What is a social enterprise?
Like a spin-out company, a social enterprise is a brand new legally independent company created to further develop research ideas and turn them into products or services.
What makes a social enterprise unique is that it is a business that is established to deliver a specific social and/or environmental mission. Social enterprises are a way for the impact of your research to be adopted and the desired change to be achieved. Maximising profits is not the primary goal as is the case with a traditional business.
However, regardless of whether a social enterprise is operating for profit or not for profit, the innovation behind the company must have the potential to generate sustainable revenues and be attractive to funders, including trusts, foundations or governmental and/or social impact investment funds.
As with any other business, the social enterprise will seek to make a surplus and maintain commercial viability. The distinction lies in the ways that the social enterprise operates, including who they employ, how they use any surplus, and the guiding principles of the organisation.
In Scotland, social enterprise has no legal definition, but it is defined using a Voluntary Code of Practice with accepted benchmarks. According to the Scottish Government, the Voluntary Code of Practice for Social Enterprises describes social enterprises as a community of organisations with the following characteristics:
- They trade in a marketplace with the primary objective of social or environmental benefit.
- Any profits are reinvested back into the business or for the benefit of the people it exists to serve, rather than distributed to shareholders or owners (an asset lock).
- On dissolution, any assets are reinvested in another organisation with similar aims and objectives (an asset lock).
- They aspire to financial independence through trading, which sets them apart from other charities and voluntary organisations.
- They operate outside of the direct influence or control of public authorities.
Social enterprises work in almost every sector of the UK economy, employing millions of people, and combine commercial success with their mission. They include larger organisations supplying goods and services to businesses and the public sector, as well as smaller organisations transforming communities and supporting the lives of disadvantaged people.
According to the Social Enterprise Census in 2019, there are over 6,000 social enterprises in Scotland, supporting more than 80,000 jobs and contributing £2.3bn (Gross Value Added) to the Scottish economy.
Depending on where you incorporate your social enterprise, the final legal form can be anything from charity to mission-driven businesses, but the model chosen will support the project’s mission as well as funding opportunities.
Social enterprise and social innovation: Innovating the Future
