What is Social Enterprise?

What is Social Enterprise?

Social enterprises trade in many markets – selling goods and services to individual consumers, local authorities, government and private businesses. They aim to make a profit just like any private sector business. However, their profits or surpluses are reinvested back into their social and/or environmental purpose. According to the Social Enterprise in Scotland: Census 2021 there are over 6,000 social enterprises in Scotland.

Social enterprises in Scotland are often recognised as being asset locked so that only the community and society can profit from their work, buildings, land and other assets. Social enterprises must be sustainable in order to meet their social and/or environmental mission. The Voluntary Code of Practice for Social Enterprise in Scotland is a set of guidelines used by some Scottish social enterprises.

The term social enterprise shouldn’t be confused with private businesses that simply operate in an ethical way, charities that don’t trade or public sector arms-length companies (ALEOs) – though some of these may be on a journey as emerging social enterprises.

There’s no single, legal definition of social enterprise in the UK. Definitions vary across the world and even within the UK. We believe in being inclusive and appreciating the value of other types of business, including ethical private sector companies, mission or values led business and B Corporations – while being very clear about what we mean by social enterprise. A robust debate about definitions, within a constantly evolving business landscape, is something we welcome.

What examples are there?

There’s probably a social enterprise running a shop, art gallery, sports centre or cafe in your local area. Examples include Kibble, The Big Issue, Hey Girls, Link Group, Brewgooder, Social Bite, Mondragon, The Eden Project, Homes for Good and many more! Take a look at our Directory of Social Enterprise or contact us. MSPs and other elected members, the media, public officials, private businesses and others can also contact us to arrange visits. Also take a look at Social Enterprise Scotland TV.

What specific models are there?

Social enterprise is a diverse community and the more-than-profit approach is used by a huge range of organisations, of every size, operating in every corner of Scotland and in most sectors of the economy.

A social enterprise is often simply a standard Company Limited by Guarantee with an appropriate social mission and asset lock.

It could also be a registered charity (of which there are over 23,000 in Scotland) or a Scottish Charitable Incorporated Organisation (SCIO).

Below are some of the common types (both descriptive and legal model) and a social enterprise can often be one or more of these. Together they make up Scotland’s social enterprise movement.

Co-operatives and Mutuals

Democratic, values driven businesses that give members, customers or employees a direct stake in the business. Scotland’s 600 co-ops operate in every sector, are owned by over 1m people and have a combined turnover of more than £2.6bn a year. Well known co-ops include Scotmid, Edinburgh Bicycle Co-operative and Glasgow Taxis. Co-operatives can register using a range of legal forms each guided by a clear set of co-operative principles. See Co-operatives UK and Co-operative Development Scotland.

Social Firms

A Social Firm is a type of social enterprise set up to create employment and meaningful work (inc. training and volunteering) for people who face significant barriers to employment. Particularly people with a disability, a substance abuse issue, a prison record, a homelessness issue and young people.

Community Interest Companies (CICs)

CICs are companies created by people who want to conduct a business or other activity for community benefit. CICs have to state a specific social purpose and must report on this activity to the UK CIC Regulator. They’re a growing business model and there are currently around 900 Community Interest Companies in Scotland. See the Community Interest Companies Association and the CIC Regulator.

Development Trusts

Community-owned and managed organisations focused on the economic, social, environmental and cultural needs of their community. They combine enterprise and creativity to improve the quality of life for local people in urban, rural and island communities. They might be a CIC or charity or other model. There are over 250 members of Development Trusts Association Scotland.

Credit Unions

A type of co-operative that provide financial services to members. Many operate in areas of social and financial exclusion, though more employers now offer credit union membership and they’re increasingly being used by ethical consumers. The largest offer a competitive range of mainstream financial products. There are around 90 credit unions in Scotland, serving almost 415,000 members, with assets of £629 million and with around £351 million on loan. Find Your Credit Union and see Association of British Credit Unions Ltd and Scottish League of Credit Unions.

Housing Associations

Known as Registered Social Landlords (RSLs). These are companies providing affordable housing for both rent and sale. They give priority to those in greatest need and reinvest any surplus income in maintaining or adding to their housing stock. Many Housing Associations support other social enterprise activity through Wider Role community regeneration/tenant support. There are around 160 Housing Associations and co-operatives in Scotland. See Scottish Federation of Housing Associations and Scottish Housing Regulator.

Statistics taken from Social Enterprise in Scotland: Census 2021.