What's the point of business anyway?

What’s the point of businesses? Maybe, job making? On the face of it, creating jobs – assuming half decent conditions and fair pay – is a good thing. How about ‘wealth’ creation? But, again, what is that for? A good life, wealth for oneself, one’s family and future generations maybe.

I think, through business, that we can earn a good living but also that businesses should help to create a better world and fairer society through their activities. Captains - usually male - of industry may bash their fists on their walnut inlaid board-room tables and fume that business is about making money and that only charities do good but I think it vital that businesses, as a hugely important part of our society, have a duty to contribute more to it.
 
When I founded my business, eight years ago, I never wanted to be one of those business owners who bluster and whine about red tape. Also, I definitely did not want to be one of those people who you regularly see moaning about any attempt to give workers, society or the environment a break. Other than the occasional phone-slamming fury at HMRC’s lack of assistance I think I’ve stuck pretty much to those principles. Another thing I try not to be is cynical. I want to be optimistic, trusting even. My friends think I’m an idealist.
 
Business is a profound force in the world. Businesses do create jobs and profits. Taxes on these profits – not those squirrelled away in private offshore tax havens – fund our hospitals, schools and public services. Owners gain wealth. This wealth is supposed to trickle down to benefit us all. ‘Trickle’ says it all. If it was a ‘cascade’ or a ‘gush-down’ we might feel less angry about corporate greed. Trickle down is defunct and morally bankrupt as a concept. Wealth ossifies at the top. Rich get richer, poor stay poor. Both sides of the political spectrum say they recognise this. The Conservatives say they want to build a fairer Britain that works for everyone. Labour talks about the many not the few.
 
A key question is: at what cost is that wealth made? We have seen countless scandals based on profiteering that is often criminal – financial mis-selling, horse meat in burgers, fake breast implants, Paradise Papers, Panama Papers, siphoning off pension funds. And huge damage done to people, the environment and animals in the name of profit and, by association, business. 

Attempts to address business behaviour are met with scepticism from one side and complaints of over regulatory bureaucracy on the other. Corporate and social responsibility is dismissed as ‘greenwash’. Even ‘purpose’ – that latest buzzword – can be viewed cynically without proper certification, governance and action.
 
So how might a business contribute more, whilst still doing the day job? I think that contributing more leads to doing the day job better, more productively and ultimately more profitably. Doing good is also good business.
 
Business could start by paying the real living wage. Costs will increase in the short-term but long-term stability and productivity can be increased. Businesses could improve work-place well-being. A happy, healthy workforce will be more productive. Businesses could offer flexible working – encouraging family friendly working patterns. They could spend more in their supply chains locally and socially rather than at the cheapest rate. They could minimise any gender pay gap. They could adopt a diversity confident approach to employment. National government could even incentivise these behaviours with tax breaks.

Business is a powerful force but pursuit of profit alone can be damaging. Examples of egregious executive behaviour abound. But so do instances of businesses doing better – Richer Sounds, John Lewis and Riverford have all shown what can be done with innovative ownership and pay structures; B&Q and Marks and Spencer with supply chains.
 
We cannot wait for the government - paralysed by Brexit and lobbied to death by corporate interests - to act. We need to take action and the power ourselves - our great businesses can go further. And this, in a way, is the true purpose of business: to give people the agency to create a better world.
 
We all want to get on: get a good job, feel like our life has meaning. Earn a good living and make the world a better place. Let’s put this into the heart of our businesses too.

Social enterprises for a strong economy and a fairer society

There are two problems at the heart of Britain’s economy: that of driving fair, sustainable growth and that of boosting productivity. The focus has been, for too long, on the latter. We need a shift to investing in, buying from and supporting social enterprises.

We need an economy where businesses create decent work and the where the dividends of growth and prosperity are more equally shared. Check out your history books at the pages on Russia and France: if the rich get richer and the poor get poorer we can head, ultimately, into violent revolution.

The proceeds of growth are, too often, not shared fairly and this leaves many workers dispirited. Too many businesses are focused on minimising their tax bill, rather than contributing a fair share to fund public services. The largest social enterprises and co-operatives in the UK pay more in tax than Amazon, Facebook, Apple, Ebay and Starbucks combined.

