Emerging business models offer big challenge to social enterprise

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Duncan Thorp explains the variety of new business models putting people before profit

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27th September 2018 by TFN Guest 0 Comments

While Scottish families struggle to pay their bills and charities seek to operate in a tough marketplace, the corporate world is awash with profits.

The world’s biggest companies recently paid out record dividends as a result of increasing profitability, according to the latest Janus Henderson global dividend index report. Payouts jumped 12.9% per cent year-on-year in the second quarter to $497.4 billion, hitting a new record.

How did our society reach this bizarre point? A society that supports businesses that place profit before people, a corporate model that drives income inequality, squeezes out small businesses, harms the planet and employs powerful lobbyists to get corporate-friendly legislation? There’s something seriously wrong going on.

Fortunately, as many of us know, the viable alternatives already exist. Social enterprise is at the forefront of a wider movement to transform our economy, alongside the real Living Wage, tax justice, fair trade, local currencies, the Scottish Business Pledge and other key initiatives.

Duncan Thorp

Duncan Thorp

Social enterprises are independent businesses that each have a specific mission to tackle a social or environmental issue - and drive all their profits back into their mission. There are currently around 5,600 in Scotland with an economic contribution of around £2bn, providing around 80 thousand jobs, ranging from community co-operatives to housing associations, enterprising charities and more.

However, there are other emerging innovations in business, being driven by new and young entrepreneurs across the world. Ethical businesses, mission-led or values-led business and B Corporations are growing in Scotland and the UK. There are also big businesses that are genuinely committed to transforming their social impact - going beyond public relations and standard Corporate Social Responsibility (CSR).

The B Corporation (the ‘B’ stands for benefit) is a business model new to Scotland that originated in the United States, where it has legal status. In the UK B Lab is the organisation that represents this emerging movement. Scotland CAN B is the newly launched initiative that seeks to develop the model here.

We also have the new Scotland for EO initiative to drive forward the development and influence of employee owned companies across Scotland. Social investors that have traditionally invested only in social enterprises are also venturing into the mission-led business arena. SIS Ventures from Social Investment Scotland is one example, designed for impactful enterprises delivering profit with purpose.

Social enterprise, in all its forms, remains the best model to delivery genuine wealth creation, a sustainable economy and a more equal society. The most democratic and locally accountable ones are the gold standard in many ways.

However, it’s essential that we work in close partnership with those who share the same values. The social enterprise community needs to step up and engage with these new and emerging models or risk being left behind. What counts is positive outcomes for people and planet.

The old economic model doesn’t work and cannot create the wealth that individuals and families need. We need to move away from the dysfunctional corporate economy and focus on building local, inclusive economies instead. Alongside our friends and allies in the new business movements social enterprises can and should be leading the way.

Duncan Thorp is policy and communications manager at Social Enterprise Scotland.