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Social Enterprises in the Cultural Sector. The UK case

Scritto da Cristiana Bottigella il 15 Ottobre 2010 in After

Introduction

The late 2000s recession represents a turning point under several different economical, social and cultural aspects and will have, according to many experts, a lasting impact on the way people, organisations and governments handle their finances and, more generally, their priorities. To cope with the present hard times and to be ready for the future challenges, society needs to rethink their ways of doing things, their business models and their long-term objectives.

In this scenario, in which to quote a recent Art Monthly issue, “the credit crunch has revealed just how much the fortune of the art world is tied to financial markets” (Thatcher, 2010), arts organisations must prepare for structural change. Scarce public funding is being asked to stretch further and further and the cultural sector has been challenged to show how it contributes to a wide range of government policy objectives. Old models of grant-seeking and sponsorship will not be sufficient to ensure survival. Arts Council England, with a budget of £1,3 billion to fund 900 arts organisations in 2008-2011, has already announced severe funding cuts and urges organisations to find new funding streams. Private investment and Trusts & Foundations are subject to major financial constraints and cannot ensure long-term commitment. Philanthropic culture, finally, is not yet fully spread and embraced in the UK and it will probably take long time before it becomes significantly supportive.

Over the last twenty years, on the other hand, there has been a concerted push to make cultural organisations more business-like and more commercially sustainable. Even though much of the cultural sector remains dependent on grant funding to a significant degree and few doubt that this will remain the case, the increasing emphasis on organisational quality, best value, strategic planning and sustainability, including from the grant-giving sector, has meant that cultural organisations are generally more aware of their place in “the market” and their need “to compete”. The challenge is to limit reliance on public funding, and, moreover, on a “grant-seeking” attitude in favour of a more entrepreneurial approach to achieve long-term sustainability.

In the government’s multi-ministry Creative Britain policy for the creative economy, published in February 2008, Social Enterprise was claimed as one possible direction to take. Notably, governmental Commitment 12 declared: “Particularly for smaller businesses, social enterprise provides an attractive business model, which affords financial sustainability for individuals and small groups of workers, allows businesses to maintain a focus on creative and artistic as well as commercial objectives, and which can readily encompass commercial and social ambitions within a single business entity” (DCMS, 2008, 42).

Globally, social business enterprises are active mainly in the social, environmental, human rights and gender equality areas. However, the experience of social enterprises in finding innovative entrepreneurial solutions to ensure services are delivered is of significant value to the cultural sector as a whole. Several arts organisations are trying to convert their status into the social enterprise one, looking for new ways of earning part of their income by trading, providing services to the communities and shifting from a grant to a contract-based operational model. Some institutions see social enterprise as a way to reduce their dependence on charitable donations and grants while others view the business itself as the vehicle for social change. But is this really a feasible model for cultural organisations? What other components are necessary for the model to succeed and spread over the arts system?

Defining Social Enterprise

Although the label “social enterprise” is commonly used, its full understanding can be  problematic as there is no shared interpretation of the underlying business models beneath the social enterprise umbrella. According to Defourny & Nyssens (2008) the notion of social enterprise appeared for the first time in Italy in the 1980s (a few years before it emerged in the United States) but it began to circulate in Europe in the mid 1990s. In general, social enterprises are social mission driven organizations which apply market-based strategies to achieve a social purpose. The movement includes both non-profits that use business models to pursue their mission and for-profits whose primary purposes are social. Their aim – to accomplish targets that are social and/or environmental as well as financial – is often referred to as the “triple bottom line” (Elkington, 1994).

In the American context, authors and funding bodies particularly empathise the term “social entrepreneur” to underline the personal commitment of individuals launching new activities dedicated to a social mission while behaving as true entrepreneurs in terms of dynamism, personal involvement and innovative practice. On the contrary, in Europe, although the US approach is gaining some influence, the emphasis has been much more often put on the collective nature of the social enterprise, as well as on its associative or cooperative form.

