Social enterprise and CSI

This is a summary of key points from the CSI forums that Trialogue hosted in Johannesburg (10 November) and Cape Town (12 November).

Overview

Social enterprise (SE) is a fairly new concept, steadily gaining international momentum. While there is an ongoing debate about its exact definition, a SE is broadly understood as an organisation that:

  • seeks to address social issues using sustainable business models
  • is involved in trading activities, with profit always or mainly reinvested into the enterprise
  • converges social and profit missions, to create social value
  • is impact-, rather than profit- driven

South African business and social development sector stakeholders agreed on the following definition:

 A social enterprise’s primary objective is to address social problems through a financially sustainable business model where surpluses (if any) are mainly reinvested for that purpose.

Opportunities

  • South Africa’s challenging socio-economic context, coupled with reduced donor funding, can be viewed as a prime environment in which to inspire innovation that will help NPOs to transform into social enterprises to ensure sustainability.
  • A new generation of young entrepreneurs, who don’t necessarily want to choose between positive social impact and profit-making, are not necessarily attracted to pure non-profit or corporate organisations. Social enterprising presents an ideal hybrid model for such talent.

Challenges

  • An NPO’s transition into a social enterprise is not an easy process, and is dependent on a mind-set shift at a management, board and/or trustee organisational level.
  • South Africa does not have a policy or legal framework that supports the concept of social enterprise.
  • Social enterprises are considered too high-risk to be able to access bank loans and do not meet the set funding criteria to access funding for enterprise development.

Corporate support

Corporates can support SEs in the following ways:

  • Procurement from SEs
  • Financing SEs to scale and replicate their models – corporates can use CSI or ED spend to set up blended funding structures
  • Supporting NPOs in their transition to SEs
  • Supporting skills development

The benefits of supporting SEs include:

  • Reducing NPOs’ dependency on corporate funding
  • Helping corporates to implement responsible exit strategies
  • Helping to ensure that available funding is directed to NPOs that are not in a position to transition into SEs
  • Improving NPOs long-term financial sustainability, thereby helping to ensure that organisation can continue to meet their social impact objectives.

Case studies 

Social Bite sells sandwiches, drinks and other snacks, competing with mainstream companies such as Subway. This social venture allows customers to “pay it forward” by paying for food and drinks for homeless people. One in four staff members were previously homeless.  There are currently four shops, with an aim to establish hundreds, all over the UK. All profits are given to three non-profit organisations located in the UK and abroad, and the founder’s salary is limited to nine times the lowest paid worker’s salary.

Greenpop was first established by Misha Teasdale, together with like-minded individuals, as a campaign aimed at planting 1 000 trees in one month, involving as many people as possible. It has since grown into a fully-fledged enterprise, on a mission to (re)connect people with the planet and each other through reforestation projects, including the planting of indigenous and fruit trees in under-greened schools, crèches and community centres. Drawing on the principles of cause-related marketing, companies and individuals can help greening projects in urban and rural areas by volunteering their time, giving or pledging trees. The enterprise also produces wines and other products, sale proceeds of which are donated to the Stellar Foundation.

About The Social Enterprise Academy

First established in Scotland, in 2004, The Social Enterprise Academy (SEA) is an NPO and social enterprise itself, and is the only specialist learning and development provider that supports the enterprising social sector in South Africa. Hubs opened in South African and Australia in 2012, and hubs will open in China, Malaysia, India and Pakistan in 2016. SEA delivers learning and development to individuals and organisations working for social purpose, in the areas of Leadership, Enterprise, Measuring Social Impact and Personal Development. The Academy works with a number of organisations to tailor-make in-house learning programmes and offers a range of accredited courses through the Institute of Leadership and Management.

Social Investment Scotland, a Scottish impact investment organisation, ran a programme which mobilised funds from Walmart through a plastic bag tax. This money did not need to be repaid and therefore a softer loan product was created which included a one year interest-free period, followed by 5% interest and no security for a six year loan period. £500 000 was raised for NPOs to transform to SEs.

In South Africa, SEA offers a learning programme called “Journey to Social Enterprise” and is currently working with Remgro Limited, supporting NPOs to transition from donor-dependency to income generation.

Key discussion points

  • Since the gap in funding for social enterprises cannot be filled by government, other stakeholders are needed to support this transition in the short and medium term.
  • Since it is not possible to commercialise all services, not all NPOs can become SEs. The key is to ensure that available funding is channelled to the organisations that need it most, and that NPOs that have the potential to commercialise some of their products or services do so.
  • Distance from the market can make it difficult for organisations in deep rural areas to transform into SEs
  • In order to ensure effective involvement, CSI practitioners must understand the concept of social enterprise and be able to ‘sell’ it to their boards, in order to support the transition journey
  • Community trusts can use their funds to set up social enterprises for meaningful impact
  • Social enterprise incubators in South Africa include Alpha Capital and Impact Amplifier. Awethu could also be included, for their work with government on The Jobs Fund.

Way forward for corporates

  • Corporates can raise awareness among the NPOs that they work with about the opportunities to transform into SEs and, where appropriate, can support such transitions
  • Corporates can explore alternative ways of funding the social enterprise sector, for instance by providing an integrated solution that draws from SED and ED budgets.
  • CSI practitioners can influence policy by raising awareness about the social enterprise concept among chief executives and boards
2017-12-04T18:38:29+00:00 November 20th, 2015|CSI|