BSC Table 1

[The categorisation on the left relates to BSC’s strategy (Social Innovation, Participation, Scale etc). ]

So to draw out a few things here:

  • there does seem to be a bit more unsecured lending going on: this is good news from a social enterprise perspective, as we know this is what a lot of organisations want/need – although we don’t know how much of the 47% lending figure relates to property; when one adds this to 9% in ‘high impact social property’ and whatever might be in the 30% to ‘non-asset locked’, then the figure could still be quite high. Indeed, if one takes the 30% not going to charities and CICs out of the equation (called Profit with Purpose here), even a cautious estimate like the Social bank lending + the high impact social property give you 45% / 70% which would be equivalent to around 65% secured lending. Not the 80% / 90% figures we used to see, but still a significant majority
  • Social Impact Bonds are responsible for 1% of all social investment in the UK. 1%. Even though the report mentions that this could have been double if calculated mid-way through 2015, that would have only taken it (by my maths) to, er, 2%. If data beats opinion, as someone wiser than me once said, then let us hope that due notice is given to this figure – community shares are responsible for 6 times as much; charity bonds 6 times as much (from the same number of investments), unsecured lending 10 times as much etc.
  • Social Investment Tax Relief-related investments are small but there’s been some decent progress in year 1; it will be interesting to see if they can grow as fast as Community Shares, and add to the ‘democratisation’ and ‘retailisation’ of social investment: 353 investments in total for community shares, involving thousands of people.
  • it’s a bit unclear what’s in the 30% at the bottom; in the annex it says this largely includes work by ClearlySo, Triodos (eg. loans to co-operatives), work by Mustard Seed and more – estimated at £462m through 807 investments, £118m dealflow in 2015 through 46 deals. Would be interesting for someone to disaggregate this a bit more, see if there is overlap with some of the sections above and what extent is just companies limited by share and what is social enterprises or co-operatives with pre-CIC or non-ben-com structures etc

I’m sure that the data isn’t perfect, and I’m sure Matt knows that too – indeed, he has some excellent recommendations on how to continue to get better with the data and reporting. More transparent reporting like this will also help eliminate duplicates (eg. with co-investees arranged by a broker) more comprehensively, and also create benchmarks that can allow for better understanding of progress. I’ve learned whilst being in charge of the State of Social Enterprise survey, that improving the data and the questions is an incremental process and one which is best improved by openness (see our report for Access, Prospecting the Future, for example).

So what are the take-aways?
– welcome the evidence of progress, especially with riskier, unsecured lending
– segmentation, segmentation, segmentation
– let’s use data to inform our policies, programmes and practice- let’s be as open about that data as possible (esp. its quality and how to improve it)
– let’s keep this stuff in perspective


Economics, equality and enterprise: recent reading + links

11 May

came_here_to_be_inspiredI’ve been struck recently how very significant trends and evidence seems to pass the social enterprise world: we’ve got our own voluminous waterfall of information, announcements, news, analysis and reports to cope with, so it can be difficult to get time to look at the contextual stuff too. And yet quite a bit of it is very interesting indeed – particularly how, at the same time as social enterprise continues to interrogate its relationship to mainstream capital (often through the vehicle of social investment), that same mainstream capital(ist) system is being questioned quite fundamentally by places like the FT and the IMF and the OECD, and other important initials. So there is a broad theme here of inequality, economics and their relationship to our world. And some other stuff I thought was interesting :0)

– Martin Wolf writes in the FT about how A more equal society will not hinder growth – he bases this on a note from the IMF (pdf) which, to quote Wolf, found that “societies that start off more unequal tend to redistribute more; lower net inequality (post- interventions) drives faster and more durable growth; and redistribution is generally benign in its impact on growth, with negative effects only when taken to extremes”. I think this (and Wolf’s further analysis) is fascinating – in a sense, at the heart of the social enterprise movement is a belief that business can reduce inequality, increase social justice, and help everyone prosper. The IMF might just be backing that up. And the analysis could not be more relevant in the UK where growth headlines don’t tell the full picture.

– There is more on inequality here (via @JeremyANicholls) on the Public Leaders Network: The 2014 budget fails to deal with the deeper issues of inequality in Britain which talks about the OECD pointing out that the austerity implemented may be having good overall economic effects in the short-term (as per growth headlines mentioned above) but be storing up trouble and cost in the medium to long-term.

– Stephen Miller, Senior Researcher at UnLtd, has been taking a look at neolilberalism and social enterprise on his blog. It explores the relationship of civil society and the social sector to business paradigms, and what effect the current financial / economic climate might have on social enterprise, social entrepreneurs, charities et al: “Is there a danger that good ideas are left on the roadside because they aren’t in vogue, or because they can’t generate substantial financial return?” and “There is an argument to be made that, actually, the retraction of the State from civil society just displaces dependence, rather than creating more independence”. Well worth reading part 1 too.