Ongoing research work characterises social enterprises as often having multiple objectives, multiple stakeholders and multiple sources of funding (Noya, 2009). However their objectives tend to fall into three categories: integration of disadvantaged people through work; provision of social, community and environmental services; ethical trading such as fair trade (Defourny & Nyssens, 2008).

With regard to what constitutes a business under the above definitions, there is widespread agreement that an organisation should acquire at least 50% of its income  from commercial activity before it can describe itself as a social enterprise.

The case of the UK

In 2002, the British government launched a unified Social Enterprise Strategy, and established a Social Enterprise Unit (SEnU) to co-ordinate its implementation in England and Wales. Following large consultation, SEnU adopted a broad definition of social enterprise which is independent of any legal model and could include not only companies limited by guarantee and industrial societies, but also charities and unincorporated associations.

In February 2010 the Social Enterprise Coalition launched the new Social Enterprise Mark. Like the Fair Trade brand, the Social Enterprise Mark aims to increase the visibility of socially motivated businesses. More than this, the mark represents the growing commercial identity of social enterprises and a deliberate attempt to carve out a recognisable niche for such organisations in the business community. Qualification for the mark requires that a business conform to set criteria should earn at least 50% of their income from trade and spend at least 50% of their profits on socially beneficial purposes (Socialenterprisemark.co.uk). The mark has been received with mixed responses and suggestions that the qualifying criteria is not strict enough (Hampson, 2009).

In order to facilitate the formation of new social enterprises, the government has also developed a new legal form called the Community Interest Company (CIC). CICs are limited companies, with special additional features, created for the use of people who want to conduct a business or other activity for community benefit, and not purely for private advantage. This is achieved by a ‘community interest test’ and asset lock, which ensure that the CIC is established for community purposes and the assets and profits are retained within the company, or transferred to another asset-locked organisation. Registration of a company as a CIC has to be approved by the Regulator who also has a continuing monitoring and enforcement role (Cicregulator.gov.uk).

According to the State of Social Enterprise Survey, released November 2009, despite the recession, social enterprises are twice as confident of future growth as typical small to medium enterprises (SMEs), with 48% of SEs responding positively as opposed to just 24% of the formers. Additionally, since the economic downturn began, 56% have increased their turnover from the previous year whilst less than 20% have seen it go down. This is a considerably better performance than SMEs in the UK, where only 28% increased their turnover and 43% saw it go down. The survey also found that 26% of social enterprises could be described as ‘women-led’ – almost twice as many compared to small businesses (Social Enterprise Coalition, 2009).

One of the political changes which led to the growth of the social enterprise sector was the promotion of the out-sourcing of services which were previously provided by local authorities. In these instances contracts are awarded through public tendering. Delivering such contracts requires organisations to have an established business capacity. The availability (or the possibility to acquire) such abilities represent – as the next paragraphs will argue – a crucial factor for the development of cultural social enterprises.

The cultural sector

Although several arts organisations may argue that they have been providing ‘social benefit’ to their community while maximising their earned income for many years, however, it is thanks to the recent developments outlined above that these practices and approaches have acquired visibility and value.

The launch of the Social Enterprise Strategy with the consequent implementation of the Social Enterprise Unit, the Social Enterprise Mark and the CIC new legal form have all paved the way towards the establishment of a social enterprise agenda across the third sector’s activities, arts organisations included. Furthermore, the New Public Management culture and the political changes which led to the promotion of the out-sourcing of services previously provided by local authorities have created the ‘market’ – on an open and competitive tendering basis – in which cultural social enterprises can perform their qualities.

Clearly enough, the fact that cultural organisations may aspire to a social enterprise status implies the recognition that culture can produce social impact, even though there are still important gaps in the way organisations measure and communicate the value of the services they provide (Arts Professional, 2010). In fact, organisations themselves highlight different aspects as catalyst of their social entrepreneurial approach: employment (or strong involvement) of disabled or disadvantaged people, provision of services, entrepreneurial approach, income generation.

