Clarifying positive impact

Finding the real meaning

As the effect of Silicon Valley ripples through each country, sector and entrepreneur, I’ve witnessed both the positive and negative changes.

An abundance of money is being pumped into startups all over the world, whether or not they actually have a working prototype or in some cases, a feasible idea. Fine, it’s your money (well kinda), you can invest it where you want.

Then you had the philanthropists, who were looking to donate large amounts of money to green or social projects. Excellent, with both government funding and donations decreasing, there’s a funding gap to be filled.

More recently, social entrepreneurship has found its footing and is starting to become prevalent in some countries. Legal structures have been formed, governments have set up policies and strategies, and universities have started teaching it. Now we have impact investment, and funds for impact companies.

What is impact investment?

In a nutshell, impact investment follows the usual rules of any investment. The investors are looking for a return over a number of years and will also have equity in the company.

However with impact investment the return isn’t just financial, but can be linked to a number of social or environmental indicators. These indicators tie in nicely with what the organisation sets out to do generally, or through a specific project.

For example, if an impact fund invests in a company selling affordable water filters, the fund will look for two things:

A financial return — the product itself has to make a profit in order for the company to be able to offer a return on investment at a certain percentage

A social or environmental return — the product has to have a positive impact on the buyers life that can be measured and thus relayed back to the fund.

What’s happening now?

As more and more funds have opened across Europe and the world, we have started to see a large change in the way they classify impact and social return.

You have the ‘purists’ who focus on specific problems such as hunger, housing or education, but then there are other funds that leave it open to interpretation.

Is xyz, a tea company really having a positive social impact on their drinkers so much so that they receive these funds? Perhaps if they are employing a certain community, developing educational opportunities there and paying them a living wage, most of which wouldn’t be possible otherwise.

Is abc, a new taxi app really changing the way we commute in a way that returns something valuable to all? Perhaps if the fleet is only made up of electric cars, or there are subsidised services for certain customers.

Have a think yourself at recently awarded funds. Would you class them all as impact-focused companies?

Impact is impact, no matter large or small though.

That’s the argument put to me when I ask. As long as you can come up with an appropriate reason for getting the funds, then it seems that any impact flies.

I think we have to really ask ourselves a few questions:

Are there not enough social entrepreneurs out there generally?
Or not enough applying for these funds that impact gets diluted?
Or do the funds want to prioritise the financial return that ‘purists’ may simply not be able to offer?

Whatever the reason, and whatever your point of view, it’s great to see that there are funds now for the causes, projects and organisations that are committed to producing real, positive, social and environmental impact. If you’re one of them, make sure you access the finance made for you, and stop abc and xyz to it!

The least well-known yet most famous social enterprises

Hidden in plain sight

Photo by Kris Mikael Krister on Unsplash

Most of my presentations start off in the same way.

“Do you know what a social enterprise is?”

Normally the answer is either a ‘no’ or a ‘kinda’. However as soon as I mention a few companies as examples, most of the audience has a better idea, whilst others are in shock. They ask how it’s possible that they know of the company, and in some cases shop their regularly, but never knew they were a social enterprise.

The answer is simple. Social enterprise is such a new term that it’s easier to market the specific things you do, rather than using an umbrella term which should hit the nail on the head.

Patagonia

A certified B-Corp which just gets better and better each year in terms of their social and environmental impact, this global brand sells high quality outdoor clothing and gear.

In 8 years, their B Corp Impact score has increased from an inspiring 107.3 to a whopping 151.5. Considering most businesses score around 51 points, shows you how much they do.

They are on a constant adventure to stop the negative impact their business may have on the environment, analysing the way they design, manufacture and transport goods, improving and solving the problems they face.

None of this would have been possible, if it weren’t for the original founders of the clothing brand, along with partners from similar clothing lines. Mostly adrenalin junkies with a passion for nature, wildlife and conservation, their personal mission meant that the company has always lived and breathed its mission.

The Tompkins couple bought up land in the Patagonia region over the last 30 years to ensure it didn’t fall foul of private exploitation. Then recently their NGO donated 1 million acres of this land back to the government as national park land.

Ben & Jerry’s

Many people are surprised to hear that Ben & Jerry’s are a social enterprise, given that the company that actually owns them is the corporate beast Unilever.

However, when the Ben & Jerry’s story began, both Ben and Jerry created the company for financial, social and environmental purposes. They wanted the best conditions for their staff and only to have a relationship with farmers who raised and treated their dairy cows in a way that met their standards.

