Minority Report

Minority Report 


 


Regeneration & Renewal


20.10.06


 


 


With a dedicated strategy, councils can give social enterprises a real boost in their work to regenerate local communities, environments and economies. But as Nicola Carroll finds, only a tiny minority have produced such strategies.


 


While researching the state of council support for social enterprise, I kept hearing two words again and again: ‘patchy’ and ‘variable’. Despite the Government’s enthusiasm for social businesses – enterprises designed to create social benefit rather than private profit – and the innovative work being carried out by many councils, in general local authorities’ support for social enterprise is inconsistent. Many commentators agree that the production of a social enterprise strategy can help with coordinating and reinforcing councils’ work on behalf of social enterprises, but research shows that few councils have prepared such strategies.


 


In a survey which asked almost all of England’s councils whether they had a social enterprise strategy, 174 – 53.4 per cent of respondents – said that they didn’t, against just 16.7 per cent which did. Most of the rest admitted that they lacked a formal strategy, but stressed that they were highly active in supporting social enterprises. In these councils, the needs of social enterprise are either considered in other ways – such as through community and voluntary sector pacts, economic development plans or procurement policies – or addressed through sub-regional projects and partnerships.


 


It is worth noting here that councils that do have a social enterprise strategy may have been keener to respond to the survey, so nationally the proportion of councils with a strategy is likely to be lower even than 16.7 per cent; certainly, when researchers pressed a sample of non-respondents for an answer, the results supported this analysis.


 


With so few councils having produced strategies, the question must be: how useful are they in creating an environment in which social enterprise can thrive? Most experts think that a strategy brings coherence when assessing social enterprises’ development needs and opportunities. They also raise the profile of social enterprises within authorities, and formally integrate relevant policies with those concerning other priorities, services and external partners.


 


Sabina Khan, director of policy and research at umbrella group Social Enterprise London, points out that a formal strategy binds a council into funding commitments and offers a degree of continuity if individual officers who have championed the sector move on.


 


Matthew Walsham, policy officer at national body the Social Enterprise Coalition, adds that a dedicated strategy can help reinforce the value of a council’s support work, by boosting the sector’s credibility and creating an over-arching policy framework. ‘It’s not a prerequisite, as lots of local authorities are doing good work without a strategy,’ he says. ‘But it’s certainly a helpful start.’


 


However, some councils argue that formulating a strategy can distract from real action. One metropolitan borough officer says a separate policy is not necessary because social enterprise is covered in her council’s economic development plan. Others, however, plead lack of resources – and, in some cases, a shortage of political commitment.


 


From the perspective of many social enterprises, a local authority strategy is a boon, but not a panacea. Heather Thomas, a director at family support organisation Home-Start Brent, thinks that a strategy would boost social enterprise in her borough by assisting with start-ups, business skills and access to grants and loans. ‘A lot of social enterprises in Brent are just having to get on and do it on their own,’ she says. ‘We need support from the top down, and a strategy would provide that.’


 


However, Belinda Bell, chief executive of Foundation East, a community enterprise in Suffolk, is sceptical about local authority intervention.


 


‘You can’t kick-start from above what should be a bottom-up process and have genuine grass-roots involvement,’ she says. ‘It’s possible to have a strategy that makes no difference whatsoever in practice, or to have lots of good activity and no strategy. What’s more important is having people (in the council) with the leadership skills and commitment to help social enterprises succeed.’ Bell claims there’s too much focus on increasing procurement of services from social enterprises, and some councils understand social enterprises only in those terms. But the sector is much broader than this, she argues, and councils must cater to a wide range of business and governance models.


 


Stephen Sears, chief executive of ECT Group, a social enterprise with a £50 million turnover providing community transport, recycling and sustainable waste services, argues that in Ealing – where ECT originated – the existence of a strategy was immaterial to its success. A strategy should be about broader ‘consciousness-raising’ and mentoring schemes, rather than targeted business support, he says. ‘There are a lot of intermediary agencies, consultancies and support bodies, but not enough business leaders in social enterprise; a strategy should be about developing that peer support.’


