A bold step
Can – or should – charities become social enterprises? This was the topic of one of the more lively debates at the recent NCVO annual conference.
The general consensus was that ‘it depends’, but it does appear that charities cannot afford to turn their backs on the potential opportunity.
Last month, Ian Hempseed’s article ‘Open for business’ helpfully explained how charities can run social enterprises and trade for a profit within their objects. So what’s stopping them?
Part of the problem is attitudes to funding. As the recent report from the Social Enterpise Coalition puts it “you try to get a charitable foundation to invest in a social enterprise and you can’t as it doesn’t count as an eligible investment” (Time for Social Enterprise, February 2011). This is rather a sweeping statement as some foundations, such as Esmée Fairbairn, have broadened their repertoire but it does flag the issue of some charities allowing funding availability to drive strategic direction. And by the same count other charities are sensibly asking themselves whether, just because start-up social enterprise funding is available from initiatives like The Big Society Bank, they should be charging off in this direction? In other words, would they be doing it if this ‘encouragement’ did not exist?
The report also suggests that charity trustees are too risk averse to give social enterprise a go. The very thought of having to borrow start-up money which must, at some stage, be repaid is very risky to some of them – especially in a climate where there is less money to go round.Speaking at the NCVO debate, Mind’s Paul Farmer reflected on how, as a child, he found the arrival of his newborn brother “great fun”. But on growing up he said “we began to fight and learned to rub along, had our rows and then I realised actually he had something useful to say and contribute”. As leader of a large charity with a sizeable trading arm he was in a good position to relate this to the sector: “I think sometimes charities have been guilty of treating social enterprises like their little brother”, he said.
It is hardly surprising that the government rather likes the ‘little brother’ and sees social enterprise, with its ‘nothing is impossible’ attitude as the cornerstone of Big Society. There is no question that the funding landscape has changed forever and, as David Carrington put it recently, “Beware the single magic wand – success in funding is usually about assembling a jigsaw of different types of funding from different types of funding sources”.
For trustees, this means keeping an open mind when reviewing what a charity is there to do. And looking hard at how the pursuit of profit can be brought within the overall business model – without damaging public trust or its overall mission.
Author: Clarissa Dann
Clarissa Dann was the editor of Caritas as well as an HR and management online service,he People Bulletin until July 2011.
She is now the editor of the specialist trade finance magazine, Trade and Forfaiting Review which can be viewed at www.tfreview.com but does write on charity finance and investment from time to time.
Clarissa has a background in legal and professional publishing, as well as business journalism and holds an MBA from
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