A Voluntary Code of Practice for Social Enterprises – Draft 2

A Voluntary Code of Practice for Social Enterprises – Draft 2

1. Introduction

1.1. Social enterprises in Scotland increasingly see themselves as part of a ‘community of practice’.
1.2. This paper is an initial draft of a ‘voluntary code of practice (The Code)’ for this self-defining community (the SE community).
1.3. The Code is an assertion of the values and behaviours by which the SE community defines itself.
1.4. The Code is considered necessary to deter private sector businesses from pretending to be SEs.
1.5. The Code is established as a voluntary peer group consensus – by which SEs recognise each other.
1.6. Elements of the Code fall naturally into two groups – minimum requirements – and desirable behaviours.

2. Minimum Requirements

A business which doesn’t meet these basic requirements is not considered a social enterprise

2.1. SEs are businesses operating in the market – through the production of goods and services – and whose primary objective is to achieve social and environmental benefit.
2.2. (a) An SE is distinct from private business in that its constitution will include the legal requirement that profits are reinvested in the business or in the community – rather than distributed to owners/shareholders.
(b) There will also be a clause to insure that on dissolution, the assets of a SE must be redirected in accordance with the social or environmental objectives of the business.
(c) Taken together these two clauses are referred to as ‘the asset lock’.
2.3. An SE is distinct from the public sector and cannot be the subsidiary of a public body.
2.4. An SE is distinct from voluntary sector organisations which do not aspire to financial independence from trading.

3. Desirable Behaviours

The ‘asset lock’ is about totally de-linking business from personal financial gain – which is the defining characteristic of social enterprise. This is what gives SE its power – makes it a genuinely different way of understanding economic activity. These ‘desirable behaviours’ are not seen as ‘tweaks’ to ‘business as usual’ – but as aspects of a new, values-based framework of business. The list is aspirational – for discussion – an attempt to set down where we are trying to go.

3.1. Social enterprise is a part of the market economy – which values social fairness and protection of the planet as preconditions of all economic activity
3.2. These core values define not only mission – but also business practices – which are expected to be ethical.
3.3. SEs will be good employers – promoting fairness – paying a ‘living wage’ and having flatter pay structures than the private sector.  Executive pay will not be excessive.  A maximum ratio of 1:5 between highest and lowest pay is a useful guide.
3.4. SEs are managed in an accountable and transparent way – involving workers, customers, directors etc.
3.5. They aspire to record and ideally measure the social and environmental benefits of their work – to prove and improve social impact.
3.6. SEs try to serve the needs of people before those of capital; they try to attract ‘patient’ investment from sources which support their mission.
3.7. The SE community is not concerned to become ‘bankable’ in the normal sense – and will try to put in place its own mutualised banking services.
3.8. SEs recognise the benefits of small/local scale – when circumstances call for growing large organisations – safeguards are put in place to preserve human scale.
3.9. SEs work particularly well serving a local community – building social capital and self sufficiency. Where SE comes together with the localism agenda – we call it ‘community enterprise’.

4. Implementation

4.1. Once approved by the wider SE Community – individual SEs are invited to adopt the code – display a ‘certificate of compliance’.
4.2. It is intended that the code would be a ‘living’ document – in process of continuous revision – amendments formally adopted at an annual event.  This could include possible regulation of the code.
4.3. This process would be co-ordinated by a voluntary standing committee of 6 SE peers – elected annually.
4.4. It is important that the general public is aware of the code and what it stands for!  This will require effective publicity.

Senscot 24th Nov 11

See word document here