Hidden Social Enterprise

The social enterprise sector has a high weight of expectations on its shoulders.  It is widely seen as the way forward to a post-crisis, sustainable future where business models themselves are designed to create a virtuous circle between economic, social, ethical and environmental performance, sustainable growth and re-investment in responsibility: “good” business in every sense of the word.  No business would want to be unaligned with this agenda as failure to recognise the social or environmental impact can create reputational risks that are potentially very damaging.

The gauntlet has been thrown down to social enterprises to define what this business model is and how it can truly lead to both economic wealth and sustainable value creation simultaneously.  Yet the hard evidence-base is manifestly weak and often grounded in ideology. 

This latest research 'Hidden Social Enterprises' is not based on an ideology and, as is stated at the outset, provides new insights into the sector not least because it was not a piece of work that set out to look at social enterprise in the first instance. Instead, it lets the data itself define what is and isn’t a social enterprise. 

Based on a survey of 2,121 founders of for-profit, growth-oriented mainstream businesses it isolates the entrepreneurs and their businesses who are motivated by primarily “make a difference” goals. It then filters this group into broad social enterprises who also reinvest their surpluses to achieve those goals and pure social enterprises who, in addition to this, do not pay a dividend to shareholders and who have a sales revenue stream that is greater than 25% of their total turnover. 

The research estimates that there are 232,000 broad social enterprises contributing £97bn to the UK economy and 109,371 pure social enterprises contributing £17.7bn.  The entrepreneurs that have set up these businesses have statistically distinctive characteristics – they are more likely to take personal risk, more likely to be motivated by value-drivers and more likely to be innovative and they use, according to the filters used in this approach, social enterprise business models to achieve those goals.

This is a first attempt at measuring the scale of social entrepreneurship in the growth-oriented business population in the UK.  Like any first attempt, it will raise more questions than it answers.  But what it does do is identify within the mainstream, growth-oriented population of businesses and their founders, a substantial group of entrepreneurs who are very different to their mainstream counterparts because of their motivations and goals. They do not self-identify as social entrepreneurs yet use different business models to achieve those goals. Except for the purest social enterprise business models, they have neither lower profitability nor substantially lower “hard” measures of business performance. 

They are the “Hidden Social Entrepreneurs”.  Their estimated contribution to the UK’s sustainable economic growth is estimated to be enormous and by identifying them, we have widened the debate on social entrepreneurship and social enterprise beyond ideology, pre-conception and vested interest.  We have also identified a mechanism for comparing this type of entrepreneur across countries. It is our responsibility now to make sure we increase our understanding of how these businesses grow so that their evident potential can be realised.

You can download a copy of the report here