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Many people have heard of social enterprise but are not really sure what is, often believing –  incorrectly – that it is charity or that it does something good in the world but on a small scale. Jordan Finney, Performance Manager in our Civil Department, looks at what social enterprise entails and why it is valuable.

It is perhaps surprising, then, that a recent study estimates that social enterprise in the UK alone employs two million people and contributes £60 billion to the economy. Social enterprises are not charities, although they are often linked to them; they make the majority of their income from selling goods and services, and cannot rely on grants and donations. Ultimately, they are businesses that aim to make profit. It’s what they do with their profits that makes them different.

Society profits when social enterprise profits

Social enterprises have explicit social or environmental aims that benefit society. For example, they might be trying to improve diversity in the workplace or they could even have global goals like improving access to clean drinking water. It is the aims that drive the activity of the business and the way in which they reinvest profits to further those aims. When they profit, society profits.

In the UK, a social enterprise has to reinvest at least 50 per cent of its profits into its aim of making a difference. Transparency is also a core value of these businesses and they tend to proudly communicate what proportion of profit goes to good causes. Sometimes it is as high as 100%.

Reinvesting in the community

The Co-op and the Eden Project are both high-profile, household name social enterprises. The Co-Op reinvests in the local community, as well as co-operatives around the world, while the Eden Project reinvests in education and conservation. The Big Issue is not a charity but another business that relies on profits from sales of magazines and its internet shop to reinvest in programmes targeting homeless employability. Another well-known example is the chocolate company Divine, which is actually owned by the farmers, with profits invested in good causes in the local community.

There are social enterprises in every sector, however, not all of them so high-profile but selling everyday goods and services that we all already spend our money on.  Wildhearts, for example, sells office supplies and services like document storage, as well as having programmes in the UK and internationally that get disadvantaged children better access to education and foster entrepreneurial skills. The company also focuses on gender inequality and period poverty.

Clarity has charitable roots dating back over 150 years. They sell soap products: everything from fancy gifts on the shelves of John Lewis to commercial toilet clear. Their annual sales also create more than 10,000 days of employment for those with disabilities and long-term sickness.

Belu sells water products to individuals and business, while also improving access to clean drinking water for disadvantaged people around the world. All of their profits go to Water Aid, which helps hundreds of thousands of people worldwide. Brewgooder, a craft ale brewery from Edinburgh, are also putting 100% of their profits into clean water charities.

Changing suppliers

Social enterprises are all around and available at the click of a button: there are estimated to be 100,000 in the UK alone. With a little research we could all be making more socially responsible choices and using our buying power for the greater good. At Lyons Davidson and File Dynamics, we have recently changed the supplier the HR department uses for gifts to new parents in the companies. From Babies With Love ploughs back all the money it makes into helping orphans and abandoned babies around the world. We’ll also be attending the Wildhearts Global Entrepreneurial Leaders Summit in September in London, where we plan to network and find out more about this vital way of conducting business.

For more information on social enterprise, visit the Social Enterprise UK website or Twitter account. They are a global authority on the subject, as well as the UK largest network promoting the use of social enterprise.

For more information on Lyons Davidson’s commitment to corporate social responsibility, visit the Sustainability section of our website.