Ben & Jerry’s were bought out, chopped and changed for sure, however they exist as their own legal entity, and have always maintained their social mission to buy the best milk from the farmers that care. The proof is in the pudding — as they say — so check out their B Corp page where they scored 100 last time round.

HCT Group

One for our English readers more than anyone else, and even they might be a bit confused.

Surely you’ve heard of Transport for London (TfL), Metro in Leeds and MCT in Manchester?

HCT Group run a number of services up and down England, including bus services for these big players. Alongside this mainstream business, they run school buses, and transportation for people with special needs, be it physical or learning.

Being owned by a charity means that their profits are put back into even more community transportation projects, meaning the most isolated and most vulnerable can live independently.

Check out their routes here, who knows you may be using them already!


These are just a few examples of famous social enterprises who many people didn’t know the good they were doing. Within the sector, we often say at how bad we are at marketing ourselves. Therefore we’re always grateful when you, our customers, can share our cause and recommend us to those around you.

If you buy from a company that has a great social or environmental cause at its core, remember to tell everyone about them!

Balancing your head and your heart

The battle of social entrepreneurship

Photo by Nathan McBride on Unsplash

I was recently training a group of current and potential social entrepreneurs about key stakeholders and how to ensure their buy-in at all stages from idea to execution. We discussed various methods, channels of communication, tools such as Social Return on Investment and how to share stories in a convincing and moving way.

I also got the participants to do a small quiz on how they make decisions. Overwhelmingly, the outcome was that most people supposedly used their head rather than their heart, however at the end of the workshop one lady came up to me and shared her current situation.

She had been running her own social enterprise for 9 years, with success, ensuring schools have access to clean water in Tanzania. However the idea came from the need for social change and better resources, with the financial side, and thus the business, following this. She had recognised herself in what I had said during the workshop.

“With a large numbers of social enterprise coming from the third sector, quite often people care so much about the social goal, they might, to some degree, neglect the financial sustainability.”

Her question was simple — how do you solve this problem?

Having been seen as both ‘the capitalist’ and ‘the socialist’ in different organisations, I offered up three solutions.

Get some sales training

One big problem is simply that owners or employees of social enterprises have never done any selling in their lives. They’re not equipped to sell, they don’t know the basic tricks of the trade and because of this lack of education and experience, they avoid selling as it’s out of their comfort zone.

If this sounds like you, then think about how you could improve your sales technique. Perhaps it’s about learning how to use persuasive language, storytelling or valuing what you have to offer, or a combination of these things and more. Put together a list of your strengths and weaknesses of your selling style, fill in the gaps through coaching and education and then get the experience through getting out there and doing it.

Set financial goals for yourself linked to your social outcomes

You may be a great salesperson but making a lot more money than you actually need to, might not be in your psyche. If you’re not motivated by money then sometimes it’s pointless setting sales targets. Each month you have a good idea of your outgoings, so you probably settle when you sell enough to cover those costs and nothing more.

Instead of having sales targets, have impact targets. Remember that every sale you make could lead to a great impact. For example, if you sell another water filter, that’s 10 more people with access to clean water or if you provide consultancy to one more business, that’s a further x amount to spend on an awareness raising campaign.

By swapping the sales target with an impact target, you’re appealing to your ‘heart’ more than your ‘head’.

Get someone else on board

They say fake it until you make it, but perhaps even when you swap the cold hard cash for warm fluffy (but still concrete!) outcomes, there’s still no faking it. Instead, you just want to work on the product, the story and the impact.

The last option for you is to think about getting a salesperson on board. It could be in the form of a business partner or an employee, but either way you’ll have to work closely with them to ensure the ethos of the company is present throughout.

This was one of the fears of the participant, that by getting a salesperson who is driven by the dollars, the social side may be undermined. This definitely doesn’t have to be the case, it’ll just be down to you to find balance, communication and results.


Need to work on your pitching skills, or to figure out what to charge for your product or service?

Types of Social Enterprise — WISE

A people-centred approach

Photo by Raoul Ortega on Unsplash

One of the oldest forms of social enterprise is called WISE — a work integration social enterprise. This is a social enterprise whose main priority is to provide employment to a specific group of people, often hard-to-employ or vulnerable.

Existing WISEs cover a wide spectrum of sectors, from clothes-making to factory-line work, and from landscaping companies to massage parlours. Just like social enterprise, you will find examples of WISE across the world, and perhaps in your own back yard.

