The Australian Centre for Philanthropy and Nonprofit Studies, qut
Chapter 18: Social enterprise and giving
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- Social enterprise as giving and volunteering vehicles
Chapter 18: Social enterprise and givingDr Sharine BarthCentre for Social Impact, Swinburne University of Technology IntroductionThis chapter examines the role of giving and volunteering within social enterprises, as well as the way in which social enterprises contribute to and influence giving and volunteering. Social enterprises are distinct from traditional nonprofit organisations (NPOs) in that they combine business and charity practices. A form of hybrid organisation, social enterprise sustainability depends on advancing both social mission and commercial performance. The need to walk a fine line between business and charity has implications for resource management and organisational legitimacy. It is therefore important to understand the role of giving and volunteering in the context of social enterprise as they face unique challenges to other social economy organisations. This review summarises the available literature and the main debates that are emerging in the field. The importance of managing the needs of multiple stakeholders and various income streams is a central theme in the literature around social enterprise management. Income sources can affect social enterprise legitimacy, and how social enterprises transition from grants and donation-based funding towards social finance and loans is a key issue. The legal structure of a social enterprise is also an important consideration as this can place constraints on the ability of a social enterprise to receive charitable donations. The review also highlights how the institutional environment is an important determinant for social enterprise access to resources. Collaboration between social enterprises and universities is an emerging trend and is more developed in the United Kingdom (UK), given concerted policy and advocacy efforts to support inter-sector collaboration. The social enterprise concept is not new, with co-operatives (one of the earliest forms of Western social enterprises) emerging in the mid-19th century (Simmons and Birchall 2008). However, the last two decades has seen social enterprises become a growing global phenomenon, which has been attributed to a decline in state involvement in the provision of social services, technological advancements and the marketisation of the social sector. Despite increased interest in social enterprise an internationally-accepted definition of the term is difficult given the way that social enterprises have emerged in different countries. Each institutional environment is unique and has shaped the way in which social enterprises have developed and are defined. While there are different understandings of the term it is generally agreed-upon that the trading of goods and services distinguishes social enterprise from other social economy organisations. This is reflected in Barraket et al.’s (2010, 4) definition. Social enterprises are organisations that:
are led by an economic, social, cultural or environmental mission consistent with a public or community benefit trade to fulfil their mission derive a substantial portion of their income from trade, and reinvest the majority of their profits/surplus to the fulfilment of their mission. It is important to recognise that social enterprises are diverse in their purposes and structures. The metaphor of the ‘SE zoo’ describes the many ways in which social enterprises combine social and market goals (Young and Lecy 2014). One way to understand the diversity of social enterprises is based on their origin and development path as illustrated in the typology displayed in Table 18.1. Table 18.1 A typology of social enterprise (Spear, Cornforth and Aiken 2009, 266)
Despite differences in type and founding origin social enterprises are distinguished from traditional NPOs and charities in that they adopt market-based principles to fulfil their social mission. For example, in the UK 72% of social enterprises earned between 76% and 100% of their revenue in their marketplaces (Social Enterprise UK 2013). As well as relying on earned income, it is not yet clear how social enterprises attract and use philanthropic donations and volunteering and whether this differs across social enterprise type and founding origin. While international comparisons are not possible without a standardised approach and definition of social enterprise, attempts to map the social enterprise sector have been made in the UK, Europe, Canada and Australia. Available country-specific data-sets and research on social enterprise include: The UK State of Social Enterprise Survey 2013 Finding Australia’s Social Enterprise Sector 2010, and BALTA Social Economy Survey 2008. International contextThere has been growing attention among government and policymakers over the last few decades into social enterprise as vehicles for social and environmental change. The UK in particular has seen increasing political and policy initiatives by government to grow and develop the social enterprise sector (Mason 2012). Despite increasing demand for social enterprise, research in the field is nascent, particularly around the various ways social enterprise utilise a wide range of resources. International research has begun to focus on social enterprise as hybrid organisations as they combine the organisational forms of both businesses and charity (Battilana and Lee 2014; Chikoto and Halicki 2013; Doherty, Haugh and Lyon 2014; Jager and Schroer 2014). In addition to earned income, social enterprises (particularly at the start-up stage of development) rely on philanthropic grants and bequests, individual contributions and government grants. However, it is not yet clear how social enterprises manage this mixture of monetary and non-monetary resources, such as volunteers, pro bono services and in-kind services (Lumpkin et al. 2013). VolunteeringThere has been scant research into the experience of volunteers specifically within social enterprise organisations. With the exception of a few UK studies into volunteering in charity shops (Maddrell 2000; Parsons 2004) the majority of studies tend to examine voluntary activity within the nonprofit context