 


In devising a strategy, local authorities must deal with a diverse group of organisations whose needs vary widely, but there are a number of common issues. The first of these is political commitment and funding, according to Matthew Walsham, of the Social Enterprise Coalition. He says that a social enterprise strategy needs the commitment of senior councillors and officers, backed up with adequate resources. The needs of social enterprise should be linked to a wide range of agendas, he adds, not just those on regeneration and procurement. Social enterprises and local strategic partnerships may discover some shared objectives, while social enterprises may also benefit from local area agreements on pooling of government funds. What’s more, while public agencies are under government pressure to source more services from the third sector, council departments such as education and environment may find that they don’t need to buy anything from a social enterprise in order to develop a useful partnership.


 


Sabina Khan says that it is important to know what you want to achieve and when you want to achieve it. ‘When drawing up strategies, be specific about what you want your milestones to be,’ she says. Care must also be taken to manage the tension between the social and business aspects of social enterprise, she adds: it can cost more to operate ethically. It may be useful to develop management tools, such as an agreed system of measuring social benefit, and factor the results into decisions over procurement contracts. This enables councils to make realistic comparisons between private and third sector contract bids.


 


Council procurement can help social enterprises to shift from dependence on grants to funding through contracts, and many local authorities are concentrating efforts on building the sector’s capacity to bid. Like Walsham, Khan warns that, ‘procurement should not be the only focus’. Nonetheless, she says that many social enterprises are at different stages of development, and some may need support to reach the bidding stage. In particular, some need help in understanding how they can work together to deliver large contracts and deal with the associated financial risks and legal considerations.


 


When asked about their major challenges, social enterprises routinely highlight lack of business and management skills and lack of access to funds. They also agree that they want to develop their own capacity and autonomy, rather than being reliant on local government. They feel that while a local authority strategy can bring coherence to business advice, networks and funding sources, it should encourage enterprises to share skills and resources, rather then doing everything for them.


 


The problem of lack of funding can be tackled by helping social enterprises access grants and loans. But Steve Wyler, director of umbrella body the Development Trusts Association, believes that as grant funding sources such as the Single Regeneration Budget and European Regional Development Fund dry up, a better solution is to help enterprises build up an asset base. ‘Local authorities should find ways of making investments,’ he says, rather than giving out grants. Assets can enable enterprises to raise finance and secure loans. However, a Regeneration & Renewal Special Report published earlier this year (R&R, 17 February, p18) found councils slow to hand over properties to social enterprises and the voluntary sector.


 


Paul Mooney, chief executive of social enterprise support agency Third Sector Enterprises (3SE), says that councils should develop clear, five-to-seven-year strategies to support social enterprises and ‘make strategic investments in key social enterprise opportunities, operating almost as venture capitalists’.


 


With so many issues to consider, drawing up a social enterprise strategy is a balancing act between creating clear responsibilities and objectives, and allowing enterprises the freedom to develop in their own way. Councils should keep their policies constantly under review, says Wyler. He argues that flexibility is essential: social enterprises come in all shapes and sizes, and have sprung up in response to a variety of circumstances. Strait-jacketing them with restrictive bureaucratic procedures could stifle innovation and disrupt their ability to react to the needs of local communities.


 


John Pearce, author of Social Enterprise in Anytown, says: ‘A good social enterprise strategy is an enabling strategy; it doesn’t try to control what happens, but helps the sector develop its own capacity.’ After all, the sector is made up of a fiercely independent and self-directing group of organisations, well used to setting their own targets, operating independently and building their own markets in a difficult business environment.


 


Social enterprises will not slot neatly into a one-size-fits-all policy designed to meet Government’s ambitions for the sector – but if councils can develop strategies flexible and powerful enough to accommodate them all, the potential benefits to local economies and people are huge.


 


This article is based on research initiated by Nicola Carroll as part of a dissertation on local authority social enterprise support, produced for an MA in urban regeneration and development at Manchester University.


 


TEN TIPS FOR PRODUCING A STRATEGY


 


1. It is important for local authorities to include a clear definition as to what constitutes a social enterprise: the term is used to refer to various types of organisation, and a definition is important in separating social enterprises out from the wider social economy and the voluntary and community sectors.


 


2. A firm commitment by councillors and officials to social enterprise, backed up by adequate officer time and resources, is vital.


 


3. A social enterprise strategy should aim to bring coherence to networks and other social enterprise support services, and coordinate resources that are available locally, regionally and nationally.


 


4. In order to assess the added value created by supporting social enterprises, it may be useful to begin by mapping current activity and setting clear targets.