WISEs used to be predominantly run adjacent to a non-profit organisation. This way they could provide tailor made work positions so their service users could find employment. It also meant that care could also be delivered at the same time, increasing the chances of successful employment and sustainability for both the company and individual.

Every WISE is different with its reasons for establishing itself for the sole person of employing a certain group of people.

Here are some examples as to why WISEs might be set up.

To provide a safe and stable route back to work

Imagine you’ve been out of work for over two years. You haven’t had a steady income, nor have you done a nine-to-five for a long time. Your skills might be a rusty, and maybe you’ve sort of forgotten how to socialise or behave in the workplace.

This description could be someone returning from maternity leave, someone off sick for a long period, someone leaving jail, or someone recovering from an addiction, to name a few examples. Such a wide range of individuals yet all with a similar common need — a safe place to work where they know the people and the pressure is off a little.

Many WISEs have been set up just for this — a stepping stone to get back into the working world. Perhaps through a contract job to give the person the confidence to find a job after. Or maybe that individual will always work in this safe and stable place. In some cases, certain WISEs crossover with support workers from their or another non-profit to provide a holistic service so that those starting work again are fully supported.

To offer flexible job positions

Not everyone has the ability to work full time, nor regular hours. This could be down to health, time availability, other responsibilities as well as many other factors.

With this in mind, some WISEs were set up that understood the needs of their workers, and could offer the flexible job position that meant those individuals could work to the best of their abilities or to a timetable that suited them.

It may sound like a nightmare to some business owners — a workforce of flexible work positions. However with a bit of ingenuity and innovation, and when your first priority isn’t profit, these WISEs were able to flourish to provide immense social impact. Don’t forget though — WISEs are generally still for profit organisations.

Fortunately, we have seen a shift within the private sector to be more flexible when it comes to working hours and contracts, meaning employment is a lot more accessible than it used to be. Therefore the need for this sort of WISE has decreased over the years.

To meet a need in the labour market

With sectors fluctuating, governments changing their employment priorities and different occupations moving in and out of fashion, there are often skilled people who find themselves out of demand.

Shipping communities, mining communities or where the garment industry was once rife, have all changed. These industries have, for the most part, vanished or moved abroad. Where they used to employ half a village or town, we find large groups of unemployed people.

Certain WISEs have set up to reemploy them in the same industry. You see this quite often happen with tailors, craftspeople and farmers. WISEs saw the opportunity to harness the local human capital and turn it into a sustainable business.

On top of this, we can think about all the skills needed in the aforementioned industries. Instead of creating the same sector, some WISEs take this certain group of people and reskill them. By using their basic knowledge from their previous profession yet applying it in a different way, they can create new sectors and new jobs for them.


If you work with individuals needing help to return to work , or if you’re thinking about starting a social enterprise to meet one of the needs above, then perhaps you should look at existing WISEs to see what models work for them. Reach out, do a bit of research, and make a good plan so your social enterprise will thrive. 

Solving problems through social enterprise

Using the five whys to break things down

If you start thinking about all the global issues out there, you’re likely to get pretty depressed. They’re so big that you sometimes feel unable to change anything, and even if you try to change things it’s on such a small scale that it’s hard to see the impact.

Instead, take a step back from that and look at your local issues — either in your country, city or street. Now things should be looking a bit more manageable and hopefully more rewarding when it comes to getting out what you put in.

Whichever problem you end up choosing to tackle, it’s how you break it down that makes sure you are able to change it and have a wider effect, or even, a ripple effect.

Activism in action

Recently in the British news we’ve heard a lot about Greta Thunberg, an activist who started by simply refusing to go to school every Friday. This was all in protest against how corporates and governments were not safeguarding her future due to their environmental policies. Fast forward six months, and over a million students worldwide have joined in with her protest.

Sure, she is the exception to the rule, but she broke things down and looked at how she could make in impact. Instead of writing letters to large companies or the EU, or her Prime Minister, or the local Mayor, she thought about where she could make a bigger impact — at her school and in her community. She turned a problem where so many people feel helpless into one where she feels empowered. Now she’s having those talks with decision-makers, and we’ll see whether she can have any impact at that level.

Tackling your own problems

Before thinking about potential social enterprise ideas, we need to think about a few problems happening locally, as many feed into global problems. I recently asked students at my former school to name a global, national and local problem.