more broadly, with little distinction between organisational types. Given the hybrid nature of social enterprise there is growing recognition that social enterprises need to develop competencies in social enterprise management because of the unique mix of both employees and volunteers (Doherty, Haugh and Lyon 2014; Royce 2007 ). However, human resource advice for social enterprise has been piecemeal (Doherty et al. 2009) and it is yet unclear what operational tensions are associated with managing a diverse workforce of both paid and volunteer staff. Similar to traditional NPOs, social enterprises also benefit from pro bono services and other in-kind gifts such as employee volunteering. Yet again there are few studies that examine these practices specifically within social enterprises. Examples of corporate mentoring of social enterprises include The Crunch Business Mentors in Australia and the Social Enterprise Mentoring Program set up in 2010 in the UK. Much greater research is needed into the experiences of social enterprise with these programs and how they may be used at different stages of enterprise development. Collaboration between social enterprises and universities in order to build social enterprise capacity is a growing trend in the UK, which has been supported by The Higher Education Funding Council for England, and UnLtd which ran a scheme in 2012–13 to help universities build their social enterprise capacity. Universities can provide in-kind support, such as mentoring and advice, as well as connect students with social enterprise volunteering opportunities. Partnerships between social enterprises and universities vary in purpose and scope and include various forms of social enterprise support including: research staff enterprise support work placements with social enterprises business development labs support for start-up businesses, and seed funding (Universities UK 2012). Examples of university and social enterprise partnerships include: Social Enterprise Zone Leeds University University Community Fund University of York, and Social Enterprise University Enterprise Network Plymouth University. GivingIn addition to earned income, social enterprises also often partially rely on grants, gifts and donations (Ridley-Duff and Bull 2011). Other financial avenues are gaining greater attention in the context of social enterprise with the emergence of social impact investing and Community Development Funds (CDFIs). However, these practices differ from traditional philanthropic giving as they focus on giving to generate social or environmental value and at the same time ask for a nominal interest payment. It is therefore beyond the scope of this review to investigate the emergence of this form of market-based giving among social enterprise. Government fundsThe UK has seen the greatest government interest and policy developments in social enterprise funding with examples such as the Social Enterprise Investment Fund. Introduced in 2007 to provide support for social enterprises in delivering their capacity to provide health and social services, the initial budget amounted to £100 million to be dispersed as a mixture of grants and loans. However, evaluation of the Soscial Enterprise Investment Fund later found that 86% of investments were in the form of grants and only 14% were in the form of loans (Hall, Alcock and Millar 2012). Grant funding was found to be particularly important for social enterprises ‘starting up’ as they were often not in the position to make interest payments. Similar government-supported funds have been made available in Australia through the Social Enterprise Development and Investment Fund; however, a significant difference has been the focus on repayable finance rather than grant funding as was the case in the UK. The institutional environment plays an important role in determining the types of support available for social enterprise. Social enterprises at various stages of development require different forms of capital. How social enterprises transition from grants and philanthropic giving towards more diverse development capital is of growing interest (Thompson and Williams 2014). For example, the skills and capabilities of a social enterprise may be tied to their experience with managing charitable donations and grants and therefore can hinder their ability to access other forms of finance (Sunley and Pinch 2012). CrowdfundingCrowdfunding has garnered much attention in the media as a potential source of fundraising for NPOs, for-profits and social enterprise. However, little is known about the implications and functions of crowdfunding in the social enterprise context (Clarkin 2014; Lehner and Nicolls 2014). While donation-based crowdfunding has been a long-established means of capital for NPOs, social enterprises differ to traditional charitable ventures in their pursuit of financial and social goals. The hybrid nature of social enterprise may influence their choice of crowdfunding models and the target audience. Crowdfunding is no longer limited to project-based funding only and can include debt or equity shares (Lehner 2013). From a social enterprise perspective crowdfunding may offer a suitable answer to the financing needs of social enterprise as ‘crowd investors typically do not look much at collaterals or business plans, but at the ideas and core values of the firm’ (Lehner 2013, 290). However, the extent to which social enterprises use crowdfunding and in what forms (donation/equity-based) is unclear. Individual givingNPOs with attached social enterprises may face particular challenges with how to manage funding sources such as grants and donations. A study in the United States (US) examined how social enterprise activities affect an individual donor’s likelihood and willingness to make financial donations (Smith, Cronley and Barr 2012). The authors suggest a potential crowding-out effect, whereby the average donor response to social enterprise activity was a reduction in donations. This is in contrast to Herman and Redina (2001) who found that most donors and volunteers have little interest in the sources of funds for NPOs. They argue that those who do pay attention to commercial activity approve of any activity that advances the mission. These studies, while not generalisable to all NPOs, raise questions