Business phenomenon of the centuryThe Government wants social enterprises to run public services in an outsourced welfare state. But arethey serious? If not,big business will get the cream and Tony Blair’s planned legacy could be destroyedNick Mathiason

The UK is on the cusp of a revolutionevery bit as far reaching as the privati-sation of nationalised industries underMargaret Thatcher. Who provides publicservices and how the public consumesthem is to fundamentally change.

This agenda won’t die with TonyBlair’s premiership. The foundations ofcentrally funded, locally managed ser-vices have been dug up over 20 yearswith the introduction of internal mar-kets and the public finance initiative.The structures have been condemned –the question is what replaces them.

The public, and much of the Labourparty, are suspicious, if not downrighthostile, to the idea of mainstream busi-ness sucking cash out of services under-pinned by taxpayers money. The story ofthe private finance initiative serves asa stark warning. New facilities, fundedby what amounts to a hire purchasescheme, are hugely expensive and oftenpoorly designed.

In recent months, politicians acrossthe spectrum have begun to suggest thatsocial enterprises – businesses with asocial or environmental mission whichtend to be employee-owned, communitybased and plough profits back into theircore businesses – together with largecharities with a similar structure, willplay a part in delivering key services.

If a place can be found for these socialenterprises to run medical centres, offertherapies, place in work those on inca-pacity benefit and run probation ser-vices, then maybe the opposition towide-ranging reform can be mitigated.

The Labour party manifesto pledgedto remove barriers to their expansion.Champions of the sector within govern-ment include health secretary PatriciaHewitt and environment secretary Mar-garet Beckett. Ed Balls, one of GordonBrown’s most trusted lieutenants, issympathetic to the cause. Conservativeparty leader hopefuls, Davids Cameronand Davis, have in recent weeks regu-larly cited the sector as a way to fosterentrepreneurialism in run-down areas.

This has manifold advantages. Theseso-called social enterprises, locally man-aged and employee-owned, have thepotential to offer a dedication thatbluechip corporates can only dreamabout. They also offer the possibility ofsocial cohesion in neighbourhoods.Social enterprises are heirs to themutual and co-operative society move-ment that sprung up in the 19th century.Throughout the country new mutualsare running nurseries, care for theelderly, waste management and anti-fuelpoverty intiatives.

The example of Greenwich LeisureLimited (GLL) – this year’s winner of theEnterprising Solutions Award backed byThe Observer – proves beyond doubthow social enterprises can deliver on awide scale. GLL has taken a failing ser-vice – sport and leisure provision in acash-strapped inner London borough –and turned it around, increasing rev-enue and customers, and reducing localauthority subsidy, while offering a train-ing to employees who own the businesswhich is second to none. The businesshas grown as other boroughs buy intotheir social cohesion ethos. It now runsmore leisure centres than any otherbusiness in the capital.

GLL is not alone. New Life, a Leices-ter-based construction company, trainslong-term unemployed, and has trans-formed what was one of the most run-down areas in the country into a sought-after district. Hackney CommunityTransport, last year’s Enterprising Solu-tions winner, consistently tops the bestcustomer satisfaction league amongLondon bus companies and is winningcontracts off its mainstream rivals.Today, nurses, therapists and doctorsnumbering several thousand are organ-ising themselves into John Lewis-stylecollectives primed to deliver services intheir local area.

One of Britain’s best kept businesssecrets is out. Until this summer no oneknew how many people were employedby social enterprises. But an economicmapping of social enterprises by theDepartment of Trade and Industry lastJuly showed that the sector makes an

£18bn contribution to the economy,three times the size of agriculture.

Nearly 500,000 are in paid employmentand 200,000 are working voluntarily. Asubstantial majority of social enter-prises make most of their income fromtrading, and 50 per cent are located indisadvantaged areas.

Thanks to a new company legal form,the community interest company, socialenterprises can now use assets to borrowagainst. Access to finance is easier. Shareissues to outside investors are not uncom-mon. In fact, annual returns from sharesin projects run by Baywind – a renew-able energy community-based enter-prise – approach a healthy six per cent.

Yet it remains unclear whether thesesocial enterprises will play a meaningfulrole in providing key public services in areformed welfare state, or whether bigbusiness will get the cream?

The problem is that despite the hypeand headlines, civil servants and localgovernment officials have little under-standing of the sector and less desire to

hand over contracts worth hundreds ofmillions of pounds. Many sector leadersare warn that unless procurement ruleschange to force local authorities to con-sider social enterprises, then big busi-ness will scoop up most of the contracts.

Behind the scenes, among charities,there are seismic changes afoot. Three ofthe UK's biggest charities, the Red Cross,the Royal National Institute of the Blind,and the Royal National Institute for theDeaf, have formed a consortium tolaunch an online exchange so those inneed can buy ‘life aids’. The move couldspark a revolution in the way essentialservices are organised. Although it isearly days, those involved in the consor-tium say the new business could even-tually lead to the charities offering fur-ther services and counselling. In effect,they could compete with, and evenreplace, social services.

Meanwhile the government is poisedto hive off all job centres to the privatesector. The Association of Chief Execu-tives of Voluntary Organisations is urg-

ing the Department of Work and Pen-sions to look at how Australia usedsocial enterprises to run much of its jobcentres. The result was a markedincrease in the quality in skills trainingand the placing in jobs of long-termunemployed.

Most of the ambulance service in Sur-rey is to be hived off to a private com-pany specialising in prison manage-ment, immigration centres and courtescort duties. A healthcare entrepreneurhas raised more than £100m from theCity to kick-start plans to build a chainof private hospitals across Englandusing an employee-owned model. A newprison building programme is about tostart taking the number locked up from70,000 today to close to 100,000. Some pri-vate prison operators are keen to hookup with local organisations to run drugtreatment, jobs retraining and probationservices.

Central to the recent education whitepaper is the drive to wrestle control ofschools from local education authoritiesand bring in outsiders to run them. Min-isters appear mindful of the problem.Last month, cares service minister, LiamByrne set up a taskforce to identify howto break down barriers that stop third-sector organisations having a greaterinvolvement in delivering services.

Jonathan Bland, chief executive of theSocial Enterprise Coalition and a mem-ber of the taskforce, said: ‘The govern-ment is very committed to open marketsin public services. But the default optionwill see big business run services unlessthere is intervention. At the moment alot of the thinking has been limitedabout this. People working in govern-ment need to unlock the potential ofsocial enterprise.’

They say social enterprises could bethe business phenomenon of the 21stcentury. Unless the politicians are seri-ous about ensuring quality not-for-profitbased organisations provide key servicesin a reformed welfare state, social enter-prises will be left on the margins. Andthe chances are the standard of hospi-tals, schools and other key institutionswon’t improve.

How Greenwich Leisure,our overall winner, grew tobecome an organisationproviding services to nineLondon boroughs page 3

Creating a splash

Increased demand forfairtrade products drawsinterest from the multi-nationalspage 7

I should cocoa

Produced by The Observer in association with Small Business Service, Natwest, Royal Bank of Scotland , DEFRA, SocialEnterprise , SAID Oxford Business, Social Enterprise Coalition and England RDA

2 Enterprising SolutionsProfiling the winners of oursocial enterprise awards,featuring the overallwinner Greenwich Leisure

4 Bridging the divide Social enterprise inNorthern Ireland

5 InterviewBaroness Thornton of theSocial Enterprise Coalitionsays the future’s bright

5 Happy returnsCan investors make moneybacking social enterprise?

6 Regional supportHow the RDAs are rallyingto the sector

7 The entrepreneursSuccess stories as told bythree top executives

8 View from the topComment from theminister of state forindustry and the regionsAlun Michael

Inside

Getting the backing oflocal authorities is thenext step in ensuring afuture for SEs page 6

On the buses

Social Enterprise

The Observer Sunday 20 November 2005

What the politicians say

The Labour party manifesto, May 2005We believe that enterprises in the mutual and co-operative sector have an important role to playin the provision of local services,from health to education,from leisure to care for the vulnerable...Its potential for service delivery should be considered on equal terms. We have introduced anew legal form – the Community Interest Company (CIC) – and want to support new enter-prises. As a major stimulus to this sector, central government and local authorities will workwith these ‘social enterprises’ wherever possible. Where services can be provided by mutuals,cooperatives or CICs to the required standard of quality and value for money, they should bepositively encouraged to develop and be included in procurement policies.

David Cameron, Conservative leadership candidateSo just as we said to business leaders in the 1980s,‘Go to our inner cities. Create jobs andwealth and opportunity in Enterprise Zones,’ so we should now say to the voluntary sectorleaders whose solutions are working where the state is failing:‘We'll set up social action zoneswhere we set you free to turn neighbourhoods around.’There is a new generation of socialentrepreneurs tackling this country's most profound social problems.

David Davis, Conservative leadership candidateI will constantly visit schools, charitable projects and neighbourhoods that can teach us howwe overcome today’s great social problems.These visits won’t be mere photo opportunities.They’ll be serious opportunities to learn why Labour has failed and how to learn from Britain’sblossoming army of successful social entrepreneurs.

2 ENTERPRISING SOLUTIONS WINNERS 20 November 2005 The Observer

Breathing new life into a communityA pioneering construction company has transformed a once-deprived area into an attractive neighbourhoodSimon Caulkin

In 2002, ‘Six Streets’, a run-down area ofBraunstone, Leicester, was about to bedemolished. As the most deprived wardin the East Midlands and one of the mostneedy in the country, it was riddled withsocial ills: soaring unemployment andteenage pregnancy, rock-bottom qualifi-cations and expectations, and incometrailing the national average by morethan half.

Now this is no longer the case. In athree-year programme, Newlife Regen-eration Construction, an innovativebuilding firm and pioneering socialenterprise, in collaboration with thecommunity, has transformed the area.Uninhabitable houses have becomeattractive homes.

There is now a waiting list of peoplewanting to move in — inconceivable in2002. Development of a play area, parkand conversion of a derelict factory havehelped turn Six Streets from an area thatpeople couldn’t wait to get out of — ifthey could — into a desirable location tomove to.