Here is what they came up with:

  • plastic waste
  • Brexit social divide
  • growing knife crime

Three problems that international bodies, governments, and whole civil sectors are trying to solve on a daily basis. The only way we, as individuals, can really have an impact on these is to dig further. For this we can use the 5 why method, a technique originally used by Toyota to help with rooting out faults and errors in their production and manufacturing.

Problem: Growing knife crime
Why 1: More young people carrying knives
Why 2: To protect themselves
Why 3: Scared of being mugged
Why 4: Don’t be feel safe on the streets
Why 5: Lack of police presence

Creating solutions

Now the bigger problem has been broken down into five reasons, some of which are easier to try to resolve than others as us as individuals.

For example, in order to feel safer on the streets, there could be some self-defense and conflict management training. To reduce the number of those carrying knives, there could be knife amnesty days and awareness building around the dangers of carrying your own knife. To protest or counteract the lack of police presence, there could be petitions, research on hotspots, community action to create safe routes or walking groups.

There are many ways to answer the ‘whys’ for this question, and we can do this exercise a few times to come up with different reasons.

How about social enterprise

You could argue that most of the solutions above are things that should get government funding or be delivered by the civil sector, and therefore turning them into a business idea is a lot harder.

This said, with the three models of social enterprise, there are many ways in which the above solutions could be funded.

Self-defence or similar training could be run on a profit-basis, which could then fund free training for the target audience of this problem. Kapap Academy from Singapore do just this.

The knives handed in as part of the amnesty could be upcycled into other products or resold appropriately, and the profits could go towards further amnesties or awareness days. One charity doing something similar is Steel Warriors, turning these knives into outdoor gyms.


Think about the problems that you and your community facing. Break them down individually by asking five whys, and see what solutions you can put to those smaller causes. Once you have some ideas, you can start thinking about completing your business model canvas — could it make money from trading on the market? Then you’re onto something social enterprise. If not, then you still might have a good idea for a nonprofit or charity.

Types of Social Enterprise — Embedded Models

A seamless model of impact and profit

Having previously looked at the external and integrated models, we move to the third model of social enterprise — the embedded model.

Impact and profit sources are the same

This model rarely exists unless the organisation was born as a social enterprise, as advanced planning and strategical thinking is required.

Put simply — it’s when the product or service you are offering, directly solves one of the social or environmental needs you set out to solve. Each unit or hour that you sell, has a direct positive impact which goes towards achieving your mission and vision.

It goes a lot further than the integrated model with this direct approach, as everything done is intentionally. A product design phase may have taken place to adapt or improve an existing product or service on the market to make it social enterprise appropriate.


Example 1 — Sanergy

One of my favourite social enterprises to talk about, Sanergy not only provided a simple solution to a growing problem, they went further and ensured there was a circular economy within what they do.

First off, they build what are effectively toilets in a portable style for slums and communities without toilets. These are franchised out to local entrepreneurs that can then make money in maintaining and offering them. Straight away, the toilet provides an income for an individual, whilst providing everyone else a safer, cleaner place to do their business.

Next up, the waste is collected from all of the Sanergy toilets. This means there isn’t illegal dumping or the need to build complex infrastructure that requires a large amount of time and funds, and can lead to the upheaval of communities. Once again, this provides further jobs.

Finally, with that waste, they treat it and turn it into further products such as fertilizer that local farmers can then use instead of potentially harmful chemicals.

It goes without saying, the amount of impact Sanergy must have on the community is mind-blowing, all through leasing of toilets!

Example 2 — Grameen Bank

Grameen Bank was founded by perhaps the most well-known social entrepreneur Muhammad Yunus. They started off by offering microloans to people needing money to start or expand their business.

A fairly common service in developing countries right? Grameen Bank went many steps further to ensure it had an embedded business model.

The loans mainly target female entrepreneurs across Bangladesh, a country where in some parts women are shunned when it comes to owning or running a businesses.

Furthermore, it is a co-operative, and anyone borrowing money from GB is a member, meaning trust and participation is needed in order to successfully apply for a loan.

Finally, the interest charged on the loan is reinvested in other individuals applying for a loan. It is in this way that the simple offering of a loan, has turned into a sustainable social business where strategical decisions are influenced by those borrowing. The funds available to others across Bangladesh has grown exponentially, since there isn’t a group of stakeholders who are paying themselves bonuses.