– More geekily / narrowly, I was interested to read David Ainsworth’s take in Civil Society on the new Social Investment Tax Relief and how it might play out – he points out that there might be some gift and loan scenarios that make it an exceptionally good deal for lenders….much more so than those getting the investment?

– There’s more good stuff from Martin Wolf on the Astra Zeneca-Pfizer smackdown: Astra Zeneca is more than the investors’ call He discusses how it creates questions about ownership, control and who should make decisions (newsflash: he thinks the employees might have a say….I wonder where that happens more currently? #socent) [via @JohnHitchin]

– Dan Corry’s RSA lecture on How do we drive productivity and innovation in the charity sector? also warrants a read. Some of it is fairly unsurprising ‘impact measurement organisation recommends impact measurement as important’ shocker, but there is some more interesting stuff there too even if (again) it assumes that importing private sector practice and theory is right (creative destruction etc). I think the part about feedback loops (which plays to why stakeholder involvement / accountability is so important) and how little collaboration we see is spot on – we’ve been involved in some really big collaborative projects of late. They are *hard* but also the most important things we are working on. Much else to agree and argue with here…

– Elsewhere, business leads government kicking and screaming into the future. As politicians tread water on the environmental challenges we face (across parties), business takes it seriously because they are thinking further than May 2015 (or indeed, 5 years after that). Latest example? Lloyd’s of London calling on insurers to take climate change into account (via M&S’ Mike Barry: @planamikebarry )

– Meanwhile, this wouldn’t be a blog about economics if it didn’t feature Piketty (review in the Telegraph of his book, Capital), who is so de rigeur as to already be a cliché. Piketty also argues that capitalism as it is leads to inequality, and that the evidence for this is overwhelming. The response from the right I’ve most enjoyed on this has been Janan Ganesh’s call for ‘rational optimism’ and the Conservatives introducing a property tax – an unlikely prospect, perhaps, but interesting reasoning on the way there.

– And then, today, Ha-Joon Chang (of 23 Things They Don’t Tell You About Capitalism fame) returns to a theme he has covered previously: how students are demanding a more plural economics curriculum, and how we should resist anyone saying that economics is a ‘settled science’. And he challenges the ‘economics can analyse everything’ trend we have seen in recent years. Read more in After the crash we need a revolution in economics teaching

– And a final non-economics, non-equality one, but one that will undoubtedly be more useful than the rest, and usable tomorrow! – 7 rules for meeting up. I love these. Now if I could just stick to them….

The right blend: Minsky, Pinsky + Alinsky?

27 Apr

gapingvoid_wisdomIt’s very interesting working at both a type of organisation (a membership body / trade association) and also in a sector (social enterprise) that by their very nature tend to be lightning rods for debate, competing ideas, different expectations (from varied audiences). Trade associations and membership bodies obviously have lots of members of different types with different needs and differing thoughts on a whole range of topics and issues – regardless of best efforts, it is difficult to satisfy all of these at the same time, whether it is the CBI, the FSB, NCVO or our smaller selves at Social Enterprise UK. Social enterprise itself is where socialists meet capitalists, where co-operators meet competitors, and charity meets business – which leads to passionate, important debates about profits, ownership, intention, reporting and much more besides.

All of which poses some questions about what are the best or most successful ways to operate, both individually and organisationally, given that context. This is post-hoc rationalisation, but I think there might be a bit of a blend of things that achieves good results.

1) MINSKY – or the importance of common sense
I was listening to a podcast on the train recently, and it was a programme about an economist called Hyman Minsky (you can listen to the programme here) which discussed how he had largely been forgotten, but rediscovered in the wake of the financial crash – sometime after his death. There is lots of detail out there should you wish to know more about him + his theories (eg this BBC piece), but the crux of it is that he believed that the economic system was inherently unstable and that this could largely be explained by human behaviour at different stages of economic booms. As one economist said about him: “He was much more for getting your hands dirty in the real world. I think Minsky gave us the first sensible overview of capitalism ever, which had warts and all what capitalism is about.

This seems to me (in retrospect) to have been a bit of a thread for me over the last couple of years. First, trying to rely on common sense; second, trying to ensure we are getting our hands dirty rather than relying on assumptions (which has meant a lot more member interaction, and higher quality research); thirdly, being realistic and pragmatic in what can be achieved and what is possible. The mantra has been the oft-repeated ‘under-promise and over-deliver’ – we don’t always succeed on either front, but it’s been underpinning our work and approach.

