Frequently asked questions

Overview

1.    What are social enterprises?
2.    What are some examples of social enterprises?
3.    What is the Social Enterprise Coalition?
4.    What is the history of social enterprise?
5.    What data is there on the size and popularity of the social enterprise movement?
6.    In which economic sectors do social enterprises work?
7.    What is the difference between a social enterprise and ethical business?
8.    Why is it important for social enterprises to make a profit?
9.    What legal forms can a social enterprise take?
10. Is my business a social enterprise?
11. Where can I get advice on starting up a social enterprise?
12. How can I learn more/get involved?

1. What are social enterprises?

Social enterprises are businesses trading for social and environmental purposes. Many commercial businesses would consider themselves to have social objectives, but social enterprises are distinctive because their social and/or environmental purpose is absolutely central to what they do - their profits are reinvested to sustain and further their mission for positive change.

2. What are some examples of social enterprises?

The Big Issue, the Eden Project and Jamie Oliver's restaurant Fifteen are examples of social enterprises.

So are award-winners Divine Chocolate,a fair trade chocolate company co-owned by the cocoa farmers cooperative Kuapa Kokoo in Ghana and Women like Us, which connects women with flexible employment.

Social enterprises cover a huge range of industries - Cafedirect is the UK's largest Fairtrade hot drinks company; The Elvis & Kresse Organisation (EaKo) takes industrial waste materials, turns them into stylish luggage and hand bags and donates 50% of the profits to the Fire Fighters Charity; Hill Holt Wood educates at-risk youth in an ancient woodland; Central Surrey Health is a pioneering social enterprise in the health care world that is run by the nursing and therapy teams it employs; Green-works takes office furniture that would have been sent to the landfill and offers it at a large discount to charities and other organisations.

3. What is the Social Enterprise Coalition?

The Social Enterprise Coalition is the UK's national body for social enterprise. Established in 2002, the Coalition represents a wide range of social enterprises, umbrella bodies and networks, with a combined membership reaching more than 10,000 social enterprises.

As the voice for the movement, the Coalition provides a powerful platform for showcasing the benefits of social enterprise while supporting and representing the work of its varied members, influencing national policy and promoting best practice.

4. What is the history of social enterprise?

The pioneers of social enterprise can be traced as far back to the1840s, at least, in Rochdale, where a workers' co-operative was set up to provide high quality affordable food in response to factory conditions that were considered to be exploitative.

In the UK, a resurgence of social enterprise started in the late 1990s with the coming together of different traditions, including co-operatives, community enterprises, enterprising voluntary organisations and other forms of social business.

5. What data is there on the size and popularity of the social enterprise movement?

Government data (the Annual Survey of Small Businesses UK 2005-2007) estimates that there are approximately 62,000 social enterprises in the UK contributing at least £24bn to the economy. Social enterprises are estimated to employ 800,000 people.

The State of Social Enterprise Survey, released November 2009 found that despite the recession, social enterprises are twice as confident of future growth as typical small to medium enterprises (SMEs), with 48% of social enterprises responding positively as opposed to just 24% of SMEs.

Additionally, since the economic downturn began, 56% have increased their turnover from the previous year whilst less than 20% have seen it go down. This is a considerably better performance than SMEs in the UK, where only 28% increased their turnover and 43% saw it go down.

The survey also found that social enterprises challenge the glass ceiling: 26% of social enterprises could be described as ‘women-led' - almost twice as many compared to small businesses (26% compared to 14%). Furthermore, 41.1% of all board members are women, compared to just 11.7% of board members in FTSE 100 companies and 4.9% in AIM-listed companies.

Click here to read the full survey

Other research released by Delta Economics in July 2008 found that:

Almost 1.3 million people consider themselves to be social entrepreneurs, representing a significant part of the UK's labour force.
35% of all entrepreneurs who have been involved in start-up activity for less than three months in the UK are social entrepreneurs.

A YouGov poll released in 2007 found that over 60% of the British public would prefer their local services to be run by a social enterprise - instead of the government, private profit businesses or traditional charity.

That same survey polled 2,000 people and asked them what kind of company they would like to work for. A clear majority, 30%, picked social enterprise, with only 16% of respondents saying they would like to work for a traditional business, 13% choosing a government institution and 13% a traditional charity.

6. In which economic sectors do social enterprises work?

Social enterprises are active in a wide range of industries.

According to a DTI survey in 2005, health and social care services is the largest category of trading activity for social enterprises as it was the principal trading income source for 33% of respondents, followed by education at 15%. Social enterprises are also extremely active in the energy, transport and recycling markets. However a social enterprise can be successful in any market - from an employee-owned bicycle shop to an IT consultancy firm hiring people with Asperger's syndrome.

7. What is the difference between a social enterprise and ethical business?

The two are distinct business models. A social enterprise's main purpose is to fulfil its social and/or environmental goals. This is achieved by reinvesting the majority of the profits back into the business.

An ethical business tries to achieve its financial goals while minimising any negative impact on society or the environment.

8. Why is it important for social enterprises to make a profit?

Social enterprises are businesses. They need to make a profit to compete in the market, to ensure their continued survival and to invest in their social or environmental aims.

For many social enterprises, being sustainable - in every sense of the word - enables them to become more independent and to reduce any dependency on public grants. It also ensures they can continue to help provide a solution for a social or environmental problem.

9. What are the legal structures for social enterprises?

Social enterprises use a wide variety of legal forms including:

Community interest company (CIC) A CIC is a legal form created specifically for social enterprises. It has a social objective that is "regulated" ensuring that the organisation cannot deviate from its social mission and that its assets are protected. For more information on CICs, contact the CIC regulator - http://www.cicregulator.gov.uk/

Industrial and provident society (IPS) This is the usual form for co-operatives and community benefit societies, and is democratically controlled by their members in order to ensure their involvement in the decisions of the business.
Companies limited by guarantee or shares are the most common legal structure for businesses and often considered to be the most flexible, particularly companies limited by shares. While they can ensure they have a social mission written into their Memorandum and Articles of Association, this is not regulated.
Group structures and charitable status Tax is an important consideration for some organisations where the retention of surpluses is essential, particularly if they can't take on equity. In these cases the tax breaks associated with charitable status can be an important factor.

10. Is my business a social enterprise?

If you generate the bulk of your income from trading and use the majority of your profits to further social or environmental goals then your business or charity might be classed as a social enterprise.

To find out more about whether your business is a social enterprise have a look at the Social Enterprise Definitions webpage

11. Where can I get advice on starting up a social enterprise?

Like any other business setting up a social enterprise will often require substantial advice and support. The Coalition has developed a range of publications which will provide you with some information on the legal structure and streams of finance you may want to consider. Visit the Coalition's publications page.

Much of the support available to mainstream business may be relevant to social enterprises starting up, as they often face many of the same barriers. You may want to contact one of the regional social enterprise networks, who have an intimate knowledge of local conditions, and can put you in touch with other local organisations.

It may be also helpful to contact Business Link, who will be able to provide you with business support. You can access the Government's Business Link portal here.

If you are starting up any enterprise it is always good to learn from what other people have achieved. You may want to read some of the case studies on businesses and profiles of social enterprise leaders.

12. How can I learn more / get involved?

There are many ways to get involved:

Contact a social enterprise network in your region, click here for further details

Become a member of the Social Enterprise Coalition

Get in touch - we're always interested to hear your story, and find out new and interesting developments you may be undertaking. Please let us know what you are doing pressoffice@socialenterprise.org.uk