Just like with Sanergy, the value comes directly from the ‘product’ itself — promoting equality, encouraging entrepreneurship, independence, financial literacy and economic growth.


This is social enterprise at its purest, where a problem was identified and a solution directly developed to solve the problem. Through the problem solving process, stakeholders, sustainability and impact were taken into consideration to produce a cycle that keeps giving.

Perhaps you have a social or environmental problem that you think you could solve? We would love to help you make it viable and sustainable. 

Types of Social Enterprise — External Model

When your operations and impact don’t overlap

In a previous blog post we looked at the different types of social enterprise model, and this time we’re going to go one step further by discussing some examples of the external model.

The external model is very interesting because it actually means any business can jump straight into being a social enterprise without necessary having any social or environmental goals linked directly to their product or service.

This does not mean however that the company can have a negative effect on either. They should still meet all the other social enterprise requirements when it comes to governance, transparency, stakeholder involvement and employee satisfaction.

Moreover it usually means that while they are busy selling and maximising their profit, there will be another organisation focused on solving a need. The need doesn’t necessary have to be linked with the social enterprises main operation either, which has enabled the funding of hard-to-fund groups through this model.


Example 1 — Ginerosity

One example of the external model is Ginerosity, a gin distillery social enterprise based in Edinburgh, Scotland. They ultimately produce and sell delicious gin all over the world. What kind of social or environmental goals do you think ginmakers would have? Protect the juniper maybe, or create more gin-tasting tours?

Nothing like that. They partner with other social enterprises or nonprofits to finance and provide vulnerable young people the change to access education, training or jobs. The profit generated from the gin goes directly to this cause, which is why we call it an external model.

Example 2 — Thankyou

Another example is Thankyou, a social enterprise based in Australia who have now extended their operations to New Zealand too. This impressive social enterprise spends 100% of their profit on solving global issues and partners with the likes of Unicef and Oxfam.

However their products don’t directly target those causes like other social enterprises do, but instead there is an external connection between them. For example, they sell their own bottled water, from which the profits go towards water projects around the world. They sell their own line of nappies, the profits of which go to births and baby health all over the world.


These two examples of many external model social enterprises, go to show how no matter what you sell or offer, there is a way to be a social enterprise and have an amazing impact of society all over the world. Some people may argue that it would be hypocritical for certain sectors to operate in such a way and then claim to be having a positive impact.

We, on the other hand, believe that external models can provide a way for many companies to move into social enterprise, before aligning the rest of the operations accordingly.

Applying the Theory of Change

Demonstrating your social enterprise’s worth

If you work for a non-profit, social enterprise or do anything that aims to have a positive social or environmental effect, then you might have thought about your theory of change.

Your theory of change should show how what you do, has an impact more far reaching than just on your customers and users. It should also show how you aim to create impact for longer than just the instance they buy your product or use your service.

It’s a strategic piece of work that can set down the foundations for your business, test your assumptions and ensure you have indicators to show the world how great you are. So let’s delve a little deeper into what’s involved.


When you started your organisation or project, you would have seen a problem you were hoping to solve. This provides your context that your theory of change relates to.

On top of this, you would have most likely stated your mission and vision. Ultimately the goals you, as an individual or group of individuals, are hoping to solve. Think of those goals again and translate them into something that we could think about measuring.

Goals / Context

For example, instead of an all reaching and broad‘Improve the lives of those affected by addiction’, we could look more specifically at ‘Decrease deaths linked to overdose’, ‘Improve the physical and psychological wellbeing of drug and alcohol users’ and ‘Improve the physical and psychological wellbeing of carers of drug and alcohol users’.

theory of change assumptions context inputs outputs outcomes context

Now we know where we’re heading, we can start looking at what we’re doing by jotting down what we activities we carry out to reach our goals. These are known as our inputs.

Inputs

In this example they could be things such as ‘Provide education about drug and alcohol at schools’, ‘run weekly meetings for addicts’ or ‘provide volunteer or job opportunities at the social enterprise.

theory of change assumptions context inputs outputs outcomes context

These inputs lead directly to an output, and they will sound very similar.

Outputs

For each educational course in a school, 30 students will receive 4 hours of information about drugs and alcohol.

For every weekly meeting, 15 individuals with an addiction will attend.

Of the volunteer/job opportunities, 3 individuals will take up this offer.

theory of change assumptions context inputs outputs outcomes context

So far, so good?