Our local economic policy is fixated on productivity. It is a thorny problem: it takes us five days to produce something that Germans do in four. The reasons for this are vexed and no-one seems to be able to put their finger on what might be the problem and how to solve it.

We need a radical shift in the way we think about business and a move to a more socially enterprising economy. This is golden opportunity for the region to create productive, inclusive prosperity. Social enterprises not only create jobs and wealth, they do so more fairly and more innovatively than standard businesses and they also tackle social and environmental problems at the same time.

So, what are social enterprises? Simply put a social enterprise is a business with a good cause at its heart that dedicates its work and its profits towards achieving this good cause. My nine-year-old daughter described them as ‘businesses that help people’ which I thought pretty much nailed it. Nationally famous social enterprises include The Big Issue and Divine Chocolate. But did you know that there are social enterprise banks, book shops and bakeries? There are sport shops, florists, pharmaceutical companies and toilet paper makers. There are also gin, wine, whisky and beer producing social enterprises! Pretty much all sectors of the economy have a social enterprise in them somewhere. Although maybe not in the arms and tobacco industries.

Social enterprises can take many forms. They can be co-operatives, community businesses, trading charities, community interest companies or a myriad of other hybrid ethical structures. This can cause problems of definition but all are united by a common feature:  that of using business to tackle social or environmental problems.

Here in the South West we are blessed with some world leading social enterprises. We have The Eden Project and Jamie Oliver’s Fifteen Restaurant in Cornwall. The University of Plymouth was the world’s first accredited social enterprise university and Plymouth was the UK’s first ‘Social Enterprise City’ - a virtual brand that has led to over £6 million of investment into the city in the last three years. Livewell Southwest operates across large parts of Devon and is one of the largest health and social care social enterprises in the UK. Plymouth Energy Community, which raised over £3 million to put solar panels on schools and Plymouth’s Life Centre, has revolutionised the way we look at local energy generation, investment and community ownership.

Across Devon and Somerset there are well over a thousand social enterprises. Their combined turnover is £1.5 billion per year and they employ close to 33,000 people. That’s big - and small - business but, despite being a significant part of the economy that is better for all of us, it is still marginal in government policy making.

So back to why investing in social enterprise is an answer to solving the knotty problem of a fairer economy. Here are some killer facts. Social enterprises are more likely to innovate and are more profitable than standard businesses. Social enterprises are more likely to be led by women. They are starting up at a faster rate and are operating in the most disadvantaged parts of the region: where we most need businesses to work to create productive growth. Critically, social enterprises are also much more likely to pay more fairly: over three quarters of social enterprises report paying the living wage to their employees.

Social enterprise shows us that we can create a vision of a better world driven by business. And this is a pro-business and an unashamedly ‘for profit’ agenda. The more profit we make the more good things we can do with it.

It is social enterprises that are building the inclusive, prosperous, productive economy we need to rejuvenate our high streets, treat workers and pay women fairly and tackle deep rooted social and environmental issues.

Business can make us noble or be a tool for oppression and control. Increasing unfairness can lead to deep societal problems. We need to enhance and protect our environment whilst creating decent jobs. I think social enterprises can create solutions and offer an alternative, compelling vision. One based on business.

Don't start a social enterprise if you just want grants

I’ve been having a little social enterprise wobble recently. I’ve met a lot of people thinking of setting up social enterprises because they wanted to get grants for their work. Then I read a depressing article where a business said they converted to be a social enterprise because: ‘we couldn’t make any money’. Argh, hold head in hands and sob.

I started to think: is this the elephant or sacred cow or third rail (insert suitable metaphor - I like Trojan sea cow) in the social enterprise room. I feared for the future of social enterprise - are we really just a group of pseudo-philanthropic organizations? Can we really change the face, body, heart and soul of commerce?

We like to talk about social enterprises being ‘businesses’. That is, they trade: they sell something to someone. One question I ask all start-up folks I meet is to write down: “I sell x to y” and fill in the blanks. I sometimes feel a flutter of disappointment by the responses. Often there is a dearth of clarity about the market for products and services. I suspect this is probably true for standard businesses starting up too. However, on the positive side, this is always something to work through with social entrepreneurs and, in working it through, you can arrive at some innovative and unusual places.