It was not just the environment thatwas overhauled. The work directly cre-ated 80 training and 74 employmentopportunities for marginalised hard-to-reach local youngsters. ‘Building tradesare always in demand; and constructionis very well suited to teaching people onthe job who don’t do well in classrooms,’says John Montague, the social entre-preneur who founded and heads the £6mconstruction firm.

At the same time, Newlife has usedthe refurbishment to bequeath the areaa sustainable new locally owned busi-ness of its own. In 2003 the East MidlandsRDA through Social Enterprise EastMidlands gave it funding to set upGround Control, which specialises inground maintenance and training.Ground Control carried out the environ-mental improvements at Six Streets, onthe back of which it has won other localcontracts. The company has seven per-

manent staff and is run by a boardlargely drawn from the local commu-nity. Although the programme has fin-ished, its legacy lives on.

Newlife, which now employs 94 peo-ple, is that rare combination, a smallcontruction firm that is both financiallysound and socially engaged. A classicsocial enterprise, it has used economicopportunity to bring about lasting socialchange to an area in need of both. It haschallenged attitudes by employingwomen on building sites (albeit two) andtraining those often thought to beuntrainable. Increases in employment,skills and income have fed through intoconfidence, engagement and raisedexpectations; development of the com-munity areas has helped to strengthenand extend local networks that in thepast barely existed. In particular, saysMontague, the initiatives have drawn inotherwise alienated young people andgiven them hope for the future.

Newlife emerged in 1999 from Mon-tague’s conviction that economic andsocial viability weren’t enemies butwent together. As a career constructionmanager at John Mowlem, working withLeicester Housing Association, Mon-tague was frustrated that his job wasn’tabout people any more (everything wassubcontracted), but about numbers. InLeicester he could see that ‘there werecommunities in need, councils spendingmoney, and a huge requirement for edu-cation and training – why didn’t we joinit all up?’ says Montague.

The opportunity to do just thatoccurred in a conversation with thechair of Leicester Housing Association.It struck both of them that maintaining the association’s properties provided avehicle for doing much more than refur-bishing: it could add social value byemploying and equipping local peoplewith qualifications for life, kick-startingcommunity enterprise, maximising localincome, and helping to bridge the crip-pling gap between hopes and expecta-tions. Regeneration, in short, in thefullest meaning of the word.

Newlife’s subsequent growth owes adebt to the bold decision of the housingassociation to get the idea off the groundwith an initial £1m contract. By the endof the second year, turnover was up to£5.5m as the company won other con-tracts, a level which it has maintainedwhile steadily building employee/traineenumbers from 15, in the second year, totoday’s 94. Of these, half are youngstersbetween the ages of 16 and 24.

So far, Montague says, Newlife hasemployed and trained 200 local people, ofwhom 100 have moved on, and most ofthose are still employed. It is importantthat they do get qualifications and moveon, Montague points out, to leaveNewlife room to take on new people.

Montague reckons that Newlife hasreached the optimum size in Leicesterfor its dual aims: it is driven by localneeds and its social mission rather thansize. For example, housing refits, ofwhich it does 40-50 a year, are in someways better for its purposes than larger-scale projects, since they provide idealopportunity for employees to learn insmall teams over the end-to-end refur-bishment process, from stripping out topainting and decorating.

However, that doesn’t mean thatNewlife isn’t out to expand, just that itwants to do so by cloning itself in otherlocalities and services rather than getbig. Ground Control and Thorpete, a gasservicing and emergency call-out busi-ness, are two examples of the latter,while the parent company has movedinto consultancy and maintenance ser-vices. The company has also formed aconstruction partnership in Amber, Der-byshire, which aims to develop localbuilding services along the lines thathave proved themselves in Leicester.

‘We can share practice and experienceand gain through joining up on procure-ment: different companies but sharingthe same infrastructure,’ says Mon-tague. The model is proven; expanding itis a matter of identifying more clientswho are interested not in lowest cost‘but true best value’.

Young, gifted and back from the brinkKibble Works turns young,troubled lives around mixing a business nous with a strong sense of community.For many who have spent years in care,it is a last resort and a guiding hand toward full-time workMarijke Peters

For most of the boys sent there, theKibble Education and Care Centre inPaisley is their last hope: a final careplacement after years spent in fosterhomes or other institutions. They comefor a multitude of reasons; some havehistories of violence or inappropriatesexual behaviour, others have been vic-tims of serious sexual or physical abuse.

Andrew, 17, has been in and out ofcare since he was three, and came toKibble a year and a half ago when hisfather could no longer cope with him.Various approaches at Kibble haveenabled Andrew to gain independenceand he is addressing his aggressivebehaviour through counselling, educa-tion, training and employment opportu-nities. ‘The main difference betweenKibble and other places is that every-body is treated the same,’ he says. ‘Theyshow me more respect. At school theydon’t try to treat us as schoolboys, theytreat us as normal boys with problems.’

The centre has made good use of itssocial enterprise status, establishing aseries of small community-based socialenterprises under the umbrella of KibbleWorks. At 16, the boys are offered thechance to become trainees at one ofthese enterprises. The idea is that theyexperience working life at the same timeas gaining useful practical skills andinteracting with the people of Paisley.

Andrew works for the CommunityWarehouse, a Kibble Works enterprisethat provides local people with access togoods at low prices. Next year Andrewwill move to ‘supported caring’ in hishome area where he will start a collegecourse. ‘I never had a lot of indepen-dence,’ he says. ‘I feel more proud ofmyself because I have learnt how to haveindependence and I know the staff cantrust me. They know I’ll be there at thetime I should be.’

Jim Mullan, the enterprise managerfor Kibble Works says the placementshelp the boys to grow up. ‘When theycome here they get a true sense of them-selves as young adults. We have quitehigh expectations of them and there areresponsibilities around their conductand toward those they work with. Forthe most part, the young men who areplaced here pick up the baton and runwith it.’

Kibble was originally conceived as afarm reformatory in 1859 and for manyyears was partly financed by the sale ofproduce grown by the boys living there.This social enterprise ethic was lost asKibble became a council-run centre,underfunded throughout the 1980s andearly 90s. It was relaunched in 1996 whenthe trustees took control back andstarted to turn it into the successful busi-ness it is today.

But functioning as a social enter-prise providing services to councils inScotland required a completely newapproach. ‘We had to move towards pro-

viding what councils needed rather thanwhat they said they needed,’ says chiefexecutive Graham Bell. ‘Simply consult-ing councils is not enough. You have todevelop services that people want to buy.’

This mixture of business nous and astrong sense of serving the communityhas helped Kibble survive. Local coun-cils were initially reluctant to takeadvice from Kibble, so it had to showthem how it could fill a gap in care ser-vices and encouraged local authorities todiversify their care provision. Bell says:‘We see part of the job of a social enter-prise is to be innovative in its responseto social need.’

Now Kibble works with most of Scot-land’s local authorities, accepting boys

aged 12-18 for residential and day places.Part of its extraordinary success is dueto the quality of the facilities. There isroom for 63 full-time residents in ninespecially designed units, and care pack-ages are tailored to individuals’ needs.Extra provision is made for vulnerableboys and there is a halfway house forthose who are planning to start theirlives outside the centre.

The majority of boys at Kibble firstcame to the attention of social servicesby the age of seven. Some have been introuble with the police, for petty crimeor more serious criminal activity. Theyinvariably have histories of truancy andmay have little or no contact with theirfamilies. ‘It’s the end of the line,’ says

Mullan. ‘Contact is key, and if social ser-vices can maintain family contact theywill, so Kibble is often the last resort.’

Stephen, 16, has been at Kibble forover three years and currently lives inthe community house which is prepar-ing him for independent living. In a fewweeks he will move into his own flat.‘I’m an inch away from getting out ofhere,’ he says. ‘I wouldn’t have had thischance if I had stayed at home.’

Although he is leaving the centre, hewill keep his job as a joiner at a KibbleWorks enterprise, and hopes to becomeprofessional. ‘Before I moved into KibbleI thought I could do anything I wanted.But as soon as you move in you realiseyou haven’t got everything – you stillneed to get it. You build up things for agood future.’

Kibble has attracted attention from allover the world, and accepts boys fromEngland as well as Scotland. The careprovided at Kibble is not a short-termsolution for their problems; it aims atequipping boys with the skills they willneed in adult life. Boys and staff are onan equal footing, which makes it easierto gain their trust. ‘We are all on first-name terms and there is a very democ-ratic feel to the way things operate here,’says Mullan.

Kibble Works placements offer boysopportunities they don’t have at othercare institutions, and Mullan believes itmakes a big difference. ‘There is a lot ofresponsibility. One of the things we lookat as an outcome is how they respond tobeing given that responsibility.’

‘The spin-off has been that there havebeen educational gains that we hadn’tplanned, that came out of the processthat we have developed here. We seestaggering improvements in basicnumeracy because arithmetic becomesa concrete function in a warehouse.’

Kibble currently employs 300 mem-bers of staff and has a turnover of £10.5million which it hopes to increase to£15m by 2007 with the creation of KibbleSafe Centre, a maximum security unitfor youth offenders and young people atrisk. It’s an ambitious proposal thatrequires Kibble to borrow money for thefirst time, something Bell describes as ‘acommercial risk’ but one worth taking.

The biggest challenge facing Kibble isbalancing its strong social mission witha need for commercial growth. Bellthinks the solution is to stick to what thecompany knows best, which is workingwith young people, and not branch outinto other areas as a conventional busi-ness may do.

Heavy investment in staff over thepast decade means Kibble can blendbusiness and professional skills with itsexpertise in care provision. But perhapsit is the investment in future genera-tions that will ensure Kibble’s continuedsuccess. Bell has not lost sight of who theservice is really for. ‘The benefit of asocial enterprise is that the assets aretied in for the future benefit of society,and nobody can walk away with them.’

Local councils were initiallyreluctant to take advice fromKibble,so it had to show them howit could fill a gap in care services

‘There were communities in need,councils spending money,and ahuge requirement for education – why didn’t we join it all up?’

At Kibble Works, enterprise manager Jim Mullen (right) supervises two trainees Photograph by Ian MacNicol

Six Streets has now been transformed from an area people couldn’t wait to leave into a desirable location Photograph by Allie Day

ENTERPRISING SOLUTIONS WINNERS 3The Observer 20 November 2005

A bigger splashGreenwich Leisure Ltd is this year’s enterprisingsolutions overall winner for achieving business andsocial goals renovating rundown sports centresNick Mathiason

You’d be hard pressed to find a betterbusiness success story. One in whichdynamic entrepreneurialism is success-fully married to meeting social andhealth goals.