about understanding donor behaviour in response to social enterprise activity. It may be that the perspectives of donors who give modest amounts may differ to those who give larger amounts (Smith, Cronley and Barr 2012). Donor perceptions may also differ depending on the founding origin of the social enterprise, for example NPOs with attached social enterprises as opposed to those that are established as a business from inception. LegitimacySocial enterprises are often described as multiresource and multistakeholder organisations. The dual mission of social enterprise means that stakeholders have different and sometimes competing views concerning the balance between commercial and social missions (Doherty, Haugh and Lyon 2014). A number of studies have raised the concern of mission drift, in which the social objectives of the social enterprise are sacrificed to achieve financial sustainability (Pache and Santos 2013). A shift in organisational mission from social towards more commercial priorities can impact on stakeholder perceptions and social enterprise legitimacy (Dart 2004). However, moving away from philanthropic donations and grants towards social finance and loans may be necessary for social enterprises seeking to grow and scale-up activities. At this stage of growth there is increasing pressure for the social enterprise to demonstrate financial viability and return on investment. Performance measurement and this need to demonstrate financial viability to attract investment becomes increasingly important for internal and external legitimacy (Luke, Barraket and Eversole 2013a; Mannetti 2014). Yet, how social enterprises continue to use and report grant and philanthropic funding while seeking to attract commercial sources of finance deserves further attention. The complex mix of organisational inputs (in-kind donations, volunteers, government grants and commercial income) complicates evaluation measures (Burkett 2010; Nicholls 2009) and the ability to attract loan finance. Given the need to balance dual missions and satisfy the demands of a range of stakeholders it is important to understand how various income streams can impact on social enterprise legitimacy and either support or constrain social enterprise development. Public policy debatesAround the world there have been attempts to recognise the legal structure of social enterprise as this can determine their legitimacy as organisations. New legal structures such as the UK Community Interest Company (CIC), L3C in the US, and the Italian Social Cooperative all represent public policy to legitimise social enterprise. For example, in the US the L3C emerged in part because of the tax framework, which restricts the ability for NPOs to raise capital (Young and Lecy 2014). These newly-established legal structures differ in each country and may not fall under traditional nonprofit regulatory regimes (Esposito 2015). It is therefore important to note that some legal structures may constrain the ability for a social enterprise to attract charitable donations. For example, the CIC in the UK does not have any of the tax advantages that traditional charities enjoy (Department for Business Innovation & Skills 2013). Similarly, donations to L3Cs in the US are not tax-deductible as a charitable contribution because it is a for-profit entity (O'Halloran 2012). In Australia there is a lack of common legal status and operating model to identify social enterprise. One policy debate that is particular to the UK context is whether charities are substituting commercial revenue for grants and donations and whether the two income streams are complementary to, or substitutes for, each other. In the UK there has been a significant push by government to encourage charities to become more businesslike. As such, the implications for a nonprofit sector’s ability to manage both income streams is of growing interest. McKay, Moro and Teasdale (2015) examined a large panel dataset of the annual returns collected from registered charities during 2002–07. They found that that between 2002 and 2007 there was a significant increase in the proportion of overall revenue attracted from commercial sources. At the individual charity level an increase in commercial revenue acted as a partial substitute for grants and donations, meaning that there was a trade-off between the two income sources. The authors argue that this challenges the UK Government’s Big Society agenda with a dual emphasis on commercialisation of third sector organisations, while also increasing philanthropic giving. The finding that the two revenue sources are substitutes for each other also raises important questions for how charities and social enterprises are able to manage different income streams. Social enterprise as giving and volunteering vehiclesThe generation of social capital is often discussed as an output of social enterprise activity. Social capital refers to the development of ‘trust, civic spirit, goodwill, reciprocity, mutuality, shared commitment, solidarity and cooperation’ (Ridley-Duff and Bull 2011, 83). As such, government and policymakers, particularly within the UK, have promoted the value of social enterprises in community development. Social enterprises often represent grassroots action for sustainable development and can be sites of innovation for addressing environmental and social issues (Seyfang and Smith 2007). A case study of social enterprises in two regional towns in Australia found that social enterprises are contributors of social, economic and cultural capital in a community. However, the institutional environment has an important role in either constraining or enabling social enterprises’ potential as development actors (Barth et al. 2015). Directory: wp-content -> uploads -> 2016 2016 -> 2017 afoCo Landmark Scholarship Program 2016 -> Instructions for the Preparation of Camera-Ready Contributions to the Conference Proceedings 2016 -> Step student Scholarships for Year 10-13 2016 -> The united church of canada 2016 -> Idan raichel biography – May 2016 Brief Producer, keyboardist, Lyricist, composer and Performer Idan Raichel 2016 -> An introduction to centre’s interventions expanding access to justice 2016 -> Sanchar Shakti 2016 -> Unit analysis should help here. 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