The idea of running a business that has a strong social mission, is launched from a solid ethical platform, and proudly commits to reinvest profits for the greater good is an attractive proposition. But is it a model for a sustainable business?
You can’t actually add social value if you don’t have a sustainable business in the first place. It’s not just about having good ideas
Despite the growing popularity of social enterprises, UnLtd, a foundation for social entrepreneurs, says one of the biggest challenges to setting up a social business is actually making a living and earning enough money to stay in business for the long run. “Commitment to ethics can make everything more expensive and time consuming,” explains Michelle Wright, founder of Cause4, which helps charitable organisations to change and grow. “It’s not impossible, but running a social enterprise isn’t for anyone looking for an easy life.”
Social enterprises must be inherently sustainable
Mark Sesnan, managing director of GLL, a charitable social enterprise launched in 1993 to take over the running of leisure services in Greenwich and which now operates 250 different facilities around the UK, says: “You have to forsake the idea that you are ever going to make yourself a multi-millionaire. But hopefully you get satisfaction from trying to do the right thing and do it well.”
Mr Sesnan, who has also mentored other social entrepreneurs, believes successful social businesses are built on a solid, sustainable plan. “You can’t actually add social value if you don’t have a sustainable business in the first place,” he says. “It’s not just about having good ideas; it’s also about having a business brain.”
Dr Gabriella Cacciotti, assistant professor of entrepreneurship at Warwick Business School, says the most successful social enterprises are those set up with a very clear goal. “Our research found that social entrepreneurs who started their venture with a very broad sense of purpose, such as ‘I want to change the world’, found it very hard to establish a sustainable business model. “A narrow purpose is much easier to turn into concrete business practices, which are more likely to form a sustainable business model.” Mr Sesnan agrees. “Idealism; there isn’t much room for it really,” he says. “You have to be realistic and practical.”
Social enterprises must think commercially from the start
Last year’s Hidden Revolution, a report by Social Enterprise UK, showed that despite the difficulties, there are more than 100,000 social enterprises contributing £60 billion to the UK economy and employing two million people. It also showed that 47 per cent of social enterprises grew their turnover year on year compared with 34 per cent of small and medium-sized enterprises.
“There’s nothing wrong with making money,” says Neil Woodbridge, chief executive of Thurrock Lifestyle Solutions, a community interest company that delivers adult social care. “It depends on what you do with it and how you’re making it. “The challenges [for social enterprises] are actually the same as for any other business; not-for-profit doesn’t mean you don’t like profit, it means we’re not led by profit.”
Cause4’s Ms Wright says: “The best social enterprises think commercially from the start. They have founders who recognise the principles of business and generating profits for investment are at the heart of the social or charitable proposition.”