It was 13 years ago that leisure centresin the south London borough of Green-wich were run-down, loss-making andfaced closure. Today, the reverse is thecase. In fact Greenwich Leisure Ltd(GLL), the social enterprise that man-ages the centres has become the biggestleisure operator in London with a £45million turnover. Not bad for anemployee-owned company.

GLL has grown its customer baseexponentially by reaching out to all sec-tions of the community – women, ethnicminorities and the elderly using flexiblepricing strategies and targeted commu-nity programmes.

And what’s more, the organisation isa trust where all profits are poured backinto the business. Instead of payingshareholders, GLL money goes to boost-ing investment in staff, ensuring its payand training are probably the best in thesector.

GLL is winning more contracts ascouncils buy into a philosophy that hasproved time and again that it can get itsresidents of all classes, ages, genders andraces taking up new active pursuits on aregular basis. Next year turnover is pro-jected at £50m and it is likely that thebusiness will be running over 50 leisurecentres throughout the capital.

Not only that, councils employingGLL – and nine out of 32 have signed upin London – find it costs less hiring themto run services than any other provider.

Welcome to the world of social enter-prise as practised by GLL, one of themost successful social enterprises inBritain repeatedly beating privatesector rivals to scoop contracts. Andits model is being replicated throughoutthe country.

‘Today it would be unusual not to con-sider a leisure trust as part a procure-ment, but getting there has been a 13-year journey,’ explains GLL’s managingdirector Mark Sesnan in a pokey meet-ing room in his London Bridge satelliteoffice.

The numbers tell the story. BeforeGreenwich transferred its leisure ser-vices to GLL in 1993, the council spent£2.5m running the service and took£2.5m through the tills. Today the 10centres run by GLL in Greenwich take£8.5m through the till and the councilsubsidy is down £1.6m to £900,000.

Out of the borough’s 230,000 residents,80,000 own leisure cards – the highest inthe UK. Of that, 30,000 are entitled tohalf-price discounts thanks to its ‘RobinHood pricing policy’.

GLL offers 16 different price bandsdepending on residency, age and status.For just £4 each week, benefit claimantscan use all facilities within leisure cen-tres.

It employs community developmentofficers who tailor sport and leisure pro-grammes to all sections of the commu-nity, be they young or old, white orbrown. Sport, previously a male, middle-class activity in Greenwich, is now opento everyone.

‘Our strength is to make sure price isnot a barrier to entry,’ said Sesnan. ‘Wework with community groups and with

clubs to get as many people as possible.The cards we issue give us access to theDNA of our customers and that forces usto put on appropriate programmes inconsultation with the centres.’

It’s one thing having an entrepre-neurial dynamism with a social purpose;it’s another meeting the demand of othercouncils who want to buy into the GLLphilosophy.

‘We used to have to tender. Now we’reinvited. But also we’re now a good busi-ness model. Councils want a good ser-vice but they don’t want to provide it. Sowe offer a good solution.’

GLL came into being in 1993 amid acrisis in local government spending.Greenwich council, after years of ratecapping, had to make cuts of £35m fromits £210m budget. The leisure serviceswere a prime candidate for the chop. Butthe decision to transfer the services to aleisure trust was made possible follow-ing the Tory government’s decision toreplace the poll tax with council tax.Business rates were set nationallyrather than locally. Businesses operat-ing as a trust or charity could claim raterelief. This saved Greenwich Leisure,£400,000 in 1993 and was the financiallifeline that enabled it to fly.

Its management led by Sesnan slowlygrew the business throughout theNineties. In the last four years, the mes-sage has got through to other councils,not just in London but increasingly fan-ning out into the home counties. To thisend, a partnership with the LondonDevelopment Agency has provedextremely valuable.

How come local authorities can’t dowhat you do? ‘Most people go into publicservice because they want to do a goodjob. But the system undermines them. Itis wholly bureaucratic. Local authoritiesare not organisations good at deliveringservices if the truth be known. What wetry to do is keep the public service ethosand be much more commercial. With anew facility we can get from decision tocompletion in 12 months. Local govern-ments take two to three years. We dowhat David Lloyd or Fitness First do.This enables us to be much more cus-tomer focused.’

But GLL faces several challenges. Itsbiggest is keeping up with the pace ofexpansion. It currently employs 80 peo-ple in its Woolwich, south east London,hub. But there are another 1,000 workingin leisure centres and 2,500 part-timestaff. Sesnan describes his organisationas now having a long tail. He can’t per-sonally influence how centres are runanymore. Staff have to be captivated bythe vision.

Though this may be easier for GLL.After all, it is structured as an industrialand provident society (the familiar legalvehicle for co-operative and community-based organisations) and is an employee-owned company with staff forming themajority of the board.

‘Clearly there’s an issue of growingtoo fast too soon. But we got to seize the

GLL is riding the wave in nine London boroughs

‘We give 110per cent tothe business’

A company formed seven years agoto provide meaningful employmentto people with learning difficultieshas flourished and diversified,yetremains faithful to its original remitJulian Graff

Martin, 31, operates the till at the Kari-buni Coffee ‘healthy options’ town-cen-tre takeaway with a little more enthusi-asm than your average nine-to-fiveemployee. ‘I used to work in the kitchensbut I prefer this position because I comeinto contact with so many members ofthe public,’ he beams. ‘I handle moneyand get to chat.’

A regular job with a competitivesalary and social satisfaction to boot is abig achievement for Martin, a man withspecial needs and learning difficulties,who a decade ago was drawing benefitsand twiddling his thumbs at a localcouncil daycentre. Today, he’s shed his‘label’ as a disabled person surviving onbenefits and instead is pulling a wageand paying his way as part of an ener-getic, award-winning team powering araft of revenue-generating businesses.

That team is Cope (Community Oppor-tunities for Participation in Enterprise),a ‘model of best practice’ social enter-prise firm formed seven years ago andbased in the Shetland Islands capital of

Lerwick. Currently employing a staff of41 – 11 of whom are disabled – it also pro-vides training for 30 other ‘disadvan-taged’ people in the Islands and in addi-tion offers an outlet for voluntaryworkers to make their mark.

A limited company with registeredcharitable status and receiving grantsand funding from a range of nationaland regional agencies, Cope estimatesthat around 68 per cent of its turnover(£1million in the year to April 2005) isderived from its interlinked enterpriseswhich range from catering to horticul-ture, furniture repair to waste disposal,luxury skincare products to businessconsultancy. The Karibuni Coffee take-away where Martin works is part of thecurrent portfolio. A unit bottling Shet-land spring water is scheduled to comeon-stream early next year.

Although he says Cope’s dynamismstems from its committed staff, it wasfounder and current general managerFrank Millsop’s vision to provide mean-ingful employment for islanders withlearning difficulties that underpinnedthe company’s creation and growth.

‘There was a daycare centre offering

recreational facilities, but no provisionfor vocational skills development or thepromotion of employment opportunitiesfor adults with learning difficulties,’ theformer special needs teacher recalls.

So Millsopp and volunteers helpeddaycentre and other ‘clients’ – of whomMartin was one – to organise their ownsandwich-making facility which earneda reputation for providing quality food.That was 10 years ago. The offspring ofthat enterprise today serves the businesspark housing Cope’s headquarters andhas had contracts to supply the local air-port and secondary college, as well asgrowing an outside catering component.

When his second project – a nurseryfor indigenous trees, coupled with a hor-ticultural training programme for thedisadvantaged – also took off, Millsopphunted down funds, including a five-year capital business grant from theNational Lottery as well as a slice ofNorth Sea oil revenue earmarked forcommunity concerns, and in 1998formed Cope.

In a population of over 22,000 spreadamong the Shetlands’ 15 inhabitedislands, it soon became apparent thatmany more people excluded from pro-ductive employment for one reason oranother could be profitably helped tointegrate into the community.

Thus it was not merely fortuitous thatone Cope idea generated another. Fromthe organic leftovers of the catering firmcame a waste disposal project; the wastewas recycled into compost which fed thegrowth of the nursery and also producedlow-burning fuel logs for sale there.

Similarly, Cope’s furniture recyclingbusiness yielded as a side-product timberfor the construction of hen houses, rab-bit hutches and, soon, flat-packed chil-dren’s playhouses, together with waste

compactors whose eco-friendly designand components are today marketedthroughout Scotland and beyond. A£50,000 contract from the local councilfor the recycling of 80 tonnes of house-hold furniture was yet another by-prod-uct of and stimulus to the business.

However, behind Cope’s example ofentrepreneurial-driven growth remainsthe firm’s commitment to those withspecial needs, including the more pro-foundly handicapped or people withmental health issues.

With its finger on the community’spulse, Cope has identified a ‘spike’ in thenumber of children with difficultiesrelated to autism coming through theeducation system. ‘The number is set todouble in the next 10 years,’ according tothe company, ‘and this drives us to cre-ate new opportunities to provide for theseyoung local people who will require anddeserve special training skills develop-ment in order to lead “normal” lives andto have the prospect of meaningfulemployment.’

Hence Cope is marketing its skills asa social enterprise business consultant,advising and fundraising for an SE cen-

tre on the British dependency of StHelena in the south Atlantic and forgingpilot trading partnerships with firms inItaly and Poland.

Closer to home, the flagship ShetlandSoap offshoot, with outlets in Edin-burgh’s top department store, the Scot-tish Parliament gift shop and its ownshops in Lerwick and Orkney town cen-tres, has grown to contribute 25 per centof the company’s turnover in little overtwo years, helped by internet marketing.

But can Cope really handle expan-sion, achieve its aim of being open to allthe islands’ disadvantaged and at thesame time further reduce its dependencyon grants? A 2004 operating deficit of£25,000 – double that of the previous year– suggests there are limits.

‘We give 110 per cent to the business,says Millsopp. ‘We’ve shown our revenuepotential. But at the same time, we areproviding a much-needed social service.That has to be recognised through on-going support from the local council andagencies. But at the end of the day, wetoo will cope.’

