It’s the buzzword across the community, corporate and government sectors, but what is social enterprise? And are those doing good just do-gooders?
PLAZA Palms was once part of the Cairns Colonial Club Resort. Its 71 units, with steep pitched roofs, are clustered on a large 10,000 square metre property, complete with a resort-style pool, only a few kilometres from the Cairns CBD. By 2010, it had fallen into disrepair and disrepute; it became a backpackers’ hostel, then accommodation of last resort.
“I’ve got numerous stories about people who came to this property and never escaped it – never escaped the system,” says Janet Guthrie, its new proprietor.
When Plaza Palms came on the market, Guthrie and her friend Stuart Wright saw opportunity. Both had worked for more than two decades in Aboriginal health and welfare, for government and for non-profits. They’d had enough. They wanted to risk something different.
“What I see is a very tired and lethargic homelessness sector here in this region. In Cairns, the rate of homelessness has increased,” Guthrie says. “I’m like: ‘Sorry, government, your plan is not working’.”
So, in 2011, Plaza Palms became Three Sistas, a for-profit business dedicated to providing affordable crisis and temporary accommodation. Over 270 people, including 44 kids, now live on site. Almost all of them are Aboriginal or Torres Strait Islanders. Many, Guthrie says, are people “regurgitated through the system”, or mob from Cape York, who’ve come down for hospital appointments “and get trapped here for a number of reasons”.
There’s a café, a convenience store, a coin-operated laundry and a heavy emphasis on individual responsibility. A bus service takes kids to school – but it’s a service for which the parents must pay. Tenants are on six-month leases; as part of the deal no alcohol or drugs are allowed on site and visitors mustn’t stay past 10 pm. Three Sistas employs seven people, each of whom had been long-term unemployed.
This year, construction will begin on 20 new units to serve as patient travel accommodation – for that, Three Sistas has partnered with Indigenous health organisations in the Far North.
“We don’t receive any government funding,” Guthrie explains. “We don’t want any, simply because we see what happens to organisations that do. We never want to become complacent. We know we have to work hard everyday to produce income to keep our model alive.”
Three Sistas is a social enterprise.
It’s one of a growing movement. At a time when corporate capitalism roars as the engine of catastrophic inequality and environmental degradation, social enterprise has moved beyond buzzword to great hope. Here’s an answer for our throbbing mess: business for good.
“Social entrepreneurs are not content just to give a fish or teach how to fish,” said Bill Drayton, social entrepreneur, academic and founder of the Ashoka Foundation. “They will not rest until they have revolutionised the fishing industry.”
Drayton, an American, did more than anyone to popularise the concept throughout the 1980s and ’90s, and his is one of the most cited quotes about social enterprise. But his choice of analogy prompts reflection, for aren’t the oceans already overfished? And in whose interests would a revolution be – the industry or the people? Can it be both?
Jo Barraket had been an environmental activist until, in the early 1990s, cooperatives caught her interest – self-funded, they seemed better able to pursue their own ends than the grant-driven organisations she’d worked with. Later, Barraket switched to academia and wrote her PhD on the social and political dimensions of the cooperative movement. She describes coops as “the original form of social enterprise: they’re member-owned businesses that exist to meet some unmet need”.
So began Barraket’s “research fascination” with all kinds of social enterprise. She emphasises, however, that she’s not a wide-eyed advocate. “Just like any other citizen, I think some forms of social enterprise are fantastic, and some are frankly not my cup of tea. I do think that needs to be acknowledged.”
She waited ten years for the sector to collect some information about itself; until, impatient with waiting, she did it herself. The research, conducted in 2010 with Social Traders, suggested there were about 20,000 social enterprises in Australia, working in every industry of the economy.
Professor Barraket, now director of Swinburne University’s Centre for Social Impact, is updating that study. While it’s too early to interpret the data, she will venture that “social enterprise is alive and well”.
But – ahem – what exactly is a social enterprise?