Then there’s also the old 1% gambit: “the total market for widgets is a gazillion pounds. If I can get 1% of that market it means returns of a, b, c.” Well, if I had 1% of the cash of the one percent gambitters I would probably…not be a rich man. Note that ‘gazillion’ is an indefinite or fictitious number. A suitable term, then, for a fictitious market.

This does get to a gritty issue at the heart of social enterprise - if tackling pressing social and environmental issues was easily tradeable surely someone would have done it by now. That leads you down some tricky paths - making money out of poverty, profiting from others misfortune, etc.

In earlier, rosy-tinted, pre peak of inflated expectation days, people said that social enterprise goes where the private sector doesn’t or that social enterprises operate in areas of ‘market failure’. I always thought, and still think these ideas are red herrings. We shouldn’t be scared to take on the private sector and I’m not even sure what ‘market failure’ is - no one is yet to explain this to me clearly. Answers on an e-card please.

I would advise not to start on the premise that you need a grant to make your business work. Start from a point of knowing there is a clear market for your product or service and that someone in that market will pay for it. Sure grants can be good sources of investment and many standard private sector organizations also get grants - maybe that is another elephant in an albeit more lucrative room - but see them exactly as that: a source of investment; not something to rely on.

Another common difficulty is thinking of an idea and having a vague notion that somehow the state will subsidise or pay for it. In an age of austerity (whatever Philip Hammond might say) that’s a dangerous path for any social entrepreneur.

So don’t start a social enterprise if all you want to do is get a grant. Start a social enterprise because you want to be a business that sells something to achieve a good cause.

New politics, a new hope

Is Brexit the rebellion of the voiceless?

No this is not another Star Wars themed blog!

Yesterday evening I attended the Nexit: What next for Plymouth and the South West event organised by RIO and the RSA at Devonport Guildhall. Around 200 people showed up - a sign of increasing politicization maybe and great to see so many engaged people. The waiting list was nearly as long as the attendance list apparently.

So a big turnout. And big ideas were discussed. There were initial ‘provocations’ from Molly Scott-Cato, Green MEP for the South West; George Cowcher, Director of Devon Chamber of Commerce, John Harris, a Guardian political journalist with a penchant for anything non-Westminster and two young people - Joe and Tom from Our Way Tech.

Molly asked for a second referendum, proportional representation and a need to reclaim our country. Citizen’s juries and a ‘progressive alliance’ of Greens, Lib-Dems and Labour were also mooted.

George gave a precise talk about business issues post Brexit. He said a majority of businesses wanted to remain in the EU and that there was still no real vision for what leaving looked like. In the South West we are particularly vulnerable to potential export problems caused by Brexit as 60% of our exports go to Europe. The main point that resonated with me was his direct question to business: “Exactly what ‘red tape’ do you want to change?” There is a lot of bluster about EU regulation but no-one can seemingly put their finger on what they want to remove.

Joe gave an eloquent and heartfelt speech (written on the back of a napkin in an impressive five minutes) expressing his fears about right-wing populism and invoking the spectre of fascism. Tom produced one of the quotes of the night: “A window has been broken - but that is good for people who fix windows.” I was left a bit bemused.

John Harris then gave an excellent talk on his approach, Brexit and the deep cynicism about politics. He said that a leave vote was just as valid as a remain vote and that we need to understand why Brexit happened. He called the Brexit vote a ‘rebellion of the voiceless’. In a telling moment he asked if anyone in the room had voted leave and only one or two people raised their hands.

We then had discussions in table groups. I was honoured to be asked to lead one of these. Our topics ranged widely over education, housing, environment, representation, inequality, economics and more.

We decided to develop our own new political party - the ‘Greater Britain Party’ - taking back the language of ‘great’ and ‘Britain’ from the far right with a new progressive manifesto:

1. Talk about politics in schools and everywhere

2. Proportional representation

3. Lower the voting age to 16

4. Sort housing and jobs

5. Improve environmental protection.

Ok, so some work needed on the detail but it was fun, lively, inclusive, honest and had real conviction.