Back at the coffee shop, Martin is justone of many who hope Millsopp is right.

A regular jobwith competitivesalary and socialsatisfaction is anachievement

day. The opportunity to work with coun-cils doesn’t come along very often. Typ-ically they look to let contracts forbetween 10 and 15 years.’

One of the biggest opportunities onthe horizon is the London Olympics inunder seven years. He sees the Olympicsas representing the pinnacle of hiscareer. After all, GLL’s ethos chimes per-fectly with the London bid team’s mes-sage to the International Olympic Com-mittee that the London games is aboutregeneration and community engage-ment.

GLL will be bidding to run Olympicfacilities, but there are concerns. It isunclear how seriously Ken Living-stone’s team recognises social enterpriseas a tool for regeneration.

Sesnan is also worried that whenManchester held the CommonwealthGames three years ago, private sectorfirms were brought in to run the facili-ties.

‘GLL absolutely wants to be consid-ered when contracts are let but morethan that, we can deal with not just the

job itself but the legacy. We operate in allfive Olympic boroughs. We have anambition to operate at least the aquaticcentre. It’s very much our skill set, ourlinks with clubs.’

Other challenges are rising consumerexpectations. Private gyms offer cus-tomers fluffy towels and gleaming facil-ities. It’s the Whiskers syndrome,’ saysSesnan. ‘Give a cat Tesco cat food andit’s happy. Change to Whiskers andthat’s all it will eat.’

Full of customised sayings, Sesnanadds with a wry smile: ‘I keep on sayingwe’re only as good as our last brokenlocker.’

The quality of GLL-managed facilitiescompare well to the private sector. Butto grow, Sesnan knows he has to createa consumer awareness of the socialenterprise model akin to fair tradegoods, in order that the public realisewhen they enter a GLL centre – or anyother social enterprise-run facility – thatthey are investing not only in a qualityorganisation but one that does socialgood as well.

As for the wider sector, Sesnan isguarded. ‘We definitely need to kick-start this. It’s for the government. If wedon’t, then all services will go to the pri-vate sector. The government talks aboutthe mixed economy but it’s not doing it.It needs to come off the fence. All theministers have their heart in it but thecivil servants don’t have any interest init.’

Maybe they should enrol in sometraining at a GLL gym.

Councils find itcosts less hiringGLL to run theirservices thanany otherprovider

Curriculum vitae

Mark Sesnan, GLL managing directorBorn in Darlington, Mark Sesnan, 50, grewup in Edinburgh. He went to college inStaffordshire and became a manager of aleisure centre in Stafford. He then workedin Burntwood near Walsall,a Labour enclavein a Conservative county council that forcedhim, he says,‘to grow up quickly’. Sesnannow earns £90,000 and lives with a long-term partner.

Service users at one of GLL’s gyms

Martin now works front of house at Karibuni Coffee shop: ‘I come into contact with many members of the public. I handle money and get to chat.’ Photograph by John Coutts

4 ENTERPRISING SOLUTIONS WINNERS 20 November 2005 The Observer

‘I lost the plot and thought what am I going to do...?’The story of Daily Bread proves people with learning difficulties can be part of a successful co-operativeBen Flanagan

Daily Bread is a thriving, profitable busi-ness where there are no managerstelling people what to do and all the staffare paid the same. In a small and not par-ticularly attractive industrial estate inCambridge, Daily Bread is a co-operativeselling wholefoods, fair trade, organicand locally produced fare. It started trad-ing in 1991, based on a similar operationin Northampton. Its turnover has grownsteadily each year to almost £1 million.

The first thing that strikes you is theshop’s aroma: herbs, spices, and fragrantsmells from the attached café. But whatthis social enterprise sells is only part ofthe story. What makes it special is theway it is staffed.

Many of the company’s 32 employeeshave a history of mental illness or learn-ing difficulties. Other members of theteam are on hand to provide support;everyone is a ‘warehouse assistant’ andpaid a flat £7 an hour regardless ofresponsibility.

Staff share duties, with all mucking into help in the packing room, serving cus-tomers, or replenishing stock. Somework on the personnel group, drawingup rotas and arranging training. Theonly distinction between staff is thatsome become ‘members’, entitling themto attend business meetings and vote ondecisions.

The company claims to have paid outover £1.4m in salaries and training in itshistory – of which around one quarterwas paid to individuals who would oth-erwise have been institutionalised or onbenefits. It has also donated over £32,000to good causes – from local schools toThird World charities.

Nick Williams has worked at the com-pany for three years. He is its chairman– although, of course, gets paid the sameas the other workers. ‘The beauty of it isthat we allow, and actively encourage,people to take on as much responsibilityas they can,’ he says. ‘Rather than havethem pushing trolleys around a car park,we give them jobs with self-respect.’

Working at Daily Bread helped 56-year old Lyn Briant gain confidenceafter she suffered a personal tragedy.

‘I lost my husband very suddenly. Ireally lost the plot – and ended up in hos-pital,’ she says. ‘I came out and thought‘what am I going to do?’. I’d been out ofthe job market for 30 years – and totallylost my confidence.’

The turnaround came when Lynstarted as a volunteer at Daily Bread in2002. ‘I started tidying the shelves andmaking the tea – it was I all I was capableof doing. But as my confidence grew I

took on more responsibility – I became abuyer, and joined the personnel group.I’ve gone right from the bottom to thetop – if such a thing is possible in a co-operative.’

It’s a supportive environment, saysLyn. ‘Nobody jumps on your back if youmake a mistake – it’s a real place ofencouragement. I dread to think whatwould have happened to me if I’d notfound this place.’

Mark Ashton has an altogether differ-ent background. Two years ago, he left asales job paying £40,000 a year to work atDaily Bread. ‘I got sick of the rat-race. Ithink the reason we’ve succeeded is ourChristian ethos,’ he says – though headds that around a third of staff are notof that faith.

Some may feel that religion shouldbe kept out of such enterprises – thoughemployee Katherine Connell disagrees.‘I’m not a card-carrying Christian,’she says. ‘But I find the Christian princi-ples on which Daily Bread is foundedprovide space for an ethical conductat work.’

Connell adds that the workspace isdesigned around social interaction. ‘Thewarehouse and shop are combined –which means that workers are interact-ing with customers. It’s an organic wayof working.’

However the management structureat Daily Bread does have its downsides.With individual salary increases a no-no,alternative ways to motivate staff mustbe found, such as setting personal tar-gets. One member of staff describes thedecision-making process as ‘a bit longand painful’’.

But the company must be doing some-thing right. In the early days it receivedsome funding through grants and loans– although in the last eight years hasbeen completely funded through trade.This year, Daily Bread has a projectedturnover of £1.13million.

The Tesco up the road may be cheaperbut Daily Bread reports a loyal andgrowing customer base, with many trav-elling relatively long distances to visit.The Ecover detergent range is thebiggest seller; they also stock ‘real’ nap-pies and a range of foods suitable forthose with allergies.

And it’s set to expand nationwide. Inwhat is a vivid vindication of this busi-ness model, the company has embarkedon a licence programme with SocialFirms Ventures UK, whereby the business may be replicated on a fran-chise basis. Expressions of interest havecome from all over the UK, from Scot-land to Ipswich. If this pans out, DailyBread can truly lay claim to be being aguiding light.

Reaching across the divide in NorthernIreland sparks an enterprise revolutionNorthern Ireland’s pioneering Bryson House is redefining business practice with a self-help spirit Henry McDonald

Northeast Ireland’s industrial revolu-tion was launched in the late 19th cen-tury from the river Lagan. Along thatwaterfront, textiles, engineering partsand ships, including the ill-fated Titanic,were sent to every corner of the planet.

In the early 21st century the rivercoursing through the centre of Belfasttowards the Irish Sea is the focal pointfor a new revolution in social economy,where a charitable community organi-sation eschews grant aid and stands onits own two feet instead.

The charity Bryson House is now cen-tral to environmental and social policyin Northern Ireland with a turnover of£12m from recycling, youth services andanti-fuel poverty measures.

It pioneered recycling in Northern Ire-land two decades ago and its waste man-agement programme earned around£1.9m in the year to last April. Its recy-cling team currently holds contractswith several local councils across North-ern Ireland. This includes the largest,Belfast, where Bryson House workersrecycle waste from 25,000 homes in thecity. It has also won yet another contractwith the waste management companyArc21, which in turn recycles waste in11 council areas. The Bryson Houseteams recycle the waste of schools inArmagh, Ballymena, Castlereagh andNewtonabbey. Overall this servicecollected and then processed 6,300tonnes of recyclable material and cur-rently employs 65 people.

And like the hard-nosed capitalistswho created the city’s past industrialmight, Bryson House is now using theLagan as a fundraising resource.

Lagan Watersports provides coursesin canoeing, kayaking, power boatingand sailing for 4,250 children and adultsfrom the deprived working-class areasbased around the river. Working in con-junction with the Irish Amateur RowingAssociation, Bryson House pays for thethree month watersport projects notthrough grants but by unsentimentalbusiness acumen. The charity owns thebuilding where the boats and kayakstake to the water and has rented the topfloor to private and public enterprises.The rent entirely funds the courses forpeople who otherwise couldn’t affordto take part in what were once regarded

as yuppie pursuits. ‘It’s about turning the river into a

social asset again,’ says Bryson House’sco-executive director John McMullan.‘The scheme reflects the philosophy ofour work as we don’t want to be grant-dependent. Bryson House seeks to fundits own projects, and the Lagan Water-sports scheme is very typical of that.’

That dualistic approach of hard-nosedbusiness sell with a social conscienceextends beyond the river Lagan as farwest as across the border in Co Donegal.Bryson House for instance runs a HomeFrom Hospital scheme that has reduced‘bed blocking’ in the local NHS. The 68workers assigned to that particular pro-ject are hired out by local health truststo look after discharged patients.

‘If, for example, an elderly lady whohas had a hip replacement wants toleave hospital early, our Home FromHospital carers can offer her assistance,’McMullan says. ‘They can look after hershopping, housework, transport fromthe hospital and so on. The patient getsto come home if they wish and anotherbadly needed bed is freed up on theNHS.’

