The rumbling debate about ECT and its takeover and its CIC status (or lack of, now its recycling arm is privately-owned) has continued over on the Society Guardian’s Joe Public blog, with Patrick Butler asking "Does it matter if a social enterprise is bought up by a big corporate?". It’s a fair question, and a pretty decent summary of what the ECT Recycling takeover looks like from an ‘outsider’ point of view.
What’s been interesting has been the comments that have followed from ‘insiders’ such as Craig Deardern-Phillips, Jim Brown and others (I’m SocEnt on there, btw). Beyond the calls for clarity on the detail of the situation, which I echo, it’s been interesting to see how have been categorised (in some cases by themselves) as on the left or right of social enterprise. In summary, this seems to mean those who are concerned with community governance / ownership / democratic accountability are on the "left", while those who are (more) comfortable with influencing, partnering and being absorbed by the mainstream are on the "right". In the case of ECT, as this illuminating post by Rod Schwartz highlights, this means it could be viewed either as a cause for jubilation or concern
As Rod (somewhat provocatively!) writes: "Readers of our blog will know that we normally applaud when successful social entrepreneurs sell out"….before going on to state that ECT maybe didn’t get as good a price as it could have: "Price is not everything but we cannot help but feel (and did ourselves
believe) that ECTR would have been worth more. I do not know if this
went to auction or not." Well, it would be nice to think that ECT was looking for a strategic partner to scale up, and that that is how this all came about. But the reality, which Rod hints at in his talk of ECT’s bankers "not being very supportive" is that this was more of a short-term solution to an imminent problem. ECT already had a relationship with May Gurney, so to that degree the partnerships were being thought about. But this wasn’t a planned auction.
This shareholder vs. stakeholder terrain is too simplistic to divide into left and right, though. Neither stance is easily applied to a political party currently….and social enterprise has always been viewed as being on that centre ground (third way territory) where economic progress meets social justice. What it might instead demonstrate are the different segments along a spectrum from voluntary and charitable through to for-profit. As we go along the spectrum (and as legal structures and investment streams / returns change), different people get more uncomfortable and draw a (personal) line. And people start on that spectrum at different ends (oh, hold on, maybe it is left and right ;0). This is why people like Rod and Nigel Kershaw have berated the CIC for not allowing large enough investment to scale up social enterprise-type organisations, whilst the ‘other camp’ have pointed to the CIC’s lack of rigour around democratic and transparent ownership, and accountability to the community. Or, as one commenter puts it on the Joe Public post:
"I see the immersion of any not-for-private-profit social enterprise into
the ‘for profit’ sector as a surrender to the very set of practices and
values which cause ingrained poverty and exclusion in the first place"
Where do we stand? Well, SSE has never backed a "legal structure" as the solution, and believe that all sorts of different organisations (charities, social enterprises, for-profits) can have positive social impact. Our belief is that it is up to the social entrepreneur to choose the ‘right’ structure for them given their proposed activities, mission, financing, governance and so on. The vast majority choose a non-profit structure (regd. charity / co. ltd by guarantee / CIC etc), but some that have had the greatest social impact have had a for-profit structure. What is definitely needed is a push for all organisations in this field to measure their social impact and communicate and report transparently to their consumers / customers / beneficiaries / community / stakeholders / funders………regardless of their structure.
A final point is that the ECT story should raise the debate about the fetishisation of scale, and the best (most sustainable and most consistent) routes to achieving that. If it’s wanted / right / needed. Because there will be more organisations coming along the ECT route over the coming years.
“What is definitely needed is a push for all organisations in this field to measure their social impact and communicate and report transparently to their consumers / customers / beneficiaries / community / stakeholders / funders………regardless of their structure.”
Thanks for that Nick, and expanding on that topic, there’s a crucial need for people to really assess what they are on about, from the outset; Too often, social enterprises claim to alleviate poverty, improve well-being, reduce crime, etc. Very ambitious and generous, but totally unrealistic, because not measurable and not broken down to exact and SIMPLE criteria. The issue with many social enterprises is that they are hanging on to criteria for success that, in fact, belong to their funders or investors. Not theirs. They also have to catter for many stakeholders and end up spreading themselves too thin.
And last but not least, despite all good intentions, they are still reporting quantitative data when it comes to evaluate their work…
This is why we are pushing for a real social impact measurement training, and lobby for it to come first, well before training about governance, legal structures, business plan writing, etc. Knowing what your social impact can or cannot be, if you can cope with it, how we plan to inform others (staff and stakeholders) about it, how we can say no to funders because they don’t fit… and what it means to be successfull… (selling out? Winding down? Duplicating?)
