Scotland Needs a Social Enterprise Economy

Posted: 16 April 2018, in Blog

A version of this article appeared in The Scotsman newspaper on 16/04/18 Taking the ethical route to long-term prosperity


Scotland needs a social enterprise economy

The public profile of social enterprises in Scotland is the highest it’s ever been. Many are now household names. Brands like Street Soccer Scotland, The Big Issue, Social Bite, The Wise Group, Kibble and GHA, alongside the rising stars of credit unions, co-operatives and social housing pioneers.

Social enterprises are independent businesses with a specific social or environmental mission. They trade like any business but invest 100% of profits into their cause. The best way to understand social enterprise is by buying a product or service from one. Businesses like Port Edgar Watersports, Our Power, Shetland Soap Company, Bookdonors and many more.

The most recent statistics, from Census 2017, demonstrate a thriving business community, with growth, resilience and increasing social impact. There are 5,600 social enterprises in Scotland, up from the 5,199 recorded in the first study in 2015. 599 were formed in the last two years and they employ the equivalent of over 81,000 full time workers.

Social enterprises compare well with other parts of the economy. The total annual income of social enterprises is £3.8bn, up from £3.63bn. Total net worth is £5bn, an increase from £3.86bn. The economic contribution (GVA) is £2bn, up from £1.68bn. 34% of all social enterprises are in rural Scotland and 79% sell direct to the public.

When it comes to ethical business practices 72% pay the real Living Wage and the average gap between lowest and highest paid is just 1 to 2.5. 64% of Scotland’s social enterprises are led by women and 70% are led by people in their local community.

Social enterprises are not perfect and there are big challenges. Some use of zero hours contracts reflects insecure work across the wider economy, though the issue is not clear cut. There are profitability and fragility issues in parts of the sector, though financially weak social enterprises often have a big social impact, particularly in remote or rural areas. 50% say they have been negatively affected by the economic climate.

Balancing traded and grant income is ongoing for some (but by no means all) social enterprises. Grants of course allow an organisation to develop their trading capacity. In this context it’s worth noting that the private sector receives taxpayer subsidy for business support, development grants and investment in education, skills and infrastructure, as well as the notorious corporate welfare for big outsourcing companies.

Going forward we don’t want to see social enterprise sitting on the sidelines as a quirky outsider. Robust ethical business values and social enterprise models must eventually become the norm, as we ditch a failed economic model. Unfortunately not much has changed in the business world – legally or culturally – since the financial crash, as frequent corporate scandals demonstrate. Read the business rankings in Ethical Consumer Magazine for the evidence.

It also seems that the business and political establishment are having the same debates with the same old economic narrative. Arguments over GDP that bear no reality to people’s lives, meaningless stats that mask the real job market, failed 1980s privatisation vs. failed 1970s nationalisation, low tax vs. high tax. We should focus on better business and quality of life not numbers on a spreadsheet.

The state of social enterprise in Scotland today is one of strong economic and social impacts and future potential. We need more members of the public to step up and demand ethical business and use consumer power to drive change. Local councils, public bodies and private businesses should use procurement to support the social economy. Entrepreneurs should choose social enterprise over a traditional business model. This can all be achieved with the current enthusiastic support from government and all political parties at Holyrood, as well as positive media influence.

Social enterprise is part of a wider movement towards building a strong, sustainable and localised economy. One that places prosperity above nonsensical growth. From ethical, green businesses to the real Living Wage, flexible working, local currencies, basic income, pay ratios, community owned land and buildings, co-operatives, high street regeneration, tax justice and fair trade – all of these movements have the core aim of bringing long-term economic stability.

It will take a massive shift for all businesses to eventually become ethical social enterprises and build progressive workplaces. But as we implement Scotland’s Social Enterprise Strategy we’ll be able to measure concrete progress in many areas.

We all benefit from the development of our social economy and we can all choose an active part in its success. It’s only by driving forward a social enterprise economy that we’ll achieve genuine wealth creation and long-term prosperity for everyone.