Friday, August 14, 2009

Do Intentions Matter in Social Enterprise?

Do Intentions Matter in Social Business?

I was talking the other week to a mate of mine with a commercial background who told me he thought that social enterprise was a was a `slippery concept'.

His big point is that the line between `social business' and pure, for-profit business' is actually misleading.

`How so?’ I asked.

`Well’, he said, `think of mobile phones in Africa. There is this company he knows that is mad for making money. So mad in fact that they risked a lot of capital, time and energy on sticking mobile phone infrastructure across a load of African countries. Tricky places to do business. Lots unpleasant Goverments to deal with. High risks’.

He continued `The company is doing OK and money will be made. But the bigger net effect is that lots of African entrepreneurs are now able to develop businesses, build up the economy etc, thus producing a lot of more `social benefit' than, say, a maize-growing co-op run by a social business. A “double-bottom line”, if ever you've seen one!’

`So’, he asked with a flourish,`Which is the more convincing social business? The one doing more good (whatever the starting intentions) - or the one with all the right intentions, ownership models etc.?’

I sat and I pondered. One on hand, my friend's view is a rehash of Adam Smith - the idea that selfish intention translates into communal benefits.

On the other though, he raises an interesting question: Might he actually be right - to a point? That certain ordinary companies' outputs - like the mobile phone one - can also produce quite clear `social benefits' which, were they produced by a social-firm, be celebrated in the end of year social accounts.
And, leading from that, could such a firm be rightfully garlanded as a social business?

The response to all this from the majority in the social enterprise world would always be that the mobile phone co. is not social enterprise. Both the lack of social intent and private ownership would count them out, regardless, it seems of how much good they do.

Where am I ? What it comes down to, I guess, is whether a social business should be defined mainly by the production of socially accountable outcomes (in this case the development benefits produced by mobile phone use in Africa) or whether it always has to defined in terms of intention, the way it is run, its ownership structure and so on.
I personally think that outcomes (what really happens) should have a greater bearing than the way things are put together – though I do also think these things matter too.
Therefore for me, the mobile phone company is a kind of social business. Not quite in the same way as most readers of In Touch – granted – but if their business generates massive social returns, I guess it has to has to be, doesn’t it?

So far so philosophical.

But ask yourself this. The phone rings. Its a 21 year old who had just been given £5m in their trust fund to change the world. He wants your advice.
Knowing what you know now , how would you advise them to do with it in order to make the biggest social benefit? £5 million into a series of CICs - or into those funky guys putting mobile phones into Africa who are looking for their next slug of investment?

I think I know what I'd be saying.


Martin said...

As with social accounting and evaluation - the unintended consequences and potential negative impacts of economic activity are important with this.

The fact that the mobile phone company creates (some)socio-economic benefits is clear - great! But as historians like Felipe Fernandez Armesto and John McNeill have shown - all technology has the potential for negative consequences. As a company they are unlikely to be as bothered as a social business about where all the materials for their phones came from (e.g. Coltan and associated conflicts over resources), the conditions in which they are made or how they're company is financed - in an age when we desperately need a new financial system.

Secondly, the mobile phone one is a bit of a 'slippery' example itself if seeking to make wider points about economics.

Corporations have been talking about 'third generation corporate citizenship' - and the potential for coporations to make a signficant contribution to addressing poverty, exclusion and environmental issues for years. The point is that such work co-exists with much wider cycles of destruction from the rest of the corporate community (at the moment)

And anyway don't Grameen have a mobile phone social business?

Thanks for the post - v.useful to think about and the opinions i have. Enjoyed it.

Craig Dearden-Phillips said...

Hi Martin, I think you broke the record for the fastest response to one of my blogs. Thank you. Your point about unintended consequences is very well made I think.


Rob said...

Hi Craig,

This is an interesting question, and much more debateable than your last one (The Stone Roses album is genius - fact!).

I'm not sure where the comparison stops. Food companies are all social enterprises? Pharmacuticals are? Probably not.

On the other hand, not all social enterprises do any good do they? Organisations with what they perceive as good intentions often don't help and invariably succeed (as they see it) and make something worse (as others see it). It's the same as traditional charities - the ownership protocol doesn't in itself mean social benefit will follow - as an extreme example the US gun lobby is comprised of many charitable organisations.

Equally there are many profitable organisations who give great social benefit and make profit as a result. I would argue the Stone Roses fit into that category, as does The Guardian, Channel 4, Penguin books, etc. etc.

I don't think there's an answer to this question!

Rob Greenland said...

A good post Craig, and an important issue. Cliff Prior from UnLtd tweeted yesterday: Why is social enterprise defined in UK as majority profits retained for social use rather than by social impact achieved? Another good question.

It's why I like the term social business over social enterprise - personally I'm increasingly interested in lots of different businesses which take their social impact seriously - some with traditional "social enterprise" structures - others not. Some of them will bring up issues around what's done with profits - just as some social enterprises bring up issues about what they do with direct and indirect government subsidies.

I think as we hit some tough times over the next few years there will be an increasing emphasis on the impact achieved, rather than on where the profits go and who owns the business. Engaging outside of the "safe" world of social ownership brings a lot of challenges, but potentially massive rewards in terms of social progress.

Rob 'Arris said...

An interesting debate (i cant believe you find this more entertaining than debating music and cultural influence though Rob........!). Semantics are damn annoying and when you throw in meaningless acronyms they become even more foggy and useless.

Craig, you know where i sit on this one so strap yourself in.... "Social Benefit" is an interesting concept in itself - i could blog for hours on that alone but i will attempt to keep it snappy and to the point. The vast majority of third sector organisations are financed and commissioned to provide some level of "social benefit" and that is where the vast majority of activity within these organisations is focussed - this work, however socially beneficial, is not benevolent (nor do commissioners and purchasers of those services expect it to be - its a service contract) and does not differ largely from the contract that a private organisation has to collect your rubbish every week (green, grey or black bin, tub, bag rotating obviously!). Therefore the "social benefit" is actually bought and dictated in consumer choice by the purchaser. In this case those purchasers and commissioners are probably not too enthusiastic about their public coin financing some other type of "social benefit" that has nothing to do with the service they have bought with overstretched budgets.

The answer therefore is in the ethics, mission and performance of the organisation aiming to deliver "social benefits" - ie investment in local projects & free services genuinely financed out of organisational surplus/profits (all difficult to place in this contract driven market).

Third sector organisations can and do invest their own money ("surplus" or that never said word "profit")towards initiatives that provide social benefit; enterprise that is benevolent and aimed at social good on a local or national level (my organisation funds a local football team for disabled people - can we now consider ourselves a social business?). There is a longer and more boring answer to this question which is about the way charities structure themselves and how much they actually cost to run and finally whether they are actually efficient. Part of the answer is in the balance sheet (use of surplus / investment etc), the organisations development plans and the aim to become financially independent and sustainable (some large national charities do this very well when they advertise for donations - in what is predictably for some an easy 'emotional' market to gather funds, and then invest those funds in projects that provide "social benefit" - alas this model is not applicable to all markets or client groups.)

My response is full of holes i know; so ask an easier question next time, like will Man City break into the top 4 this season?

Anonymous said...

Equally there are many profitable organisations who give great social benefit and make profit as a result.

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