In fact many grants or contracts these days will only ask you to report this back to them with similar information, however they have become very output driven, without really thinking about the short, medium or long term impact of what they are funding. We know that it’s not just numbers that matter, but also what you’re offering and the quality of the service or product.

This is why we now think about the outcomes, some of which are easy to measure and some of which are challenging to. Furthermore, at this stage we need to think short, medium and long term in relation to what you’re doing. If you run a business, perhaps your long term could be from 10 years to a whole generation. If, on the other hand, you’re just looking at a year long pilot, then your long term could be between 3 and 5 years.

I’ll leave that up to you, and for now I’m going to focus on the outcomes for those taking up our volunteer/job opportunities, since this could be more relevant to those reading.

Outcomes

Short term — better and more structured routine, less likely to commit minor offences, unlikely to drink/use during the working day
Medium term — improved social skills, improved self-confidence, work ready, open to coming off unemployment benefits, new and better friendships outside of old ‘circles’
Long term — employed elsewhere, stronger personal relationships outside of old circle, no offending, not drinking/using or in control of drug/alcohol use

theory of change assumptions context inputs outputs outcomes context

You can now see that we have completed the bulk of our theory of change. We have looked at what we are going to do, how we are going to do it, and the effect over time we hope it to have on its users. One thing still remains, and that is our assumptions.

In everything we do, we assume that people will react a certain way, we predict that doing x will lead to y, and that we will achieve our goals. In both the business world and social sector, this doesn’t always happen, which is why we need to analyse our assumptions to make sure we don’t trip up.

We can look at our assumptions between each stage, and when we ask ourselves these questions, we can then strengthen what we are offering.

Have you ever heard of the NGO that gave out laptops to a village in Sub Sahara Africa, only to later find they were being used as paperweights? They’d made a lot of wrong assumptions — that the locals needed laptops, knew how to use them and had the power to run them, and ultimately didn’t reach their goal. Let’s not make the same mistake!

Assumptions

Inputs to Outputs

  • Users want to volunteer/work
  • Users want that sort of volunteer role/job position
  • Users will turn up as agreed to volunteer/work

Outputs to Outcomes

  • Users at a stage in recovery where reduction of using is possible
  • Users stick to the schedule given
  • Users will be physically/psychologically able to volunteer/work full time

Outcomes to Goal

  • Job secured leads to improve physical and psychological wellbeing
  • Job secured doesn’t lead to a return to old habits
theory of change assumptions context inputs outputs outcomes context

In this example, I have limited the assumptions for each stage, however it is important to list as many as possible and answer them prior to starting your project or organisation. The ones that are easier to answer can be removed when you feel you have adequately answered or countered it.

Putting together your theory of change should always be done with a wide range of stakeholders, to help combat these assumptions and really define what will work.

When I was part of setting up the social enterprise we used service user involvement to define how it would work that would make it more attractive to potential volunteers and employees. We involved them in the visual identity, branding, product list, product selection, setting of hours, role allocation and so much more.

They felt ownership from the beginning, which ensured many of our assumptions were solved. We offered flexible shifts, a relaxed work ethic, smart uniforms, suitable perks and everyone was trained to be a barista. They grew with confidence, made new friends, solved old problems and broke their own prejudices as well as fought stigma against addiction.

One only lasted a few months, he shared his views that it wasn’t right for him, not hands on enough and he didn’t want to be in that location. Others moved on to other jobs, and one or two still work their part time today.

The theory of change helped us take an idea, and turn it into reality to meet our goals. It’s not a complex thing to do, it doesn’t take weeks to do, and will really help you connect to your cause.

Give it a go and feel free to share what you’ve done or let us know if you’d like some help putting it together – michael@ensoco.co.uk

Originally posted at https://medium.com/@michaelfreersplit/applying-the-theory-of-change-e1f0f570ec12

How much profit should go towards your goal?

Reinvest, spend or share the wealth

A key element which puts the social into social enterprise is the way you spend your profits. Out with the idea that only shareholders or investors should benefit from the hard work of your company. Instead, it’s now time to invest in the wider community.

However as you navigate the literal world of social enterprise you will see a range of regulations or recommendations. Here we look at what exists in terms of asset locks, commitments and suggestions.

Legal structures, definition or certification

Community Interest Company (CiC), United Kingdom

Over in the UK, you can legally register as a social enterprise, locally known as a CiC. Once registered, the asset lock and dividend cap come into place. These ensure that the profit is either retained within the company or used to meet its social or environmental goals. This currently stands at 65%, meaning the rest can be paid out as dividends to the traditional shareholders or investors.