The 52-year-old former factory workerhimself personifies the Bryson Houseethos. He joined the charity on an Actionfor Community Employment (ACE)scheme 12 years ago after being maderedundant at a local tyre factory. Whileworking in the early days at BrysonHouse, the charity sponsored him toreturn to education. He eventuallyended up with an MBA from university.

‘What Bryson House did for me, I andcolleagues want to do with others,’McMullan says, ‘We are proactive ininvesting in people. It’s not a slogan on awall for us but a reality every day. Theyhelped me work my way up from theunemployment queue to where I amtoday.’

Paul O’Kane comes from one of theareas that has benefited from BrysonHouse’s Lagan Watersports project. The36-year-old grew up beside the Lagan inthe Markets, an inner city area of Belfastwhich saw its fair share of violence dur-ing the worst days of Northern Ireland’sTroubles. He joined Bryson House sixyears ago and has risen to head repairand maintenance at the organisation’sheadquarters in central Belfast.

‘Bryson House encouraged me to goback and get an education while I was

working with them. They pushed me on,they convinced me to go back and learnand make a fresh start.’

Although based in the sectarian-neutral space of central Belfast, BrysonHouse has satellite organisations dottedall across the city and beyond. Many ofthem, such as its North City Trainingorganisation, a community employmentscheme, are situated along major sectar-ian flashpoints.

‘Whenever there are riots on thenews from the flashpoints of northBelfast you are bound to see our trainingunits in the background. This showsthat we are working to train people up inemployment skills in the most deprived,

Troubles-hit parts of Northern Ireland,’McMullan says.

Despite 35 years of incipient civil war,Bryson House has maintained a balancein its workforce that accurately reflectsthe sectarian demographics of NorthernIreland: the present ratio is 50 per centProtestant, 40 per cent Catholic and 10per cent other, including the new ethnicminorities settling in the Province fromacross the globe.

As well as the river, Bryson House hasalso harnessed the city’s other mainnatural landmark, its mountains, as aresource. It helped establish a consor-tium comprising several other charitiesto protect and preserve the mountain

range that marks the city’s northerngeographic boundary. Again with an eyeto making money as well as protectingthe environment, the consortium isselling the mountains as a touristattraction.

The spirit of self-help and indepen-dence stretches back more than a quar-ter of a century to when the charity’sthen director, the late Peter McLachlan,pioneered a heating scheme to cut downpoor families’ household bills. BrysonHouse’s home installation scheme is stillused to this day by the Northern IrelandHousing Executive to save millions inpublic-owned homes across the mostdeprived parts of Belfast.

Daily Bread’s Nick Williams and Lyn Briant, warehouse assistants in a workplace where parity and social interaction are key Photograph by David Rose

‘Wherever thereare riots on thenews you arebound to see ourtraining units’

Bryson House waste management employees, now numbering 65, are contracted by a clutch of local councils

THE ISSUES 5The Observer 20 November 2005

The government will avoid controversy byoutsourcing to socially aware businessBaroness Thornton of the Social Enterprise Coalition reveals why the sector’s profile is on the riseNeasa MacErlean

The development of the social enterprisesector looks set to change the landscapeof the workplace. These businessescould double in number in the next fewyears to more than 30,000 organisations,according to Baroness Thornton, chairof the Social Enterprise Coalition.

And if they keep employing people attheir present rate, then social enter-prises will have a payroll of over one mil-lion, employing about one in 30 of theUK’s employees. This sector will be amajor beneficiary of the government’soutsourcing plans. On the day that thisinterview took place, the Department ofWork and Pensions was talking about itsplans to outsource 650 Job Centres.

The government knows that contro-versy about such proposals – includingprivatisation of the NHS – will be greatlyreduced if some of the new operatorscome from the voluntary and socialenterprise sector.

Baroness Thornton’s most importantrole in this story is undoubtedly her postat the Social Enterprise Coalition whereshe opens bureaucratic doors, calls onher government contacts, redefines thecapabilities of social enterprises and per-forms the other detailed work of genuinechange rather than lip service.

But the social enterprise culture hasbeen with her since birth and before.‘I come from a working class co-operativetradition,’ she says in one of the fewasides where she is prepared to dwell onherself, rather than on the cause.

Glenys Thornton was enobled in 1998and attends the House of Lords everyday it sits, in her capacity as a Labourand co-operative member. In the pastcouple of years since the coalition waslaunched she has worked behind thescenes on the kinds of schemes whichremove the barriers to change in a worldincreasingly tied up in red tape. Forinstance, she has worked closely withthe Department of Trade and Industry’sSocial Enterprise Unit – set up for athree-year period in 2002 – to acceleratethe development of this sector.

The unit’s achievements might soundbasic but the social enterprise sector wasnot even able to say how big it was untilJuly this year when research from theunit concluded that 15,000 social enter-prises generate £18 billion of turnover byemploying nearly half a million andworking with another 200,000 volun-teers.

Baroness Thornton’s next task is toensure that the unit, now offically at theend of its lifespan, becomes permanentand flourishes. ‘We would anticipatethat it would continue,’ she says. Otherspecific tasks include changing the pro-curement roles of local government tocater better for social enterprises; liais-ing with different central governmentdepartments to see more work commis-sioned out to social enterprises; devel-oping better links with regional devel-

opment authorities and other interestedparties; and encouraging banks to lendto social enterprises just as willinglyas they do to traditional purely profit-motivated businesses.

The procurement issue is a big one fornow. ‘If you want to get real growth insocial enterprises, we’ve got to have aneven playing field,’ she says.

She and the coalition are currently indiscussions with ministers and civil ser-vants at the Office of the Deputy PrimeMinister over issuing new procurementguidelines which would make it easierfor– and perhaps even explicitly encour-age – local government to commissionnot-for-profit organisations. ‘I think weshall see changes over the next year,’ she

says. In her view, the current procure-ment guidelines have sometimes beeninterpreted to exclude social enterprises.

Another development which maysound innocuous is actually crucial. Itis the creation of a new legal entity,community interest companies (CICs).

Established in July this year, CICsenable social enterprises to own or usepublic assets – whether schools, old peo-ple’s homes or swimming pools – but toguarantee that such properties willalways remain in use for the publicbenefit. About 20 CICs have been set upsince the summer.

Another part of the coalition’s jobis to help social enterprises deliver.Whether they are running doctors’ surg-eries, providing Meals on Wheels orgenerating renewable energy, socialenterprises need access to capital andprofessional expertise in order to pro-vide a service as good as any profit-mak-ing business. Baroness Thornton seesthe challenge for the organisationsthemselves as being to meet theexpected future demand: ‘The challengefor social enterprises is to scale upquickly enough.’ Many social enter-prises work in fields where they couldtake on health, education and otherfunctions traditionally provided in theUK by government.

One of the largest social enterprises,the Eaga Partnership, is a former energyefficiency quango and now employs over550 staff in the UK. Another, the Big LifeCompany which was spun out of the BigIssue idea in the north-west, provides

healthcare services including drug reha-biliation. ‘I am very interested to seehow this one works,’ says Thornton.‘They are very entrepreneurial.’ Enter-prises such as these could take ongovernment contracts in the ever-increasing trend for outsourcing.

To help the enterprises meet suchdemands, Thornton and the coalitionstaff have their work cut out. Take theRegional Development Authoritiesbehind Business Link and other busi-ness support. ‘They’re providing theright sort of business support now,’ shesays. ‘They are making a lot of progress.But when you spoke to RDAs five yearsago, they did not know what you weretalking about.’ Now though, the NorthWest RDA is a major supporter of theCoalition’s national conference.

A lifetime’s involvement in the socialservices and local sides of politics clearlycontributes to her current role at thecoalition. She persuaded high-profilemembers of each political party (PatriciaHewitt for Labour, Liam Fox for theConservatives and Simon Hughes forthe Liberal Democrats) to visit socialenterprises in the run-up to the lastgeneral election. And Labour carried acommitment to social enterprises in itsmanifesto. She founded the all-partysocial enterprise group in the Houses ofParliament. ‘We’ve worked very hard toget buy-in,’ she says.

And she describes all these activitiesas ‘what I do in my leisure time’. She hasa full-time job at work just off London’sPiccadilly where she chairs a communi-cations and media company, Pall MallConsult, and she has a full-time role ather Hackney home which she shareswith her husband, John Carr, a consul-tant on child safety and the internet, andtheir two teenage children.

Until now social enterprises have nothad a high profile – but that could beabout to change. ‘When they did noteven know how big a sector they were,they could not boast about it.’

Before the DTI did its research, therewere vague estimates that perhaps 5,000organisations were in this sector – athird of the number which the DTIproduced. ‘Some of the organisationswhich classify themselves as socialenterprises – including the Eden Project,Cafedirect and Jamie Oliver's Fifteen –are actually very famous but not identi-fied as social enterprises by the public.’

When it is outsourcing the provisionof health and education services, thegovernment could well find it useful tohighlight the admirable aims – plough-ing back rather than distributing profitsto owners – of this sector.

The vocabulary of this field also lendsitself to New Labour. While the privati-sation of the NHS might sound provoca-tive, outsourcing away from the first andsecond sectors (the public and privatesectors) to the third sector of the volun-tary and social enterprise fields willsound far more attractive to Labourparty traditionalists.Baroness Glenys Thornton hails from a cooperative tradition

Demand is significant for shares in wind power Photograph by Murdo Macleod

‘The challengefor socialenterprises is toscale up quicklyenough.’

Put your money where your ethical mouth isOpportunities to buy shares in social enterprises are opening up. And the returns are good.There are evencalls to create a stock exchange for the sector .But there are still problems accessing enough financeHeather Connon

If you want to buy shares in BaywindEnergy Co-operative you have to waitfor someone to die. Its investment per-formance means death is the main rea-son its 1,300-odd shareholders sell.

Mortality rates would have to jumpdramatically to satisfy demand: the com-pany, which operates six wind turbinesin Cumbria, has around 3,000 people onits books interested in investing in theschemes. And not all of them can beaccommodated in Westmill Wind FarmCo-operative either, which is poised tolaunch a share offer to raise £3.7 millionto buy five wind turbines.

Interest is not restricted to wind-power: Cafedirect, the fair trade coffeecompany, had to turn investors awaywhen it launched its ground-breaking£5m share issue last year, and a numberof other ethical organisations, such asthe Ethical Property Company andGolden Lane Housing, have also man-aged to raise money from outsideinvestors.

