Social Firms UK

What are social enterprises?

The UK government defines and describes social enterprise as follows: "A social enterprise is a business with primarily social objectives whose surpluses are reinvested for that purpose in the business or in the community, rather than being driven by the need to deliver profit to shareholders and owners." A more simple definition is that a social enterprise is an organisation that trades for a social purpose. Sometimes social enterprises are described as 'not for profit' as any profit or surplus generated is used to further the social objectives of the business.

Types of social enterprise

There are seven main types of social enterprise:

1. Social Firms

Businesses set up to create employment for those most severely disadvantaged in the labour market.

2. Co-operatives

Co-operatives, and associations of people united to meet common economic and social needs through jointly owned enterprises. Co-operatives are organised by and for their members, who come together to provide a shared service from which they all benefit.

3. Development trusts

Development Trusts are businesses created to provide integrated employment to people with disabilities and disadvantages. They are umbrella organisations under which different regeneration activities can take place.

4. Intermediate labour market companies

These provide training and work experience for the long term unemployed and other disadvantaged groups. The aim is to assist these groups to re-enter the labour market through the provision of paid work together with high quality training, personal development and active job-seeking.

5. Community business

These are social enterprises that have a strong geographical definition and focus on local markets and services. They are trading organisations which are set up, owned and controlled by the local community and which aim to be a focus for local development and ultimately create self supporting jobs for local people.

6. Credit unions

Credit unions are finance co-operatives that help people save and borrow money. They also provide access to community finance initiatives.

7. Charities trading arms

These enable charities to meet their objectives in innovated ways such as restaurants, shops and fair trade companies.

What are the six main ways to become a social enterprise?

There are six main starting points for social enterprises:

1. Community regeneration

Members of a local community come together to meet a specific need.

2. Employee buyout

Employees of a business that is already operating come together to buy out the existing owner. Employee owned businesses are expected to grow rapidly in the next few years following the introduction of tax credits in the All Employee Share Ownership Plan.

3. Local authority externalisation of services

A local authority transfers one of its services to an independent operation.

4. Individual social entrepreneur

An individual with a particular vision will create a business to meet an identified need, often in an innovative way.

5. Voluntary organisation transformations

A voluntary organisation that has been funded by donations and grants decides to turn to trading. This may be driven by a desire to ensure its long-term viability, or from a belief that its beneficiaries are better served by the transformation, or perhaps both.

6. Voluntary organisation spin-offs

A project housed by a voluntary organisation may then be transferred to a separate legal entity.