The government is over-counting social enterprises

I was interested to read about Charles Leadbeater, speaking at the International Year of the Co-operatives, indicating that too much time was perhaps being spent trying to make the social enterprise/co-operative movement the next big third sector thing. He said: “I think social enterprise is not supposed to be that big. I think it is supposed to have huge influence on the other sectors.”

The social enterprise sector spends a lot of time justifying itself by using the estimate of that there are 68,000 social enterprises. But it doesn’t question, firstly, whether the figure is accurate and, secondly, if it is, what the figure actually shows us.

‘Mapping’ the sector has been notoriously difficult, and it still is (I personally hate this term, being a geographer who was always taught that a map should include a North point and a scale). Original attempts tried to work through a process of elimination –  drawing down information about companies via legal structures and trying to apply a set of criteria gleaned from those that had on-the-ground knowledge. This gave good information about ranges of sectors and regional percentages, but did not give good estimates of numbers, because the methodology supposed high levels of intelligence about local organisations which did not exist and a consistency of application of criteria of what was a social enterprise. It was also incredibly expensive.

Instead, BIS now includes questions in the ONS Annual Business Survey to allow social enterprises to self-identify, given a number of questions about fit of definition, profit share and trading income. At the Social Enterprise Mark Company, we have tried this approach in various guises, but have discovered that most respondents do not have the time, inclination or understanding to answer these questions with any degree of accuracy.

We have discovered a huge level of complexity of hybrid legal and group structure. The question about profit  share is also not easy unless an organisation is a CIC or charity, as it may well vary on an annual basis (many companies are not even making a profit at the moment). We have also discovered that, even with a regulated legal structure, many CICs, for example, are not actively trading. The government also counts those that are gaining income of up to 75 per cent from grants and donations, which begs the question about where the ‘enterprise’ bit actually comes in. This is why the only accurate way of finding this information out is through an independent assessment process.

In counting, we also need to understand what it shows. Are huge increases in numbers of social enterprises actually a good thing, and is that growth sustainable? This government and the last encouraged the wholesale growth of new social enterprises through policy incentives such as externalisations from the public sector and exit strategies from funded regeneration programmes. In many cases, these new organisations might have displaced or competed with existing social enterprises in that local area. Social enterprises are also increasingly merging in order to survive the current economic climate.

Measuring numbers does not say anything about the quality, impact or sustainability of those businesses themselves. The social enterprise mark ensures that this is the case by asking organisations to provide evidence of these aspects.

So is there an answer to the numbers question, given our experiences of applications to the mark? My suspicion is that we should probably cut the numbers in half given (a) the original DTI mapping figure of 15,000 in 2005, (b) the growth of the sector and (c) the experiences we have had in registrations to the mark. But I doubt we will ever really know. What we should be concentrating on is measuring the quality, impact and sustainability of social enterprises that we do know about and help new ones get the best possible start.

Lucy Findlay, managing director, Social Enterprise Mark Company