The exploitation of these opportunities, where they exist, requires specific elements which either are incorporated in the process of becoming a social enterprise from the beginning or have to be acquired and exercised at the right moment.

According to a research recently undertaken at the London City University and involving several cultural social enterprises from London and the region, the first essential condition for the development of a cultural social enterprise is the commitment of a strongly motivated leader, whose vision and charisma have to be able to persuade staff, Board members and public opinion of the validity of the project and the convenience of the process. For the organisation to grow, however, the right resources have to be present and properly capitalised. On one hand, assets and services for the commercial viability of the project, on the other, experienced and skilled staff for the operational delivery. Finally, a sound internal structure incorporating a department devoted to the development of the social enterprise model and an entrepreneurial (and creative) approach within the whole organisation represent healthy conditions of long-term sustainability.

In addition, four factors which don’t depend on the organisational potential but come as opportunities from the external environment are also crucial. In particular, the existence of dedicated educational courses for social entrepreneurs and the possibility of access to specialized counselling sessions or participation in supporting public programmes represent significant occasions for acquiring knowledge, expertise and improve networking. Lastly, solid external financial investments in social enterprises as well as the possibility of participating in public commission schemes were maintained as inescapable conditions for any cultural social enterprise to achieve that financial resilience and social impact that their status requires and asserts. These last two, moreover, if not seized as an opportunity, might transform into high barriers against the development of the organisation.

Interestingly enough, the study also concluded that there are no considerable differences between the London based arts centres and the ones working in the region. Their priorities, drives and concerns were similar and none of the interviewees ever mentioned any apprehensions in regard of their geographical location.

To conclude, the research demonstrated that social enterprise is a viable alternative for the cultural system to the commonly used funding streams. However, the experience of the institutions involved in the study reveals that converting the organisational status into a social enterprise model is anything but simple work. The process is long and entails personal characteristics, knowledge, resources and opportunities which are not easily found all together at the right place at the right time. In other words, the alchemy works but the ingredients are rare and their combination has to be calibrated wisely. In fact, what is often proposed as a strictly financial alternative, implies social consciousness, high capacities and an entrepreneurial culture which are not easily negotiable.

Although the Social Enterprise Strategy was launched in 2002 with the intentions of favoring the advancement of a social enterprise culture and of facilitating the creation of new social enterprises within the third sector, only recently the social enterprise model has gained some attention within the cultural sphere. Indubitably, the global recession and the present financial climate, while discouraging and making things hard on one side, are playing a catalysing role in the establishment of a social enterprise culture within the creative environment. If this is the case, certainly – and hopefully despite all the difficulties-  we will see the proliferation of more and more cultural social enterprises in the future, as times are becoming harder and dramatic changes are needed to ensure that financial resilience which, in the end, spawns freedom and social awareness.

References
Arts Professional, “Social Benefit Needs Structure”,  in Arts Professional, Issue 222, July 2010
Cicregulator.gov.uk (no date) Community Interest Companies
Defourny, J. & Nyssens, M. (2008), Social Enterprise in Europe: Recent Trends and Developments, EMES
DCMS (2008) Creative Britain. New Talents for the New Economy, London.
Elkington, J. (1998),  Cannibals with Forks: the Triple Bottom Line of 21st Century Business, New Society Publishers, Gabriola Island (Canada)
Hampson, G. (2009), “Social Enterprise Mark isn’t Failing, Says its Boss”, in www.socialenterpriselive.com [1]
Noya, A. (ed.) (2009), The Changing Boundaries of Social Enterprise, Paris, OECD
Social Enterprise Coalition (2009), The State of Social Enterprise Survey, London
Socialenterprisemark.co.uk (no date), What is the Social Enterprise Mark?
Thatcher, J. (2010), “Crunch Time”, in Art Monthly, No 332, Dec-Jan 09-10

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