What I found particularly refreshing was the ability to talk about politics in a community, non-party political setting. It felt natural and engaging. Yes, most people were in broad agreement but judging from responses there was a mix of Greens, Lib-Dems and Labour (new and old) and possibly some Conservatives too.

I think the event could have been improved with a ‘Leave’ key-note speaker and maybe we needed more dissent in the room around the opportunities presented by Brexit. A criticism could be that it was a large number of ‘Remainers’ talking to themselves.

John Harris wrapped things up with a call to arms - to find innovative solutions - one being found in Plymouth’s burgeoning social enterprise movement. His most powerful argument was his last. He said: “Dark forces are at work in the country - any attempt to overturn the referendum result through legal or other means could further disenfranchise the ‘voiceless’ turning them to more extreme politics.”

We must not let that happen.

Ten myths of social enterprise and social entrepreneurship

1. Social enterprises are not-for-profit

WRONG!

'Not for profit' is a tricky phrase. Most social enterprises we see are ‘for profit’ but they dedicate their profits to achieving a good cause. Many social enterprises can also pay dividends from profits to investors and shareholders although this is usually restricted so that a majority of profit is dedicated to social causes.

2. Social enterprises can't pay salaries

WRONG!

Social enterprises can pay salaries and bonuses. A social enterprise that turns over tens of millions of pounds would be justified in paying their CEO a salary commensurate with running such a business. Directors of social enterprises - depending on the legal structure chosen - can also receive remuneration.

3. Social entrepreneurs can’t run a real business

WRONG!

Many social entrepreneurs come from successful business backgrounds. Social entrepreneurs are just like other entrepreneurs - some will succeed, some will change track and some businesses will fail. Most social entrepreneurs we meet are acutely aware of the need for their business to succeed so they can tackle the social issue that they are passionate about.

4. Social enterprises are just small businesses

WRONG!

There are many examples of large social enterprise businesses. Examples include large healthcare providers, big leisure trusts and universities. These are usually multi-million pound businesses with thousands of employees that have chosen social enterprise as their business model.

5. Social enterprises rely on grants

WRONG!

The whole point of being a social enterprise is that you trade to achieve a good cause. This means selling goods, services and products. Many social enterprises do access grants to help with start-up or with certain projects. Our advice is that a social enterprise should aim to use a grant as an investment with a view to developing an income generating idea once the grant runs out.

6. Social enterprises are automatically more sustainable

WRONG!

Social enterprises will only succeed if they can sell their services and products to customers. Many charities have survived for decades by relying on grants. That said, being dependent on grants can be challenging and developing successful, socially enterprising income streams can improve sustainability. Social enterprise should not be seen as a panacea - you need a strong business model, excellent market insight and an ability to deliver what customers want and need. Much like a ‘standard’ business really.

7. Social enterprises are more likely to fail

WRONG!

There is plenty of evidence that suggests that social enterprises are more resilient than their ‘standard’ private sector counterparts. We can speculate on the reasons for this including diverse income streams, social purpose and tenacity of social entrepreneurs. Recent research into longevity of the top 100 PLCs and top 100 social enterprises showed that, over the last 30 years, 41% of social enterprises have survived compared to 33% of PLCs.

8. Social enterprises are not scalable

WRONG!

Social enterprises are no different to ‘standard’ businesses in this regard. If you have a great product or service, a great team, the ambition, the drive, resolve and a clear plan for scaling there is no reason why you cannot significantly scale your business.

9. Social entrepreneurs are only concerned about social impact

WRONG!

Whilst most social entrepreneurs we meet are motivated by social or environmental issues they also understand that their business needs to be profitable to enable them to achieve their good cause goals. Focussing only on social impact without paying regard to finances, marketing, customers and all the standard business issues is a surefire path to trouble.

10. Social enterprises only operate in health and social care

WRONG!

Social enterprises operate in many sections of the economy. There are social enterprises in banking and finance, media, creative industries, business services, agriculture, tourism, fashion, education, entertainment, energy, heritage, housing, sports and more. Pretty much any business could be a social enterprise (maybe not selling cigarettes?).