Social Traders definition, Australia

With no legal structure in Australia, things aren’t as clear cut as in the UK. Therefore many turn to the definition used by Social Traders in their FASES report, where it states that the majority of profit/surplus must be reinvested. Given that a majority can be 50.01%, any company that does this, either through reporting or constitutional locks can be classes as a social enterprise

Benefit Corporation, United States

Not to be confused with Certified BCorp, the Benefit Corporation is a legal structure with different rules on reporting per state. The main difference is that it gives the board the opportunity to make decisions based on both financial AND social reasons. This signifies a shift from the previous focus on a financial duty to shareholders. However there is nothing related to paying out dividends nor reinvesting profits.

What’s best for social business?

Three countries, three different set of rules. They do all protect the need for the triple bottom line, to ensure the organisation is able to make the social or environmental goal as important as the financial one. Which one goes far enough? There are arguments that dividend caps can share of investors, but this is why there is now a movement in the ‘impact investment world’.

Ultimately I would say, for trust purposes with both customers and stakeholders, having a legal requirement that a set percentage has to be committed, is better. You can build your business model around this, you can plan short, medium and long-term investment on it, and you can boast about it to the world.

What do you think is a reasonable percentage for reinvestment?

Originally published at https://medium.com/@michaelfreersplit/how-much-profit-should-go-towards-your-goal-167fe95a465a

Dear Social Enterprise,

It’s time we looked at our relationship.

I’ve fallen in love with you over the last ten years. Finally, I thought, the best of the private and civil sector can come together to solve social and environmental issues both big and small, and I can be a part of this world, of your world.

However right now, I feel like we’re going through a tough spell. It seems like not everyone likes you so much, and when people start doubting you, I have to admit, I start to second-guess my own feelings. I know I shouldn’t be pressured by my peers or by people I don’t even know, but sometimes it can be overwhelming.

“Why do you love Social Enterprise?” I’ve been asked on a number of occasions, and I tell them why I love you, with all my heart. “But why would you do that?!” they continue, and all I can say that, for me, it comes down to a feeling of what’s right or not.

I’ve been mulling over what they’ve said for a few months now, and I feel like I understand why not everyone is convinced by you, or even worse, they don’t even know you exist. I’m going to share the ‘why’ with you now, and hope we can fix these problems together.

You’re complicated

When I have to explain what you are exactly, I have to think about who I’m talking to. Where they’re from, what they do and why they do it.

I have to find examples that they can relate to, because not everyone knows Patagonia or Sanergy.

Then, I have to explain the legal nitty gritty about you, which in some cases doesn’t exist and instead I talk loosely about strategies and plans.

You’re just not so easy to define, and everyone has their own ideas of what you are, in some cases linking you to things such as socialism, communism, or hippies, instead of just doing good.

Your parents didn’t raise you so well

It’s easy to blame the parents, but lets face it, you were born out of the third sector. Your parents have loads of heart, and are perhaps idealists, but quite often lack the ‘head’ to steer you into being a real enterprise, and not just a charitable cause dependent on grants and donations.

They always needed your other relatives to join in and help, sometimes financially, but most often with leadership and guidance. This isn’t necessarily a bad thing, but when Uncle Unilever and Cousin Phillip Morris are giving advice on solving social or environmental problems, you should really take a step back and think.

You’re too quiet

When I walk into a room of business graduates, and start talking about social enterprise, I see blank faces I’m stunned. How the hell do these guys not know about you. I try to shout your name from the rooftops, promoting, education and consulting wherever I can, but it seems so many others aren’t.

Quite frankly you still haven’t found you voice. You haven’t shown people what you can do. You need to think about your PR and marketing which at the moment is close to non-existent.

Our relationship doesn’t have to be exclusive, I am in fact happy to share you with the whole world. I know you also want this, as it’s part of your goal that you often talk about. So please, please, please, find more spokespeople to represent you better and inspire others to start some sort of relationship with you.


I don’t know if anything in this letter to you is new, perhaps you’ve heard it from others but I just wanted you to know that I won’t lose faith in you. I will always sing your praises, and I will continue developing ideas with you in mind.

But we need to work on our relationship together, to make it stronger, and to stop people questioning whether it’s right or not.

Are you in?

Originally posted on: https://medium.com/@michaelfreer_2342/dear-social-enterprise-5fa3a4c3fd60