SEUK’s Charlie Wigglesworth on why we should be investing in markets not impact

Much of the discussion and work in this sector focuses on impact. This isn’t entirely surprising: the raison d’être of any social enterprise is to make a positive difference. It means that much of the support and investment available to the sector is aligned to this – how we improve impact measurement, or how we benefit specific groups (such as homeless people or ex-offenders) or localities (for example, through place-based initiatives or community programmes).

But there’s a fundamental issue. Social enterprises are businesses who rely on markets to achieve their impact. By aligning funding, support and investment to social issues, the only market is the state, as only governments will pay for a reduction in homelessness, reoffending, etc. Yet the public sector commissioning and procurement landscape is as challenging as it’s ever been. Isolated gestures such as recent government pledge of £100 million against homelessness, or talk of ending austerity, are all well and good. But they do little to calm the fears of most social enterprise providers around their capacity to grow in the public sector.

As always, social enterprises themselves offer a solution to this growth challenge – because they don’t have to rely on the markets, nor on public money, to pay for the services they are delivering. Change Please can tackle homelessness by flogging coffee, Connection Crew can do it through putting on events, Brigade can do it by dishing up lunch. None of these services is being offered to homeless people, nor is the state paying for them. So, to increase impact, we need to increase the ability of these and many thousands more outstanding enterprises to win more business, wherever that may be. And critically, we need to enable this in markets beyond the public sector to diversify and grow revenues. Doing this means creating the impact we’re all seeking in the first place.

This approach has been at the heart of Social Enterprise UK’s market-building strategy for some time. The Buy Social brand and campaigns such as Social Saturday have aimed to engage consumers, while the Buy Social Corporate Challenge is building demand among big business. To date, this has been principally focused on demand-side activity – our theory of change being if we encourage enough willing customers, providers will come forward to meet that demand.

But we’ve become increasingly convinced that we need to go further to fully stimulate market activity. Take our B2B work. Our Buy Social Corporate Challenge now has 16 businesses on board who between them spend tens of billions of pounds in the UK. The social enterprise supply chain has the capacity to capture only a very small slice of this. We’ve therefore undertaken a piece of work with FriendlyFires (a consultancy that specialises in corporate and social enterprise collaboration), funded by Access – The Foundation for Social Investment. We’re looking at the spending data of these businesses and identifying significant (£500,000 – £5 million) areas of procurement not yet served by social enterprises. This doesn’t consider areas with the highest barriers to entry (supplying multinationals such as HP or IBM may have to wait!), but it does leave a huge scope for opportunities. The revenue from delivering these business areas effectively represents a multi-billion pound opportunity.

So where next? Take the construction sector. Wates, Amey and Mace are all Buy Social Corporate Challenge partners, and by and large they buy a lot of the same stuff, as do their competitors. There are currently very few social enterprises providing site services, but there’s no reason why there couldn’t be more. This is even more compelling when it solves a business need. There is a dearth of high-quality scaffolding businesses in the UK, for example. Why shouldn’t a social enterprise that makes high-quality scaffolding, also creating thousands of jobs for those furthest from the labour market, step in? Imagine if we then multiply that for the rest of the construction supply chain, and then consider more categories like facilities, learning and development, business support and so on.

So the challenge is this – how do we get social investors, support organisations and entrepreneurs to unite behind solving business problems? We think three things are needed:

  1. Align money to markets. The social investment market needs to understand that impact-themed funds are for charities. Social enterprises want, and need, funds that are aligned to their business models as these will allow them to grow (and therefore have impact). So let’s have a construction fund or a fast moving consumer goods accelerator, rather than (yet another) place-based fund.
  2. Be ambitious. Let’s consider mergers and acquisitions, including buying and converting private businesses, to create the scale we need. Let’s look at how large social enterprises can diversify from public to private sector markets that offer greater opportunity. The business demand is there, it just needs the supply and the impact model to leverage it.
  3. Co-create solutions. Let’s work with the businesses who are actually doing the buying to create solutions that really work for them. This shouldn’t be about the commercial sector doing the social enterprise market a favour, it should be how the social enterprise market can solve genuine business problems.

There is a multi-billion pound opportunity in the UK for social enterprises who can deliver effectively at scale to willing buyers among B2B markets. It’s now the responsibility of the sector to ensure we capitalise on this – doing so will unlock the social impact we’re all seeking in the first place.

Charlie Wigglesworth is deputy chief executive at Social Enterprise UK

 This blog originally appeared in Pioneers Post