Unfortunately, these companies arestill the exception: social enterprises arelikely to find it hard getting their fund-ing from conventional investors. Thebiggest obstacle can be their structure:social enterprises will often be set up ascharities or co-operatives and their ruleswill differ from conventional companies.At Baywind, for example, every memberhas just one vote, regardless of howmuch he or she has invested, and themaximum shareholding is just £20,000.

Others may stipulate that their profitsare ploughed back into their charitableor social activities. This can be hard toreconcile with the rather more selfishinterests of equity investors, venturecapitalists and other conventionalsources of finance for small businesses,whose main interest is usually in howmuch of the profit will be channelledback to them.

But there is a growing awareness of

the need for social enterprises to haveaccess to a wider range of finance.Research by Bridges Community Ven-tures, a private equity firm whichinvests in socially deprived areas,concluded that there was a real need forventure funding to back companieswhich do social, as well as financialgood. Bridges director Michelle Giddenssaid that about one-tenth of the compa-nies which approached Bridges forfinance in its first year of operation weresocial enterprises.

‘Many of these were exciting businessmodels that could be financially sus-tainable and achieve great social impact,but we could not invest in them with ourcurrent funds because we invest inprofit-maximising businesses located indeprived areas. We found that there wasno clear place to refer these entrepre-neurs and many were failing to getstarted or to grow their businesses

through lack of access to appropriatecapital.’

Bridges’ research concluded thatthere was a place for a venture capitalfund which was both socially responsi-ble and could produce a return ofbetween 3 and 4 per cent a year. Itbelieves that ‘wealthy individuals wereexcited by the prospect of investing insuch a fund and that foundations werewilling to make grants for operatingcosts’. But Bridges is not currentlyconsidering such a fund and there is noindication that others are rushing to fillthe gap – Bridges’ research concludedthat any organisation which did wouldhave to have experience in the area.

Some social enterprises are producingreturns well above that level. Baywind,for example, has returned between 5.6and 6.6 per cent to its members in six ofthe eight years of its life so far. It quali-fies under the Enterprise InvestmentScheme so members can claim 20 percent tax relief on their initial invest-ment, raising this to between 7 and 8.2per cent. But the shares are notredeemable on a specific date for a spe-cific price: members who want out haveto rely on the list of willing buyersremaining.

Jonathan Bland, chief executive of theSocial Enterprise Coalition, thinks oneof the keys to getting a vigorous finan-cial market would be a social stockexchange which would allow investorsto buy and, more importantly, sell theirholdings easily. Not every company willhave Baywind’s waiting list and the fearof being locked in for ever could beenough to deter many investors fromconsidering social enterprises.

But he added a significant caveat:‘While investors can make money frominvesting in social enterprise, it is notthe same as buying shares in a companylisted on the stock market. For a start,the share price will often be determinedby the company, rather than the stockmarket – as is the case for Cafedirect,Ethical Property Group and Triodos

Renewables. That is perhaps inevitablegiven the lack of an active market for theshares, but it does mean that shareprices tend to go nowhere.’

Triodos Bank, the ethical bank whichbacked the Cafedirect finance raising,runs its own Ethex market which willtry to match buyers and sellers. Cafe-direct, Triodos Renewables, its ownwindpower fund which has just had athird share issue, and Golden LaneHousing are among the companies onthis. Others, such as Traidcraft, useBrewin Dolphin as their marketmakerand some are traded on Ofex, the over-the-counter market for small companies.

But Joel Moreland, an equity andinvestment manager at Triodos, says:‘What matters to investors is liquidity –it is not a matter of who markets thecompany; the ability to sell is the realissue. Investors need to think about thefacts of smaller companies.’

Judging by the 500,000 or so peoplewho hold ethical unit trusts and othercollective vehicles, there is plenty ofinterest in investing in companies whichare socially, as well as financially, good.So far, however, the list of investors insocial enterprises is quite small –Triodos, one of the main participants inthis area, has less than 9,000 investorsacross its four schemes, although Traid-craft, for example, have considerablymore. But getting information out tointerested investors can be challenging– Cafedirect used its coffee jars to pro-mote the issue but not all companieshave such high-profile brands. Baywindgives priority to people who live locallyso uses the local media to promote itself.

Moreland says there has been grow-ing interest in external fundraising fromsocial enterprises but does not expect aflood of new issues: ‘There will not be 20next year. The key is to bring good qual-ity offers to the market. We do not wantto do just any old thing. It would be easyto put off investors and allow them tosay that all social enterprise is rubbishjust because one fails.’

Investment table

Baywind 5.64% average income over last five years.

Ethical Property CompanyDivdends annually 3p so average annualreturn 3 per cent based on initial sub priceof 100p.Share price in a year has risenfrom 100p to 110p in five years – a 10 percent rise. Price is set by directors ratherthan dealings.

CafedirectPrice is set by board and hasn't yetchanged since share issue – based on earn-ings per share and about to do latest fig-ures so may change now – and no dividendso zero return.

Triodos RenewablesAverage 2.24 per cent dividend paymentover five years, shares risen from 100p issueto 130p, though been 130p for three years.Again price set by board.

6 REGIONAL ASSISTANCE 20 November 2005 The Observer

In competition for the local businessDespite government support,few local authorities are procuring their services from social enterprisesHeather Stewart

It sounds like a win-win for local coun-cils. Instead of handing over millions ofpounds to faceless conglomerates toempty the bins and mow the parks – andrewarding their shareholders in theprocess – why not invest the money inlocal providers which will throw thepromise of community regeneration intothe bargain?

Social enterprises can often providelocal services efficiently, at the sametime as training long-term unemployedor disabled people, for example. But MattWalsham, of the Coalition for SocialEnterprise, says they can have problemsmaking their case to local authorities.‘The biggest barrier is a lack of knowl-edge of what social enterprises are. Localauthorities see them as a strange beast.’Neither private sector business nor char-ity, social enterprises can slip throughthe net if there isn’t someone within acouncil who understands their potential.

And handing a contract to a socialenterprise may take some seriouslycreative thinking. The New EconomicsFoundation (Nef), which has produced‘Public Spending for Public Benefit’, aguide aimed at local authorities, sayscouncils need to learn to ‘bend thespend’. Instead of tendering for councilservices strictly on the basis of cost, andthen looking for separate providers todeliver local regeneration, for example,they might be able to ‘bend’ some of themoney earmarked for, say, help for thelong-term unemployed, towards a socialenterprise that can also deliver a service.

That’s exactly what happened in Liv-erpool, with Bulky Bobs, a social enter-prise that collects people’s large items ofrubbish and is funded by the council. Atthe same time as keeping Liverpool’sstreets free of fridges and sofas, it is pro-viding training and employment for thelong-term unemployed, paid for throughthe Neighbourhood Renewal Fund.

Bulky Bobs is now tackling 50,000calls a year, for the same price that the

council was previously paying for 29,000calls – and since they recycle more thana third of what they collect, the councilalso saves money in landfill charges.

‘We get a service very well delivered,and the profits stay in Liverpool,’ sayscouncillor Richard Kemp. But he admitsthat persuading procurement profes-sionals to think creatively, to ‘bend thespend’, is the key to working with socialenterprises.

‘One of the difficulties is convincingprocurement people that we can bundleoutcomes together like that,’ Kemp says.‘It’s total procurement rather than just

services procurement. You need peoplewithin the council to understand whatsocial enterprises are and how to usethem.’

Convincing civil servants from White-hall that a social enterprise might be thebest provider of a service can also be dif-ficult, says Chris Roberts, the leader ofGreenwich council, which helped to setup Greenwich Leisure, a non-profit-mak-ing enterprise now running sports facil-ities in a quarter of London's boroughs.‘It's not as easy as I think it could be.'

In theory, the government is entirelyin favour of councils procuring servicesfrom social enterprises. Local authori-ties are now expected to take the needsof the local community into accountwhen they spend money – even to workwith local groups to help develop mar-kets, if that’s what’s needed. But Robertssays that's not always reflected in day-to-day reality. ‘Between the ministerialstatements and the civil servants wehave to deal with, there is a big gap ofunderstanding.' Before he could getGreenwich Leisure off the ground, hehad to win over Whitehall, and it wasn'teasy. ‘We just kept telling them, “we cando this", and we got to a stage whennobody said no any more. Nobody eversaid yes – they just stopped saying no.'

But perserverance can pay off. JohnTaylor of Nef points out that the sumsof money councils have to spend areso large that even a small shift towardslocal providers – and particularlytowards social enterprises – could havean enormous impact. Councils spend£125bn a year on procuring services. Ifjust one-tenth of that was retained inlocal areas, it would be worth 17 timesmore than the government spends onregeneration projects. ‘Social enterprisesare very good at recycling money withina community: they’re very lean, they’revery embedded in their community.’

They also have a special character,says Roberts. ‘The people running it arevery important. You get the entrepre-neurial spirit and risk-taking that yousee in the private sector, but you also get

very much the public service ethos.'Greenwich has been able to reduce itssubsidy of leisure services each year, asits not-for-profit sports centres havereinvested their surpluses.

Dai Powell, the chief executive ofHackney Community Transport, whichruns transport services in many Londonboroughs using local staff, says councilsare beginning to wake up to thesebenefits.

‘There are a lot more local authoritiesnow who understand the role that socialenterprises can play,’ says Powell, ‘ butthere’s still an awful lot that don’t.’ Hesays the way that councils tender forcontracts is critical for determiningwhat services social enterprises can pro-vide. ‘That’s always the crunch. It’s pro-curement, without a shadow of a doubt.’

He says authorities should try to takea longer-term view of the cash they layout on services such as transport andwaste collection. ‘They’re investing thatmoney: they’re investing it in local peo-ple and services.’

Hackney Community Transportrecently won a contract to provide yel-low school buses in West Yorkshire,against private sector competition.Powell says that’s because there weredemanding quality criteria whichprivate-sector companies struggle toprovide, while still turning a profit. ‘Ifit’s a quality contract, we’ll be verycompetitive on price,’ he says. ‘Socialenterprises in general don’t bid for thecheapest services: it’s not about poorservices for poor people.’

