Narrowing down social enterprise

New research from the third sector calls for clarity in measuring social enterprise

Social enterprise? What does it mean, and how can it contribute to society?

As the third sector gains increasing attention from politicians, seeking to promote a greater range of organisations to deliver services as part of the 'Big Society' agenda, there is a need to clarify what is meant by 'social enterprise'.

This is the research findings gathered by the Third Sector Research Centre (TSRC), which claims it has found stark differences in the ways social enterprise has been measured.

The report highlights that social enterprises are usually defined as 'organisations that have social aims and trade'. Surveys have tended to identify social enterprises as organisations that earn over 50% of their income from trading, and invest more than 50% of their surplus into social causes, or back into their organisation.

But this loose definition means that different surveys reflect different interpretations of social enterprise. Some have focused on private sector businesses with a social purpose, while others have capture mostly not for profit organisations engaged to some degree in trading.

The number of social enterprises in the UK has been regularly quoted as 62,000. Most of these have been assumed by people working social enterprises to be charities, not for profit companies limited by guarantee and cooperatives, says the research.

As such, the majority of advisory support tends to focus on these organisations rather than the private business sector. Indeed, very few private social businesses are found on the lists of infrastructure bodies and social enterprise networks.

The TSRC analysis shows that 89% of these 62,000 social enterprises are private sector organisations. This figure rises to 96% if it includes enterprises with no employees.

Much of the research has come from the annual small business survey, which takes small businesses as its sample frame, using figures quoted by the last government.

This survey is shown to be dominated by private enterprises (companies limited by share, partnerships and sole proprietors) and is likely to under-represent third sector organisations. Other surveys, on the other hand, have looked at specific elements of civil society, and ignored private enterprises.

By carefully examining existing findings, we are able to get a more accurate picture of the different organisations identified, or self identifying, as social enterprises.

Fergus Lyon, associate director at TSRC said "The challenges in measuring social enterprise in many ways reflect the contradictions within social enterprise itself. What might be considered a social benefit by one person may not be by others, such as sports or social clubs for example.

"Furthermore, surveys have relied on organisations judging whether they consider themselves to be social enterprises. There is evidence that many organisations may reject the term despite meeting the criteria, while others use the term despite failing the criteria. Future research should look at social enterprise activity in all types of organisations and not get stuck on debates of what is and is not a social enterprise. We also need to examine the social impact of enterprises whatever their legal form. "

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