2) PINSKY – or the importance of (individual) inspiration
Before I got into the disruptive, innovative, paradigm-shifting world of social enterprise (no, me neither), I worked at a small charity that made most of its money from signing publishing deals and selling books. The charity’s founder, an amazing man called Nicholas Albery, had a hundred ideas a day, one of which was about learning poetry by heart – both because it is good for the brain and for the heart, and also because you could be sponsored to do it (learn + recite) and raise money for other causes. This, in turn, led to a book (Poem for the Day) and a follow-up (the creatively-titled Poem for the Day Two) which I co-edited – the royalties still go to charity.

Recently, I found myself diving into some poetry books again, and came across one by Robert Pinsky (himself a pretty inspirational figure) called Samurai Song which speaks to me a bit of resilience, and individual self-reliance: “When I have no means fortune / Is my means. When I have / Nothing, death will be my fortune. // Need is my tactic, detachment / Is my strategy.

I’m not suggesting that everyone should go out and read poetry as part of the working day, but that we all need those beacons of inspiration, either from our past or our present, who give us strength or encouragement to carry on; and who can provide insight that you don’t get in the twelfth meeting of the day or a policy consultation response.

3) ALINSKY – or the importance of community
Of course, if you just hang out on your own reading poetry and being inspired, you’re likely to become insufferable to yourself + others, and even less likely to achieve anything. If there’s one thing that’s important in my job and my organisation, it’s being able to build relationships and work in partnerships and sustain communities of interest.

This is where Saul Alinsky, the godfather of community organising, comes into it. He went through a brief period a couple of years ago when our sector paid attention to his work (largely when Citizens UK’s campaign work started breaking through, and when the government’s community organisers stuff kicked off). But he’s been less talked about recently. I still think his Rules for Radicals bears some reading, even if it is more rooted in direct political activism – after all, despite the pragmatism and realism that’s needed (see 1 above), we are still trying to change things and change the world around us.

I particularly like Rule 10: “The price of a successful attack is a constructive alternative.” This feels to me entirely right: critique by all means, challenge and bust the myths, point out the imperfections…but have a possible answer or alternative ready too. This seems particularly appropriate for social enterprise, but we still see plenty from all sectors content to criticise without suggesting what they would do differently.

And what is underlying Alinsky is the belief that we are stronger together, as a movement or collective, than we are as individuals and individual organisations. Increasingly, I think all our best work (if most complex and sometimes slowest and most challenging) comes in partnership and through partnership.

That mix: of realism and sense; of inspiration and self-reliance; and of constructive partnerships. That’s the blend I’m aiming for at the moment.

[NB – Of course, the more cynical amongst you might just be thinking that I’ve chosen these three because they rhyme (with a nod to my previous poetry days), but you would be wrong. Besides, I could have included Gore Verbinski, David Wallechinsky and Natassja Kinski if it had just been about the rhymes. Next week, a post on William Hague, Martin McCague and Norman MacCaig for Tory cricketing poetry fans]

Trust, social investment, and the real definition debate

25 Nov

mission_drives_the_businessA couple of weeks back, I was on a panel at the Good Deals conference – it was an interesting and informative event, and Matter & Co had done wonders on the pricing (day 1 free, day 2 very reasonable) for social enterprises + charities. As David Floyd has pointed out since, this had some effect, though perhaps not as much as I expected. There is still a divide to be bridged clearly, be it of language, jargon, perception, location or relevance – there just simply weren’t many frontline practitioners there.

The panel I was on was looking at something that is both a hoary old subject and one of increasing current relevance: the definition debate. The premise was that social enterprise as currently defined (mission in governing docs; 50%+ income from trading; 50%+ profits reinvested / gifted to social mission; controlled or owned in interests of social mission; transparent in how it operates / reports impact) is not fit for this ‘brave new world’ of social investment. Primarily, this is based on the assumption that, because most social enterprises can’t give equity, they can’t get access to capital to grow or give investors exits in the same way. Which limits both their potential to scale impact, and the investor appetite and ability to get involved. See James Perry’s (good) recent piece for this argument expanded.

I do think there is a definition debate – but it is not about ‘what is a social enterprise?’ – that’s pretty much agreed; as I’ve pointed out before, there’s very little difference between ourselves, the SE Mark, SENSCOT’s code etc. on this. The definition debate is actually about ‘what is a social venture?’ or ‘what is a social business?’ I asked this at the event, and got no answers – did it mean they were companies limited by shares, but with their social mission in their governing documents? Did it mean they had committed to operating ethically and transparently reporting their social impact? Did it mean they had committed to giving a proportion of their profits to the mission, rather than shareholders? It is entirely unclear how they differ from a standard business, apart from in most cases (for now) the ethical values and purpose of the founding social entrepreneur.