But what social enterprises reallyneed is champions. Powell says thatyears of working in the local communitymeans he understands people’s needs,and he has built up the political savvy tochange things.

Kemp in Liverpool sees part of his jobas pestering the rest of the council togive social enterprises a fair chance.‘This never works unless you’ve gotwithin the council someone who’s inter-ested. And even then you’ve got to kickarse the whole time.’

Regional Development Agencies: We’respreading the word and here to helpRegional Development Agencies want to extend their support to all businesses, including the third sectorConal Walsh

JIM BRATHWAITE is a man on a mis-sion. Most social entrepreneurs have notrealised that England’s Regional Devel-opment Agencies (RDAs) are champi-oning the sector. But as national lead forthe RDAs on enterprise policy, Brath-waite is determined to get this key mes-sage across.

‘We now give social enterprises thesame support that applies to all busi-nesses, including financial support andbusiness advice,’ he says. ‘More peoplefrom a vast range of backgrounds aregetting involved in social enterprisesand it’s important to make clear that werecognise all forms of economic activity.’

The key change came last April, whenEngland’s nine RDAs began funding theBusiness Link network, an organisationfor SMEs, including social enterprises.Closer links with social enterprises areprobably long overdue. RDAs, after all,exist to reduce social and economic dis-parities at a regional level, which chimeswell with the aims of social enterprise toregenerate deprived communities by fos-tering innovation and jobs.

Brathwaite is keen to hear from allmanner of socially minded outfits.‘There are lots of charities and not-for-profit organisations out there that don’tsee themselves as social entrepreneurs,but we want to include them as well,’ hesays. ‘Increasingly, charities are seekingto become financially independent.Social enterprise offers a way to gener-ate income that fits with their purpose.’

The nine RDAs, each a public bodywith responsibility for a different part ofEngland, bring an impressive trackrecord to the job. Together, they claim tohave created more than 270,000 jobs inthe past three years – as many as thereare in the UK oil and gas industry. Theyhave helped create 17,000 new busi-nesses, regenerated 3,686 hectares ofbrownfield land – an area equivalent insize to a large London borough – and pro-vided retraining opportunities for morethan half a million people.

Brathwaite, whose day job is chair-man of the South East England Devel-opment Agency (SEEDA), has a busyrole, briefing politicians and travellingthe country, from crowded inner cities toimpoverished rural localities, encourag-ing new economic life.

Different regions have different prob-lems, which is why locally nurturedsocial enterprises are sometimes so effec-tive. Less than a year into their involve-ment with social enterprises, RDAs canclaim some notable successes. In York-shire, for example, the RDA has pro-vided financial assistance to Pitstop,which provides training and leisureactivities to help keep vulnerable anddisengaged young people in education,and has generated such demand that ithas outgrown its premises.

Run by social entrepreneurs AdrianWoods and Paul Craft, and working with SEEDA chairman Jim Brathwaite recognises the importance of social enterprises

‘Between the ministerialstatements and the civil servantswe have to deal with,there is abig gap of understanding ofsocial enterprise’

Homeless youthIn Thorntree,Middlesbrough,one of the mostdeprived districts in the UK,Community Cam-pus provides training,housing and support toyoung homeless or excluded people.

In 1987 a group of youth and social work-ers set up a company to provide better hous-ing to homeless people. With a grant fromthe John Paul Getty foundation, they boughta dilapidated property and contracted a localbuilder to renovate it.The various problemsthey encountered made them think that theycould do it better, and in 1991, with a grantfrom Middlesbrough Task Force they boughtseven properties, which were renovated andrepaired by young people trained by Com-munity Campus Key Skills Project.Those prop-erties were later used to house young people,and the experience allowed them to developa sustainable model that could be put intopractice again and again.The business nowturns over £1m.

Some of the young people trained are nowemployed by the Community Campus Trad-ing Company, which provides 50 per cent ofthe projects’ funding. Recently it completedthe renovation of a children’s hospital inRomania:‘Some people working on that pro-ject didn’t know where they were going tosleep when they were 16;now they work andhave a place of their own. In terms of per-sonal development I think that’s great,’ saysLawrence McAnelly, Community Campus’sdevelopment co-ordinator.

The RDA One North East has been work-ing closely with Community Campus assist-ing their business development and raisingtheir profile within the region.The project nowowns 50 properties,houses 70 16- to 25-year-olds and provides training on building workand living skills for over 100 people a year

while it continues to support similar initia-tives across the region.

Credit unionsMainstream banks often refuse to offer theirservices to the poor.This is where credit unions– new-style mutual savings and loan compa-nies – come in. One of the most successfulprojects in the UK is Creating Wealth in theWest Midlands Through Sustainable CreditUnions,an initiative developed by the Associ-ation of British Credit Unions Ltd (ABCUL).

From 2002 until May 2005, a group ofexperts worked closely with seven creditunions in the area,while also offering supportto 30 others.The result in the seven beaconcredit unions was that the value of loansincreased by 49 per cent to £6.44m.Savingsrose 48 per cent to £7.51m, compared withgrowth in the rest of the region of 22 per centand 26 per cent, respectively.The consider-able increase in loans and savings meant thatnot only more wealth was created, but alsothat it could be retained within the region.

Andy Powell, initially manager of the pro-ject and now an Abcul employee,was pleasedto see how most of the credit unions involvedwere transformed from traditional, product-driven organisations to more customer-drivenones. He says that the credit uniont alsorealised the importance of analysing their fig-ures and devising plans, alongside maintain-ing their ethical values:‘To achieve their socialmission they have to become successful busi-nesses,and this is something we were able tohelp them with.’

RDA Advantage West Midlands enabled theproject, allowing it ‘to effectively operateacross regions,‘ says Powell,‘and this regionalapproach made the project more powerful.’Maria Quevedo

Key RDA projects

local schools and youth offending teams,Pitstop now has plans to develop a pur-pose-built facility with accommodationand workshop. The Halifax-based organ-isation says it helped 31 young people tosecure full-time jobs last year and a fur-ther 103 to gain qualifications.

In the east of England, the RDAhelped set up a fund providing unse-cured loans of up to £50,000 to social busi-nesses. Companies and individuals caninvest in this fund and, as well as wit-nessing the community benefits theirinvestment brings, can expect a safe, ifmodest, rate of return: the loans arerepayable in full and charge interest.

Wood’n’Stuff, a recipient of a £25,000loan from the fund, is a garden centre inBury St Edmunds. It is also the commer-cial face of a respected disability daycare business. Plants and shrubs sold inthe garden centre are grown on site.Furniture sold in the shop is mostlymade in workshops run for people withdisabilities. The firm has 12 staff cater-ing for over 100 people on behalf of fourcouncils. And the South West RDA hasbacked several businesses including acommunity recording studio in Bristol.

A recurring complaint from somesocial enterprises is that they have diffi-culty securing large contracts from coun-cils and other public-sector bodies, manyof which allegedly adopt a conservativeapproach and award all work to compa-nies in the old-fashioned private sector.Brathwaite says that the RDAs can pro-vide crucial help in tackling this problem.

Social enterprises, he says, often needto be given a little extra business savvyin order to compete for the most lucra-tive work. ‘In my opinion councils arewilling to give work to social enterprises,but the government has imposed rules ofaudit on them which make it difficult togive money to organisations unless theyhave the right credentials.

‘Councils used to have budgets to giveto charities for jobs of work. Now theyhave to tender for such work, whichneedn’t be a problem, because very oftensocial enterprises are indeed best placedto carry out the work. The problem isthat once words like “tender” are used,some social enterprises are all at sea.We’re trying to make sure they get thebusiness skills that will enable them tocompete properly.’

Hackney Community Transport wins a contract to supply school buses in West Yorkshire Photograph courtesy of Metro

MOVERS AND SHAKERS 7The Observer 20 November 2005

Meet the social entrepreneursThree top leaders in the sector offer their take on what it means to be a social entrepreneur

In 1991 the Big Issue started a socialenterprise. Starting an enterprise is notlike starting a charity. Starting a charityis building a constitution that guaran-tees, above all else, longevity. That is,you will be around in years to come.

Starting an enterprise is an endeav-our that, one hopes, will find a market-place, that will, through some smartthinking, supply products or servicesthat fulfil a need. But it may wellflounder, it may be overtaken by otherenterprises, or suffer the fate of manyattempts at gaining a foothold and fail.It is a perilous journey to take the enter-prise road because it is more like a busi-ness than a charity.

Charities have to be cautious, steadyand therefore lacking in initiative. If acharity does show initiative it has to becareful that it has no chance of failing.As charities are playing with the lives ofthe needy and the coffers of the public,they quite rightly have to be dominatedby the cautious.

I am not being critical of charities. Iam just accepting that to be entrepre-neurial and socially enterprising, yourun the risk of failure. And one thing thepublic and charities custodians hate isfailure. It smacks of incompetence.Whereas an enterprise will expect tolearn from its failures and mistakes, con-stitutionally a charity has to do all in itspower to deny the very possibility ofsomething not working.

At the Big Issue, we still receive plau-dits because we were one of the first tomarket ourselves and we are a rarething. We need more enterprises thathave about them all the features of a

Social enterprises are mission-drivenbusinesses. Our mission at the DayChocolate Company is to improve thelivelihood of small-scale cocoa farmersin West Africa.

Our business is to establish Divinefair trade chocolate in the UK market,one of the most competitive and valu-able markets in the world. To do this wehave had to win over some of the mosthardnosed people in the UK retail sector.Comic Relief and Christian Aid's supportgot us through the door, but the deal withFairtrade and the farmers' ownership ofthe company engaged and inspired theretailers. And as the products were goodand the margins were reasonable, theywere prepared to give us some shelfspace. Then it was down to chocolatelovers to buy Divine and move it off theshelf. Slowly but surely they did.

This has been an incredible year: thecombination of UK G8 presidency, theMake Poverty History campaign and theLive 8 concerts saw more UK media cov-erage about the issues affecting Africathen ever before. One of the results is agrowing appetite among UK consumersfor fair trade products, products thatdeliver real benefit for producers indeveloping countries, products thatmake them feel they can really make adifference.

