If you’ve ever heard about social enterprises but wondered how they work, here’s everything you need to know.
How does a social enterprise work?
Social enterprises exist to make the world a better place.
They aim to make a profit like traditional businesses but the end goal is not to generate dividends for investors, social enterprises take their profits and reinvest or donate them into projects, ideas or initiatives that create positive social change in communities.
By selling products and services on the open market, social enterprises create employment and investment in their chosen sector or local communities. They use the money generated to tackle social problems or provide training and employment opportunities for people who are unable to access work.
The average annual turnover of a social enterprise in the UK is £100,000.
Social enterprises can be big or small – from coffee shops and cinemas, to pubs and leisure centres, banks and bus companies. They can offer socks to homeless people for every sock bought in their shop like Jollies Socks. Or create innovative products that help disabled people and promote social inclusion using the proceeds from the sale of bags like Trabasack. Or making jewellery can also help people with anxiety be welcomed back into the community, just as the creators of Haringey-based Studio 306 do.
All the profits made by the Big Issue Group are reinvested back into helping vendors with a ‘hand up, not a hand out’. Like many social enterprises, we tackle social problems, improve people’s life chances and support communities across the country, whether through social investment with Big Issue Invest, or by vendors selling the magazine or receiving support through The Big Issue Foundation, our charitable arm.
As Big Issue founder John Bird said: “Making pictures frames with a social echo – you get what you want while giving somebody in need support – is as I said quintessentially what my work is about. Create a trail of good behind you.”
The UK’s social enterprises have diverse missions. Madlug, a luggage company founded in 2015, uses funds from bags it sells to provide free bags for children in care.
Change Please sells coffee, but uses its profits to support homeless people by offering them jobs, housing, and training.
The governing body works with six government departments to lead public policy for social enterprises and they also keep track of how social enterprises contribute to the economy.
At SEUK’s last count, there were 100,000 social enterprises in the UK that contributed £60 billion to the economy.
The sector also employed two million people although these figures are subject to change with the Covid-19 pandemic’s impact on the economy still hitting the jobs market.
Who runs and works for social enterprises?
As companies, social enterprises tend to be younger and more diverse than big businesses. Nearly half are under five years old, and nearly half of social enterprises are led by women. According to Social Enterprise UK, “women and people from racialised communities are more likely to be running start-ups now” compared to previous years.
Compared to other companies, social enterprises are more likely to have directors from non-white ethnic backgrounds, too.
Most people working for social enterprises live in the community around the company, and nearly a quarter of social enterprises run in the most deprived areas of the country.