This question has led to a discussion about ‘trust engines’ or ‘commitment devices’ which can provide trust to a customer (be they public sector, private sector, social sector) that they are really ‘social’. I also asked at the event if anyone could give me any examples of trust engines or explain what they are – no answer again. I’ve heard differing things – some have told me it’s about mission lock; some about reporting; some about what they do with their profits; some say it’s all three. Interestingly, none of these are anything new (they are all part of the social enterprise definition). Worryingly, one social entrepreneur running a social venture said on video that her ‘trust engine’ was “my personal integrity“; another told us that they would “go to the press” if the investors tried to change their mission. This isn’t encouraging, when these organisations are receiving public money and publicly funded support.

None of this is about social enterprise being ‘better’ than anything else; or necessarily saying that they do all of these things (reporting, reinvestment, operations etc) perfectly. But it is about knowing what we are talking about on the spectrum – blurred lines don’t build trust. If government money and social investment are going to flow to these organisations, rather than social enterprises and charities, should there not be demands on them or standards they have to reach / aspire to? Otherwise, how can we tell them apart from any other business, apart from some nice words? It’s been noticeable that Treasury seems to be going for regulated social sector organisations (namely CICs, BenComms, charities) to qualify for its tax incentive – even companies limited by guarantee (a non-dividend, non-shareholder owned structure) with a social mission enshrined wouldn’t qualify in that scenario. And yet we read articles about how ‘trust engines might be the answer’ to the tax relief? How, when we don’t even know what they are? It’s on a spectrum between baffling and mythical.

There is something even more critical at stake here – social investment wholesalers and intermediaries are under increasing pressure to ‘loosen’ up their criteria so that they can invest in ‘social ventures’ and ‘social businesses’ (no, we still don’t know what they are). In some cases, this is money that has been *explicitly* ringfenced and set aside for investment into social enterprises and charities. And yet, because “the structures don’t work” or because “there isn’t enough pipeline“, we apparently have to widen definitions and broaden the scope. Rather than continue to innovate and improve the financial products to suit social enterprises and charities (who might have chosen those structures for good reasons of governance, transparency, community ownership and much else besides), or work to find ways to reduce rates of return or its price, there is instead a rush to suit the models to the finance. As Nigel Kershaw of Big Issue Invest might say, we are at risk of forgetting that the finance is a tool – it is a means to an end.

Will those making the decisions look back and be saying, “Yes, those hundreds of millions were originally intended for charities and social enterprises, but that proved quite hard, so we decided to open it up to businesses that said they were social. That was a lot easier, although I couldn’t really tell you what they are up to now, or what impact they had. The financial returns were excellent, though.”

It’s a curious state of affairs – we are told that social enterprises can’t achieve scale; but two of our members between them (both charities / companies limited by guarantee) have raised twice as much social investment in external bonds this year than Big Society Capital has got out of its doors in total in its entire existence; the first six-figure investment of a new forthcoming energy-related social investment fund isn’t a company limited by share – it’s a CIC which has successfully raised several million pounds from a wide variety of investors. Community share offers are flourishing up and down the country, largely under-the-radar, quietly achieving great things in local areas through local ownership. Our own Social Investment Deal of the Year nominees demonstrate how social investment can provide appropriate finance to social enterprises and charities who need it – when the financiers have alignment of mission, and when the partners work hard to innovate and develop models that work.

It’s also a curious argument and position to take at a time when public trust in shareholder-owned, profit-maximising organisations is arguably at an all-time low (be that in banking, energy, or public service outsourcing). What we don’t need right now is woolliness and blurriness that confuses and doesn’t build any trust: the opposite is true. We also don’t need to divert money away from charities and social enterprises who badly need it, just because social investment isn’t working as well or as quickly as people might have hoped to start with. If I’ve learned anything in this sector in the last decade and more, it’s that things generally take a lot longer than we think – a little patience wouldn’t go amiss right now; nor would a little robustness and rigour. If the easy path was always the right one, we would all be doing something different.

This also isn’t about ‘purity’ or, as I read recently, being ‘cultist’ about social enterprise, as opposed to being ‘big tent’ (though I’m yet to see the evidence that those proposing social ventures / social business are larger in numbers…). I’d actually welcome a more rigorous definition of social ventures, so that we could more proactively advocate for what they do – they might not be able to join us as members as things stand, but obviously we would be hugely supportive of more businesses locking in social mission, reporting against a triple bottom line. operating ethically and transparently, and so forth…than not. Then you might get to a big tent of social enterprises and social ventures side-by-side, some suited to some areas (eg. NHS / public service delivery where public trust is paramount, so social enterprise is more appropriate) and some to others. Agreeing to disagree in some areas, but broadly aligned on how business itself needs to change in the round. But there is much work to do to get there – and we need to focus on the right definition debate.