The business world, once driven solely by profit, may be beginning to see how delivering wider benefits to society can also help the balance sheet.
Giles Crosse learns more.
Not for profit businesses and social enterprises were once seen as contradictory. After all, how can you be making the most money if you’re employing volunteers, offering placements, supporting local projects or helping the local environment?
More recently, this perception has begun to change. Wales was among the first countries worldwide to embed an element of social enterprise into its legal constitution.
The Welsh Assembly now has a Social Enterprise Action Plan, launched in February 2009, and this recommends the ‘establishment of a Social Enterprise Coalition for Wales: an organisation to champion the social enterprise sector in Wales.’
‘A social enterprise is a business with primarily social objectives whose surpluses are principally reinvested in the business or in the community, rather than being driven by the need to maximise profit for shareholders and owners.’ explains the Assembly.
Such logic allows businesses to become important parts of the local community, developing projects with schools, employing marginalised members of society, or providing paths back into gainful work to people following spells in prison, or offering help to those with addictions or mental health issues.
It’s not just about social benefit. There’s cash involved too. Wales is a small country, but ‘recent research carried out via the ‘Mapping Social Enterprise Activity in Wales – Understanding in Order to Influence’ report confirms that social enterprise solutions form an important part of a mixed economy.’
‘Researchers identified 3,056 organisations undertaking social enterprise activity in Wales. It is estimated that the size of the social enterprise sector in terms of turnover is £2.2 billion based on Financial Year 07/08 figures. This would suggest that the social enterprise sector contributes approximately 2.6 per cent to the turnover of all enterprises in Wales.’
The Assembly figures also reckon social enterprises account for about 29,000 full time jobs, 20,000 part time jobs and 105,000 volunteering opportunities.
This is where benefits become less easy to quantify in monetary terms alone. Of those 105,000 volunteers, how many will steer a path away from crime, become more interested in safeguarding the environment, or learn skills leading to their later employment? And what is the financial, social and human value of this?
Society’s gain
So could all businesses ever be required or persuaded to include a social element? Is this inevitable? And how long can solely profit driven ventures succeed for?
There are some pretty convincing arguments a shift might happen. The Global Reporting Initiative (GRI) has released a report, ‘High Impact Sectors: the Challenge of Reporting on Climate Change.’
‘The report provides an insight into the degree to which large companies around the world from the 15 most high impact industry sectors have begun to disclose their greenhouse gas (GHG) emissions and their strategies for reduction.’
‘The bad news is that less than half of companies, studied at a global level, disclosed specific climate change related information using GRI indicators in their company’s sustainability reports.’
‘Standards of voluntary corporate climate change disclosures can still be improved, but the climate change policy framework needs to be firmed up considerably to enable this to happen’.
Now imagine an improved framework demanding such reporting. Imagine companies offering placements to teams of local sustainability graduates, giving them work experience delivering such data. Reporting is improved, graduate employability and skillsets are improved, as is ultimately the environment and the company’s CSR record.
And as future businesses will need to adapt to a changing planet and economic model, social elements will help them react more quickly to new landscapes, legislation and challenges.
Teresa Fogelberg, Deputy Chief Executive at GRI, explains: “It is important to consider that while governments spend months and years in climate negotiations, it is companies who are ‘the elephants in the room’”. Perhaps social elements to business might help change this.
“Many of these are large companies from emerging markets such as China, India and South Africa. Companies really are the silent force, and a significant one; of the largest economies in the world, 52 are multinational enterprises and only 47 are nation states. It is therefore vital to monitor what enterprises have done, and what they are doing to measure and reduce their carbon usage.”
Global groundswell
There are other motivations to move towards a different model. Not least among them is the recent financial fiasco; prompting a change to transparency and non profit driven motives, something at which the social sector excels.
‘How do we create a system that is accountable not just to the few, but to the majority? How do we create lasting and equitable change? How do we bring about social, environmental and economic prosperity?’ asks The Social Enterprise Coalition’s ‘Social Enterprise Manifesto’.
‘We should be promoting businesses that operate for more than profit alone; that foster social and environmental innovation; that are ethical in their motivations; and accountable to their employees, consumers, and communities. Social enterprises are such businesses.’
Peter Holbrook, CEO of the Coalition, said: “This is a crucial time for the social enterprise movement, the public demands, and deserves, a fairer and more sustainable economy. Social enterprise can help to achieve this, but we need the right support.”
Business for Social Responsibility (BSR) works across a global network, seeking to embed sustainable business strategies and solutions. It too sees a shift towards more social business practices. It appears environmental, social, and governance (ESG) investment is growing, and with this may come increased opportunities for social enterprise.
“Recent BSR research on ESG integration and on sustainable investing in China reveals that more mainstream investors are using ESG criteria as a predictor of long term, sustainable performance and share price,” said Laura Gitman, Director, Advisory Services, who leads BSR’s financial services practice.
“BSR recommends an approach that incorporates ethical products and services,” she continues, “Whereby companies expand access to financial products while ensuring that these products are truly helping customers,” Social enterprise sounds just right for helping put this in the mix.
“In the long run, companies that increase access by offering ‘ethical’ products and services will ensure more sustainability, as well as payback for the company and the customer,” said Gitman.
Proof of the pudding
There’s evidence a shift in business is happening. ‘In May 2009, Australia based ANZ asked BSR for expertise on expanding its operations in Asia. ANZ sought input on how to develop a new corporate responsibility strategy to align with its business growth strategy, focusing on new target markets in China, Indonesia, and Vietnam.’ says BSR.
For once, it seems the plan wasn’t totally profit focused. ‘After conducting comprehensive stakeholder engagements in these locations, BSR helped ANZ develop a corporate responsibility framework that ANZ launched globally in September 2009, focusing on:
‘Building individual prosperity: using products, services, education, and employment programs to create pathways to security and prosperity. Contributing to thriving communities, developing local capacity to create solutions for important community issues, navigating growth responsibly: demonstrating responsible practices and decisions that balance economic, social, and environmental considerations.’
Banks can be clear leaders in the change towards more social business, as their day to day work involves judging where to invest and the relative benefits of directing cash into and among society.
Over the next few years, how many will follow the ANZ lead?
What are your views? Not sure? Read the resources below for more information. Add your comment below. We welcome your thoughts and proposals. Not a Planetary Citizen? Sign up to Our Future Planet today!
Resources:
Enhance - Business Planning for Nonprofits: Why, When and How It Compares to Strategic Planning
Social Enterprise Coalition: No More Business as Usual: A Social Enterprise Manifesto
CSI Report: New CSI Research Cluster Volunteering revisited
Welsh Assembly Government: Social Enterprise Strategy for Wales 2005
Welsh Assembly Government: The Social Enterprise Action Plan for Wales 2009
NACC: Curricular Guidelines for Undergraduate Study in Nonprofit Leadership, the Nonprofit Sector and Philanthropy
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