It’s a matter of debate. British social enterprise expert David Floyd cites folklore that Londoners are never more than six feet away from a rat. Likewise, he says, at a social enterprise conference you’re never more than six minutes away from “the social enterprise definition debate”.
Prompted by her Australian research, Professor Barraket adopted a big tent approach: social enterprises are organisations that exist to serve a public benefit, trade to do so, and plough a substantial part of their profit or surplus into fulfilling their mission. That might include charity op shops, community-owned wind farms, or cafes waited by refugees; fair trade chocolatiers, healthcare cooperatives, or recycling businesses staffed by people with disabilities.
She notes that her interpretation is broad enough to include Sanitarium, the large food company wholly owned by the Seventh-day Adventist Church.
“Just being a social enterprise does not indicate that it’s more socially progressive than the thing next door,” Barraket says. “One person’s social purpose might be seen by another as quite regressive, depending on what their values are.”
The Big Issue – which is one of Australia’s best known social enterprises – employs a stricter definition: social enterprises should be not-for-profit and create work for marginalised people.
“There can only be one first principle – either shareholder return, or social benefit,” explains The Big Issue’s CEO Stephen Persson. “We all know businesses that will jettison environmental, social, or employment outcomes to ensure they deliver the profits that are expected.
“Our first obligation is not to make more and more profit, but to deliver a social return – and not go broke in the process,” Persson says.
The Skoll Centre for Social Entrepreneurship, based at Oxford University, takes another line. It holds a torch for the entrepreneurs, not the enterprise. Its director, Dr Pamela Hartigan, is adamant that the two are different. A social entrepreneur pursues transformational change. A social enterprise may or may not; it could just chase money to support a charity’s existing programs.
Recently, Floyd, the British social enterprise blogger, has written that the definition debate has migrated upstream, to the academics and investors. Practitioners are too busy trying to keep their businesses afloat. But by anyone’s definition, more people are trying – and talking about – social enterprise.
Professor Barraket links its popularity to the rise of ethical consumption and the desire, especially among younger people, for workplaces where you don’t have to check your values at the office door. Social enterprises have also been “manufactured” by governments, she says, as they shift to market models of governing: outsourcing and devolving services to private providers. Traditional charities, too, are seeking new ways to secure their funding.
“We’re experiencing a contraction of resources relative to social demands in most societies in a complex world,” Barraket says. “That environment lends itself towards new thinking about social interventions and about business models.”
In this territory the role of social enterprise becomes fraught, liable to accusations of complicity in creating the disadvantage it seeks to address. In the UK, Conservative prime minister David Cameron has championed social enterprise as part of his vision for “Big Society”; it’s a key plank in his plan to slash budgets. Local governments’ discretionary spending will fall by two-thirds by 2020, leaving civil society to pick up the slack.
Persson foresees a similar situation in Australia: our aging population means fewer tax dollars will support growing social need. “The government should and will, I hope, always provide these services in part, but the economics will be really challenging. Unless we come up with different methodologies to deliver services sustainably, we’re leaving those people on the margins in a desperate situation,” he says.
As well as supporting street vendors to sell magazines, The Big Issue runs women’s subscription and school talks programs. One of its latest initiatives is The Big Idea, a competition in which university students spend a semester developing a business plan for a social enterprise. This year’s winners, from Central Queensland University, were Angus Hughes, Jessica Kahl and Mattison Rose, engineering students who devised The Shelter Project, flat-pack emergency housing made from pallets.
It’s one of several such incubators, including programs run by the School for Social Entrepreneurs, Impact Academy and Social Traders – where every month, about two-dozen people attend introductory workshops. “The first message we communicate,” explains Mark Daniels, its head of market development, “is that if you’re not prepared to run a small business, which involves worrying about wages and taking a risk, then social enterprise probably isn’t for you.
“People fall in love with the social side, but our key advice would be you’ve got to be really good at business to run one of these.”
