Is social enterprise being coopted by the profit motive?

"WTF is social enterprise?" asks Social Good Stuff 

They make a valid point:

"While sidestepping a definition creates a diverse and inclusive environment, it also puts the value and meaning of social enterprise at risk of being co-opted and misused – much like sustainability, CSR and triple bottom line."

As our late founder asking the same question some years ago put it:

"There is so far no commonly agreed definition. Is an enterprise social if it produces some sort of social benefit? If so, in that sense, many or indeed most traditional businesses for profit can be considered social enterprises. "

He went on to explain the difference. That social enterprise goes where conventional business and trickle down ideology does not attempt to reach, making a point about reciprocity:

'The term “social enterprise” in the various but similar forms in which it is being used today — 2008 — refers to enterprises created specifically to help those people that traditional capitalism and for profit enterprise don’t address for the simple reason that poor or insufficiently affluent people haven’t enough money to be of concern or interest. Put another way, social enterprise aims specifically to help and assist people who fall through the cracks. Allowing that some people do not matter, as things are turning out, allows that other people do not matter and those cracks are widening to swallow up more and more people. Social enterprise is the first concerted effort in the Information Age to at least attempt to rectify that problem, if only because letting it get worse and worse threatens more and more of us. Growing numbers of people are coming to understand that “them” might equal “me.” Call it compassion, or call it enlightened and increasingly impassioned self-interest. Either way, we are all in this together, and we will each have to decide for ourselves what it means to ignore someone to death, or not.'

This was not melodrama, as Axiom News revealed in a subsequent interview:

"Hallman is currently investigating the setup of a multi-million dollar fund offering split financial ROI if needed, that is, a portion to investor(s) and the remainder to P-CED.

"The funds will be directed to concluding a project in the Ukraine which involves funding the training of residents to develop social businesses. Included in this work is supporting children who have disabilities, many of whom have been left to die in secretive locations. P-CED is helping to move these children to safety and give them access to modern healthcare."

As the article reveals, Hallman is arguing the case for a non-dividend distributing approach, warning that too much emphasis on profit will result in social mission being diluted and potential stripped by the usual suspects.

As he had reasoned in the 'Marshall Plan' . Business must make a profit, an absolute requirement for survival but profit needn't be the final bottom line. Profit could be deployed to address a wide range of social problems, including the needs of these children.   

Even in 2007, we were aware of the risk of being coopted, when our latre founder wrote:

“As the 60th anniversary of the Marshall Plan came around in June 2007, noise was emerging within Ukraine of a certain political boss preparing a Marshall Plan for Ukraine. This person was a reputed mob boss — exactly the sort of entity that the original Marshall Plan meant to oppose. It seemed most likely that whatever he came up with would be self-serving, hijacking the label ‘Marshall Plan’ and turning the whole notion on its head. I reviewed the original Marshall Plan and realized that what I had written was, in fact, the definition and spirit of the original Marshall Plan. Thus, in June 2007, I appended the original title with “A Marshall Plan for Ukraine.” After some discussion among trusted colleagues over timing, I published an abbreviated version of the paper in two parts in August 2007 in the ‘analytics’ section of the Ukrainian news journal for-ua.com.”

Today, Ukraine's oligarchs and several members of our own House of Lords, collaborate to do just this. The price tag for this 'Marshall Plan'  is 300 billion dollars.

Going back to 2004, when this model was introduced to the UK he made this point about the profit motive in our business plan: 

"Capitalism is the most powerful economic engine ever devised, yet it came up short with its classical, inherent profit-motive as being presumed to be the driving force. Under that presumption, all is good in the name of profit became the prevailing winds of international economies — thereby giving carte blanche to the notion that greed is good because it is what has driven capitalism. The 1996 paper merely took exception with the assumption that personal profit, greed, and the desire to amass as much money and property on a personal level as possible are inherent and therefore necessary aspects of any capitalist endeavour. While it is in fact very normal for that to be the case, it simply does not follow that it must be the case.

"Profits can be set aside in part to address social needs, and often have been by way of small percentages of annual profits set aside for charitable and philanthropic causes by corporations. This need not necessarily be a small percentage. In fact, there is no reason why an enterprise cannot exist for the primary purpose of generating profit for social needs — i.e., a P-CED, or social, enterprise. This was seen to be the potential solution toward correcting the traditional model of capitalism, even if only in small-scale enterprises on an experimental basis.

"Enterprise for the primary objective of poverty relief, localized community economic development, and social support became the business model which guided P-CED’s efforts and development at a time in the US when terms such as ‘social enterprise’ and ‘social capitalism’ had not yet been coined.

"Traditional capitalism is an insufficient economic model allowing monetary outcomes as the bottom line with little regard to social needs. Bottom line must be taken one step further by at least some companies, past profit, to people. How profits are used is equally as important as creation of profits. Where profits can be brought to bear by willing individuals and companies to social benefit, so much the better. Moreover, this activity must be recognized and supported at government policy level as a badly needed, essential, and entirely legitimate enterprise activity.”

To some extent this began to happen the following year when the Community Interest Company was introduced, and yet, almost immediately, there were arguments about not being able to make a financial return on investment.

Later things went the other way, with the introduction of the Social Impact Bond in which profit was to be made. Clearly, the lower the cost of social intevention, the greater the margin for investors.

Every Child Deserves a Loving Family was an argument for this kind of intervention within our 'Marshall Plan' for Ukraine proposal. It pointed out:   

"While this section has strong focus on financial aspects for reforming childcare in Ukraine, these are just financial numbers to demonstrate that this can be done for an overall, long-term cost reduction to state budget. That is to say, simply, this reform program is at the least financially feasible. The barrier between old and new is the cost of the transitional phase.

However, it is essential to not get lost in financial numbers and budgets. These are only important to show how this will work and will end up costing less money as the new program is fleshed out and the old program is closed. Most important is the welfare of each of these children. There are at this time, for example, numerous institutions across Ukraine where children die on a daily basis from little more than lack of knowledge about how to help them. "

Social business and health is now the focus of a new faculty at Glasgow Caledonian and its the same message, business with a social motive rather than a profit motive. Yet no-one at GCU  or Grameen cares to engage on this subject. 

at GCU orGRA

 

 

 

 

 

Stepping back further, to the 1996 paper for a people-centered business model we made a challenge to the concept of shareholder primacy. The assertion that business can use its profits for social benefit given the mandate of its directors and shareholders.  . The same reasoning will be heard today from the founders of Conscious Capitalism and B Corporations which make no commitment of profit to social benefit :

"We are beginning to see an evolution in capitalism, from a 20th century view that the purpose of business is to maximize value for shareholders to a shared view that the purpose of business is to maximize value for society. Significantly, this transition is being driven, not by government regulation, institutional blame, or partisanship, but by market-based activism and personal responsibility. We are witnessing an historical moment when, rather than simply debating the role of government in the economy or the role of business in society, people are taking action to harness the power of business to solve society's greatest challenges. "

Social Good Stuff now ask . It's a 2 day conference about rediscovering the value of humanity

If social enterprise is being coopted, it's by this kind of promotion which never engages with practitioners but reaches the same conclusions.