This increased demand has led tomore interest from retailers, who havestocked an increasing range of products,and even developed own-label Fairtraderanges. Ultimately there has even beeninterest from multinational corpora-tions like Nestlé. They are all respondingto a growing consumer demand, andwhile increasing numbers of people inBritain are looking for products and ser-vices from companies that are poweredby their principles, the outlook for socialenterprise is good.

But the challenges are still the same;raising finance to fund our growth is stilldifficult. In the main, we are companieswithout assets to secure loans. I repeat-edly have to explain why it is not appro-priate to ask directors who are not paid,who donate their time and expertise, toput up a guarantee. David Cameronrecently recognised the potential socialenterprises have to solve the social prob-lems particularly in the inner cities. Ifwe are to see this potential unleashedthen financial institutions need to takethe leap. They might not understand therisks, but the impact of backing socialenterprise could be more then theydared to imagine.

business, but with a social purpose.There are few truly social enterprisesbecause there is little appetite for enter-ing the marketplace. Rather, there arehybrids. The hybrid is about languageand organisation. Aware of the factthat a charity or local authority depart-ment cannot convert to swashbucklingmarket-led entrepreneurism, they takeup the language. And they try to take upthe form and appearance, too.

Government departments, local coun-cils and charities now court social enter-prise, though within the constraints oftheir cautious, predictable brief. Theydo their best to shake up the old ways ofdoing things. They try to create initia-tive. The National Health Service is fullof social enterprising, often supplied bythe private sector.

Charities are moving in the samedirection. Any provider, riddled withconstraints, should be applauded for try-ing to create initiative and enterprise.But possibly the best method is to createtruly independent and therefore risk-laden social enterprises.

Creating an appearance of enterpriseis not the same as creating an enterpriseculture. Culture is deeper and shouldbring better results. And that is whatpeople want and need. Social enterprisecan at times deliver opportunity betterthan anyone. They can move quickly.And they can inspire those who needwhat is being offered.

The social enterprise sector, as itmatures, will increasingly demandfunds, support and no interference, inthe best traditions of business. And thatis how it should be.

In 1999, after delivering the Home EnergyEfficiency Scheme (HEES) for centralgovernment for nine years, Eaga, anorganisation founded for the social pur-pose of tackling fuel poverty, faced goinghead-to-head with the big utility compa-nies over the renewal of its contract.

My first priority was to find a struc-ture for Eaga that encompassed privatesector disciplines while retaining publicsector values. We looked at joint ven-tures with utility companies, a manage-ment buyout, setting up a co-operative,and co-ownership as potential modelsfor the future structure. I contacted theUK's largest, most successful employee-owned company, John Lewis, to look athow a partnership model might work,and the rest is history.

Eaga won the contract in three out offour areas of England, and on 1 January2000, with 135 employees, Eaga Partner-ship Ltd was born. Today, Eaga has over15 years of experience of delivering keypublic sector projects. During that timewe have worked with central govern-ment, the devolved nation governments,local authorities, housing associationsand utility companies to make a differ-ence to the lives of more than seven mil-lion vulnerable people across the UK.

In 2005 Eaga tendered for and won allfour areas of Warm Front (the successorto HEES), a contract worth over £1.5bnover the next five years. Faced withdelivering against some tough targetsand a UK industry capacity not ready torespond to the challenge of lifting a fur-ther 2 million vulnerable households outof fuel poverty, Eaga took the decision toacquire MICO Group, a market leader

installing insulation in homes acrossEngland and Wales. By establishing anin-house installer capacity for insulationand heating, Eaga has been able to makeimportant improvements to the deliveryof Warm Front and other key fuel povertyschemes across the UK, and to expandits ability to tackle the housing andsocial problems of low-income families.

Today Eaga is Europe's largest resi-dential energy efficiency provider, withover 1,600 employees and operations inIndia, Canada, Ireland and the UnitedArab Emirates. Eaga Partnership acts asthe anchor of the Eaga Group, a matrixof companies that exist to provide prod-ucts, services and solutions where social,environmental and energy needs meet.

Eaga is keen to explore a greater rolefor employee-owned social enterprise inthe delivery of public sector services. Asa commercial business with co-owner-ship and a strong set of ethics, our suc-cess lies in the mix of the commerciallycompetitive and the socially responsible.

I am no less committed to the partner-ship model that sits at the heart of thisgrowing organisation than I was when Iset up the partnership in 2000. The chal-lenge now is to take co-ownership acrossa business with over 1,600 people whichoperates in eight different countries.

As Eaga expands, one thing remainstrue. We're not just another fast-growingand ambitious enterprise — we're a fam-ily. Like any good parent, I want to allowour offspring to be different and individ-ual, to go out and make it on their own,as long as they retain the ethics andvalues that define our organisation tothe core.

‘We haveworked to makea difference tothe lives of sevenmillion people’

‘We need moreenterprises thathave about themall the featuresof a business’

‘As the productswere good andthe marginsreasonable,retailers wereprepared to giveus shelf space’

John BirdFounder and editor-in-chief, The Big Issue

John CloughChief executive, Eaga Partnership

Sophi TranchellManaging director, the Day Chocolate Company

Cocoa farmers get a fair deal in Ghana Photograph by Karen Robinson

SAR

AH L

EE

8 COMMENT 20 November 2005 The Observer

‘A growing force in our economy’Social enterprises solve social and environmental problems and are now part of the business mainstreamAlun Michael

We have a government-wide commit-ment to building an enterprise cultureand supporting enterprising people. TheEnterprising Solutions Award helpsby recognising the very best of socialenterprise.

We need a can-do attitude in all walksof life – not just in terms of wanting tostart a business, or changing society, orprotecting the environment … or doingall three at once.

That is why it is vital that enterpriseactivity is encouraged in the UK to sup-port a diverse economy. And the startingpoint must be to change mindsets.

Enterprise needs to be seen andunderstood as a positive and worthwhileactivity by those making career choicesand by society at large. This will nowhappen in schools – stimulated this yearwith the provision of Enterprise Entitle-ment funding for pupils at key stage 4.It’s also being done outside of the class-room, led by organisations such asYoung Enterprise, Shell LiveWIRE, thePrince’s Trust, Entrepreneurs in Actionand Enterprise Insight.

I hope that everyone is now awarethat 14-20 November is Enterprise Week– part of Enterprise Insight's Make YourMark campaign. The government is akey supporter and main funder of thiscampaign and I am delighted that thefirst ever Social Enterprise Day tookplace on Thursday. The day was anopportunity to wave the flag for socialenterprise, showcase inspirational rolemodels to young people and celebratesuccessful examples of social enterprise.

Social enterprise is a growing force inour economy, and part of the businesslandscape. It is about achieving successby solving social and environmentalproblems through business.

Our survey found that there are atleast 15,000 social enterprises operatingacross all sectors and all regions of theUK. The vast majority of social enter-prises exist to help particular groups ofpeople either through providing employ-ment or providing goods and services.Nearly a quarter had environmentalobjectives. They generate almost £18bnin annual turnover and employ at least450,000 people.

The majority of turnover and employ-ment is generated through trading activ-ity. Almost 90 per cent of those surveyedgenerated 50 per cent or more of theirincome from trading. In other words,these are serious businesses

Like other businesses, social enter-

prises can take different legal forms. InSeptember, I extended that choice bylaunching a new legal structure forsocial enterprises, the community inter-est company. At the last count, 30 busi-nesses have been approved as commu-nity interest companies.

This new legal structure providessocial entrepreneurs, with a dedicatedlimited liability structure for the firsttime. This enables them to competefairly and to be paid going market rates,to run competitive businesses, whilehaving an ‘asset lock’ for the commu-nity. Regulation provides them with theclear badge they need to unambiguouslysay, ‘I want to do good with my business,not just to do well."

The novel features of the communityinterest company include a public decla-ration of intended benefits and methodsto achieve them – to be reported on eachyear. An asset lock ensures surplusesremain within the organisation or itscommunity.

I also believe there is much to be

gained from closer links between socialenterprises and the private sector. Thatis why we have just unveiled Match Win-ners, a guide to commercial collabora-tions between social enterprises and pri-vate sector businesses produced byCommunity Action Network. My hopeis that it will be the catalyst for futurepartnerships benefiting all.

Finally, with the continued support ofNatWest and the Royal Bank of Scotlandand England’s Regional DevelopmentAgencies, together with our partner, theSocial Enterprise Coalition, and associ-ate sponsors, Defra, the Oxford SaidBusiness School, The Observer andSocial Enterprise Magazine, the Enter-prising Solutions Award is now in itsseventh year.

With the ever-increasing quality ofapplications, this is further evidence ofthe strength and continuous growth ofthe sector. I congratulate the winnerswholeheartedly. Alun Michael is minister of state for industry andthe regions

Minister Alun Michael congratulates Enterprising Solutions award-winners Photograph by Andrew Lloyd/Wales News Service

Resources directory

Social Enterprise Coalition:www.socialenterprise.org.uk

Community Action Network: www.can-online.org.uk

Development Trusts Association: www.dta.org.uk

Social Firms UK: www.socialfirms.co.uk/

Co-operatives UK:www.co-opunion.coop/live/welcome.asp

Small Business Service, Social Enterprise Unit:www.sbs.gov.uk/sbsgov/action/layer?r.l2=7000000416&r.l1=7000000412&r.s=m&topicId=7000000412

Social Edge: www.socialedge.org

CIP Hounslow: www.hounslow.info

Greenwich Leisure: www.gll.org

ECT: www.ectgroup.co.uk

Eaga Partnership: www.eaga.co.uk

Northwest Regional Development Agencywww.nwda.co.uk

Yorkshire Forwardwww.yorkshire-forward.com

One NorthEast www.nesep.org.uk.

Advantage West Midlandshttp://www.advantagewm.co.uk/

East Midlands Development Agencywww.seem.uk.net.

East of England Development Agency www.investingincommunities.org.uk orhttp://www.socialenterprise-east.org.uk/

South West of England Regional Develop-ment Agencywww.southwestrda.org.uk or www.rise-sw.co.uk

London Development Agency www.lda.gov.uk

South East England Development Agencywww.seeda.co.uk

‘Enterpriseneeds to be seenand understoodas a positive andworthwhileactivity by thosemaking careerchoices’

Want to find out more aboutSocial Enterprise? Check outthese websites