RIP social enterprise?


Do you remember the Big Society bank? Indeed, do you remember the Big Society? There was a great Guardian cartoon a few years ago showing an armed robber going into a branch of the bank saying “this is a Big Society stick-up” to which the teller replies “we don’t have money as such…” and (holding two bags) adds “I’m afraid that all we have is bollocks” to which the robber says “put the bollocks in the bag… and hurry”.

That was pretty much the end of the line for a bank which was going to lend to social enterprises. There’s been a lot of talk about social enterprises being the third way between businesses and charities

but I can’t help wonder if social enterprise is going the same way as the Big Society – being full of the stuff the bank teller offered the robber. Indeed, many people who make a living working in social enterprise investment funds privately tell me they no longer have a credible explanation of the term and yet they sit on millions of pounds that they have raised to back socially responsible businesses.

The problem is that they can’t find enough of them to fit their criteria. Most of the social enterprises I have come across are weak businesses and are driven with the same (and admirable) zeal to improve the lives of the less fortunate that drives conventional charities. They just remodel themselves because they are more likely to get financial backing from these huge funds as government says it has run out of cash to back their projects.

So here’s an unfashionable thought: should we ditch social enterprise as a well-intentioned but ultimately flawed model? This is my thinking: To start with, there is no agreed definition of the term. I remember meeting a well-known businessman who was particularly noted for his aggressive boardroom battles. He gave me his card and underneath his name it said “social entrepreneur”, by which he presumably meant “nice guy” and social entrepreneurs generally are nice people doing nice things.

To most of you, a social enterprise will mean a business that has
a charitable aspect, probably giving away its profits for good causes whether that’s finding work for ex-offenders or the long-term unemployed. So far, so good. But ?most of the ones I have come across don’t actually make any profit.

There used to be a social enterprise restaurant in a fashionable part of London dedicated to hiring apprentices. It was so bad that many people went only once because it sounded like a good thing to support. Over time fewer customers came, so fewer apprentices were trained. Some got laid off while the project’s executives who had a swanky office above the restaurant continued to draw salaries higher than they were paying anyone below until all the money they had raised dried up and they went bust.

Three years ago, the Harvard Business Review published a now famous article called “Shared values”, which argued that many businesses have in the past suffered a terrible reputation for the way in which they largely conducted themselves yet a lot had impressive charitable activities within their portfolio. To paraphrase, the article said that those activities should be taken out of a marginalised CSR practice and brought more into the mainstream corporate culture. Capitalism, it concluded, is and needed to be seen more as a force for good.

If the cynics among you are asking why it should be seen this way, here’s the answer: because it’s good for business. There hasn’t in the past been much evidence for such a claim but reports are coming in thick and fast that businesses which are conducted on ethical bases tend to win more new customers.

A government report published in September found that out of the 2,000 people it surveyed, a third were ashamed of buying from ethically irresponsible business, with an even higher number saying there weren’t enough companies with their values that they could happily buy from. The report concluded wrongly that this made a good case for social enterprises and highlighted a few. Unfortunately the ones cited are largely loss-making.

We should, though, be grateful to the social enterprise movement for highlighting this market opportunity and now real businesses can more credibly own society’s problems and fix them better to everyone’s advantage.

About author

Iqbal Wahhab

Iqbal Wahhab

Iqbal Wahhab is a restaurateur who drives social impacts to the core of his businesses. The founder of The Cinnamon Club and Roast is chair or patron of a variety of social projects and is planning more restaurants this year.

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