His organisation founded the Social Enterprise Awards in 2013, and that year, the prize for “Youth-led Social Enterprise of the Year” went to Thankyou Water, a bottled-water business that devotes its profits to water aid projects. It has expanded into muesli, soaps and hand creams.
For Daniels, Thankyou is the perfect example of scalable commerce. “Now they’re in Coles and Woolworths they’re reinvesting millions every year, because they built a really strong business proposition,” he says.
Bottled-water is popular, but it’s a dubious product, banned in one Australian town, as well as a few schools and campuses. Its production and distribution wastes water and energy; its consequences are more greenhouse gases in the atmosphere and more plastic in the oceans. Consumer advocate Choice estimates that it is almost 2000 times more expensive than tap water.
The business has reverberations, but measuring them makes for a difficult and contested calculus. While it is a brave observer who casts judgement, there is certainly cause for contemplation, not only celebration.
Throughout 2013, the UK’s Economic and Social Research Council coordinated a seminar series called Reconstructing Social Enterprise, presented by experts with “a critical yet sympathetic perspective”.
In the first seminar, Pascal Dey and Chris Steyaert, from the University of St Gallen in Switzerland, called on academics to ditch their “rose-tinted view” and instead, to provoke and intervene: to engage in “myth-busting” about the connection of “social enterprise to system-wide social change or to the sweeping eradication of the intricate problems of our era”; to interrogate failures; to question how social enterprise is used by people in power; to analyse how it contributes to the common good – are market solutions the best way to solve the ills of a market society?
Alan Greig has spent decades investigating and championing all kinds of ways to do business for good. Among other roles, he’s a director of Social Business Australia. With long experience, he’s both enthusiast and cynic.
Social enterprise can be part of the mainstream economy, he says. “It’s not your everyday business of empowering and enriching the individuals who set it up. It’s about empowering and enriching communities.”
As an advocate for cooperatives, and employee- and community-ownership, however, Greig is sceptical of the notion of an entrepreneur as a lone social hero – as in Bill Drayton’s quote about fishing and revolutions. “It attracts a certain kind of determined individual wanting to change the world by ‘doing good’,” he says. “But I’d like to see more emphasis on group enterprises where the focus is more economic – on tackling inequality by using business ownership to share wealth more broadly, for instance.”
Greig is also a member of a working group charged with investigating legal models for social enterprises here and overseas.
In the United States, registered “benefit corporations” have a special legal status recognising that there’s more to their business than the bottom line. There’s a similar model in the UK, called “community interest companies”. Both enshrine the businesses’ social and environmental purposes and guard against mission-creep. In the UK, they can sell shares, but the company can’t be wound up or merged for the personal gain of the shareholders.
“There are massive reforms happening in all the Anglo countries,” Greig says. “Australia is just very backward with these things.”
In October, Three Sistas became a certified ‘B Corp’, a voluntary, international standard for good business practice. There’s no special legal status attached and not all B Corps would be considered social enterprises, but for a fee, you can be assessed for social and environmental performance. Three Sistas’ score placed it the highest in Australia and among the best in the world.
And yet, it has not been received benignly: Guthrie says they’ve been criticised by other service providers, accused of profiteering from poor people. She sought B Corp status to help demonstrate their accountability to their community.
Their enterprise is still young, but Guthrie is ready to offer a verdict: “It works”. From their experiences, she and Wright spied a business opportunity to answer a social question: a way to make a living and a difference.
She believes there’s no contradiction, in their case. In fact, the nature of social enterprise will help it succeed: while government contracts and handouts breed complacency elsewhere, she says, Three Sistas’ tenants are free will vote with their feet. She has to do a good job.
“We’ve got skin in the game. Everything I own is tied up in this business. If this fails for me, there goes my children’s future,” Guthrie says. “It’s a case that it won’t fail, because I can’t allow it to.”
An edited version of this article was published in The Big Issue, No. 476.