Community business / Social enterprise
The management committee/board must ensure that the organisation understands and complies with its own governing document, relevant laws, contractual obligations and the requirements of any regulatory bodies.
(Supporting principle to Principle 2 of The Code of Good Governance)
"A social enterprise is a business with primary social objectives whose surpluses are re-invested, for that purpose, in the business or in the community rather than being driven by the need to maximise profit for shareholders or owners." (DETI)
Social enterprises operate as a business as a vehicle for achieving wider social goals. They differ from other businesses or enterprises in that they have the following characteristics:
- They have a social, community, ethical or environmental purpose;
- They generally operate using a commercial business model;
- They are not run for personal profit (but do aspire to make profit)
- They operate on the basis of a set of values
- They have a legal status appropriate to these characteristics
The objectives of social enterprises may vary, but common examples include:
In Northern Ireland, the social economy includes organisations such as:
- Job creation
- Training for employment
- Local regeneration
- Provision of housing
- Helping people save or borrow money
- Integration of people with disabilities.
Social enterprises whose objective is to provide employment for marginalised groups (e.g. the disabled) are also known as social firms (see www.socialfirms.co.uk)
The actual activities of the social enterprise vary as widely as any other business form. In Northern Ireland, they include: IT services, community cafes, housing associations, local enterprise agencies, printing businesses, credit unions etc.
Commercial business model
Social enterprises operate on a commercial basis as a business, with staff members paid at the market rate (although many do also involve volunteers in their activities). Many enterprises or community businesses are trading organisations, competing alongside traditionally run businesses. Often charities will set up a social enterprise as a means of delivering products and services where profits are channelled back into the charity, enabling them to achieve their wider social objectives.
Social enterprises do aim to generate profits. However, the profits of a social enterprise or community business are typically reinvested in the enterprise or channelled into directly achieving their wider social objectives. These businesses are not run for the purpose of generating personal profit for shareholders. Some limited profit share is permitted in certain cases, depending on the legal structure of the enterprise (e.g. community interest companies can pay dividends to shareholders, although the level is capped).
Social enterprises are further distinguished by a set of values that determine the way in which their social objectives are delivered. These values may include, for example:
- Care and compassion;
- Common good; and
- People centred.
There are a range of legal structures appropriate to the purposes and dynamics of a social enterprise, including a couple of new innovations. When choosing your legal structure, it is important to seek advice and carefully research the pros and cons of each option. Each brings its own set of rules and restrictions regarding how the business can be run.
Structures appropriate to a social enterprise include:
- Company limited by guarantee (with or without charitable status)
- Community Interest Company (CIC)
- Industrial and Provident Society (IPS)
- Charitable Incorporated Organisation (CIO)