That’s going beyond left or right thinking, it’s going forward…
Couldn’t agree more, Servane. As part of the SSE programme, I do an evaluation workshop which aims to get people to understand their story of how they make change. Doing this at the earliest stage means not only hardwiring the processes (as simple or as complex as they wish / can resource) into the organisation from the outset, but also makes it a useful sanity-checking planning tool to ensure that what they are aiming to do is leading to the change they want to make happen.
My workshop is based on NEF’s storyboard / impact mapping, which I’ve found extremely useful, particularly when introducing the concept of evaluation and measurement, which is largely viewed with suspicion, fear and boredom….
I’ve already made the point elsewhere that this is not an ideological issue, but more a question of developing good social enterprise practice. Fully agree with the position that there is no single best governance or legal structure for all social enterprises. However, that shouldn’t dstract attention from the need to improve the CIC regulatory framework. Whilst calling for greater community accountability within CICs, I also support the argument that the asset lock and dividend cap are too onerous, and actually discourage community investment. That’s why many organisations are turning to IPS legislation as an alternative. CIC regulations need reform, to make community investment and engagement a more attractive option.
Picing up on the social impact side of this debate, I agree with the points Servane makes, although measuring social impact doesn’t create the social impact. We all need to learn HOW to run a high-impact social enterprise.
ps Pleased to know who SOCENT is!
Yes, don’t know why I ended up with Soc Ent: legacy of registering for something else on Guardian Unlimited, I think.
I basically agree with pretty much all you write above Jim. Just because a variety of legal structures are suitable doesn’t mean we shouldn’t improve the ones we have got for people to choose from.
I also pretty much agree that it’s not ideological, but about clarity and good practice. The impact point is well made: I was just writing to someone about rewarding actions and funding organisations that are achieving things, rather than rewarding their business plans….
On the high-impact stuff, have you come across the Forces for Good book?
[http://tinyurl.com/4eydaz] Looks a touch American/scale-at-all-costs for my taste, but perhaps helping raise the level of debate.
Never been one for all this techy blog stuff but the media monitor is raising my awareness. I really believe we have to have this debate and pleased to hear today that SEC are going to initiate some ‘discussion’. First of all I think the suggestion that social enterprise is understood by 1 in 4 of the population is complete tosh. More like 1 in 20 if we are lucky and then how many really have an understanding? If we present such a broad spectrum from a slightly cuddlier corporate to a charity that does a bit of trading how an earth can we expect anyone to understand especially when a major player sells out. I am ‘right’ in the sence that I see social enterprise as a business model (and therefore totally inappropriate to be in the Third Sector with VS) but I am strongly ‘left’ when it comes to Governance. I want both sides. That is an investable business model that is innovative and entrepreneurial (NOT funded) but is democratic in its control, locked into this to prevent its sale and based on a balance of social, environmental and economic drivers. It should be business driven by passion not by greed. I see that Craig D-P has been saying something similar. I have argued for years that we should not ‘pay market rates’ as what we should be offering is something different that is about quality of work experience. I see the CEO salaries for the larger charities spiralling ever upwards as they say they have to attract the top quality managers. Shouldn’t we be different in recognising the value of everyone with a sense of proportion between the lowest and highest paid or are the super SE’s of the future going to pay an elite of managers mega-bucks. I have heard so called social entrepreneurs whinge about the restrictions on their entrepreneurial drive by the Governance structures and that they are considering going into mainstream business. Get a grip! See how you like it when a pension fund turns the screw to squeeze higher dividends.
I have always supported the view that we need clarity and that we should be a model that people aspire too. I also believe that we are at a turning point when society has to decide whether to continue on a never ending growth model or to step back, analyse and turn to a more sustainable future based on quality of life and environment (umm sounds like social enterprise to me). Some may see this as hippy-s..t but I reckon that we are well on the way to it working and I do not appear to be suffering for the cause.
By the way SocEnt I am Nigel from HHW aca ECONS always ready to stir it up.
Nice to know who ECONS is too! Very interested you think SEC is going to initiate a discussion about all this, given that they have remained so silent since the first announcement about ECT Recycling, and the realisation that Stephen Sears’s explanation that it was “business as usual” was not going to hold. It will be interesting to see what the Social Enterprise Magazine, or even Society Guardian, is able to unearth about the future of ECT Recycling. As I understand it, Stephen Sears has now retreated to the “no comment” position.