 


5. Links between social enterprises and the local authority’s economic development, regeneration and social inclusion objectives should be spelled out. The way in which social enterprise feeds into other strategies, particularly those on economic development, the voluntary and community sectors and procurement policies, should also be made clear.


 


6. It is unwise to concentrate solely on procurement when looking at social enterprises’ support needs. Not all social enterprises wish to deliver council services, and they are not always the best-placed organisations to do so.


 


7. Ensure that a strategy will help social enterprises to access funding and develop their own capacity to operate independently, rather than trying to do everything for them.


 


8. Build into the strategy ways to help social enterprises involve disadvantaged individuals and under-represented groups, and incorporate techniques to promote equal opportunities.


 


9. Promote the use of performance management tools such as ‘social auditing’ or ‘triple bottom line’ accounting, which can help demonstrate non-financial benefits of social enterprise activity.


 


10. Make sure that the strategy allows for flexibility. Many social enterprises have developed ad hoc in response to particular local circumstances, and will not flourish in an overly-bureaucratic or restrictive environment.


 


LIFE WITHOUT A STRATEGY: SHEFFIELD


 


Sheffield City Council has a long history of working with social enterprises and the sector’s needs are considered in its policies on procurement, economic development and the voluntary and community sector. The council also works with organisations such as Sheffield Community Enterprise Development Unit (SCEDU), itself a social enterprise, which runs services to support its peers.


 


More than £40m worth of council services are delivered through third sector organisations each year, and the council is committed to expanding social enterprise opportunities. The authority does not have a formal strategy, arguing that it doesn’t want to over-complicate matters. But some question whether Sheffield Rebuild, a social enterprise which carried out millions of pounds worth of council work until it folded earlier this year, might have fared better if there had been such a strategy.


 


Dave Thornett, SCEDU’s chief executive, suggests that a strategy taking into account social benefits in the award of contracts might have given Sheffield Rebuild a boost in the highly competitive construction market in which it operated. The enterprise’s competitiveness was weakened by the extra costs associated with delivering environmental and social benefits, he says; the use of social auditing or other such measures of non-financial performance might have enabled it to win more contracts and remain viable.


 


The council is now working with SCEDU to examine such issues, and actively considering introducing a strategy. Karen Lythe, the council’s programme director for strategy and investment at the council, says: ‘Procurement rules limit discretion, but social auditing is a way to show how social enterprises add value, and a social enterprise strategy can recognise that.’


 


LIFE WITH A STRATEGY: LANCASHIRE


 


Lancashire County Council’s economic development unit, Lancashire County Developments Limited (LCDL), has a clear strategic framework for social enterprise support. This is set out in an annual delivery plan, which outlines priorities and targets, and a community regeneration team action plan.


 


LCDL also aims to link social enterprises to other council departments and external bodies, works to align social enterprises’ activities with regeneration priorities, and helps social enterprises to develop as commercially-viable businesses.


 


At St Augustine’s New Avenham Centre in Preston, the council’s strategy has been important in improving financial viability and community benefits.


 


The sports and community centre, which opened last year, is owned and managed by St Augustine’s Regeneration Trust, a company limited by guarantee.


 


Social inclusion is a key part of its role: a series of health and education programmes are in place for unemployed people, single parents and disabled people, and the trust earns income from public funders by meeting agreed output targets.


 


Recognising the value of such a community-led service provider, LCDL funds the post of the manager appointed by the trustees – thus reducing the trust’s financial outgoings, while helping to align its service delivery priorities with those of the council.



 


Partly as a result, the trust is on course to achieve financial viability within three years; the norm among new businesses. LCDL’s managing director, Steve Dean, says that having a clear strategy has helped the centre to succeed.


 


NATIONAL STRATEGIES


 


While councils ponder the merits of social enterprise strategies, national politicians in England, Northern Ireland, Scotland and Wales have all produced or are finalising their own strategies.


 


Social Enterprise: A Strategy for Success was published by the Department for Trade and Industry in 2002. The publication of a new social action plan for England is expected next month.


 


In Northern Ireland, social enterprise is covered within the Department of Enterprise, Trade and Investment’s three-year strategic plan for the social economy sector, which includes annual action plans and progress reports.


 


Meanwhile, a draft strategy for social enterprise was issued by the Scottish Executive during the summer. Consultation is now complete and the final strategy is expected to be launched before the end of the year.


 


Finally, the Welsh Assembly Government produced its Social Enterprise Strategy for Wales last summer.