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In the market economy

The boundaries between the private sector and the social sector are breaking down for many reasons.  They include the continued growth of social industries – such as health, education and care. Social provision has also been opened up to business in many countries. And business has increasingly seen engagement in social issues as a source of new ideas, reputation and recruitment.  Many businesses now see social innovation as a field for creating new business opportunities: for growing brand equity (through association with well known charities or social enterprises); attracting talent (particularly younger people who want to believe that their employer has a social conscience); and to stimulate cultures of innovation in the mainstream business through engagement with different types of organisation.

The most significant development has been in the growth of social enterprises. These are businesses which earn a profit but are focussed on their social goals.  The main challenge for social enterprises is to maintain their commercial position in the market whilst staying true to their social goals. Many, being small, lack economies of scale and scope. Where their innovations are successful larger commercial organisations will tend to enter their markets and swamp them (as has been the case with organics, fair trade and recycling). In some cases, clusters of social enterprises have developed a network for collaboration and joint services which has enabled them to access services normally available only to large firms while remaining small themselves. Increasingly though, there are examples of social enterprises establishing themselves in the mainstream.

Inspirational examples and more information on successful business models are critical for the growth and sustainability of the social enterprise sector.  There need to be more diversified capital markets, packages of support for social entrepreneurs, and more supportive regulatory and legislative frameworks. More broadly, business leaders also need to become aware of the growing importance of values to their business. 

Social business models

Social business models are enabling organisations to tap into new sources of funding and organise governance and accountability structures in a way that resonates with the mission of the organisation.

Social business partnerships

There are also a variety of ways in which businesses can engage with social innovation. Some are more ‘hands on’ – such as the provision of services for social good – and others are more ‘hands off’ – such as providing resources such as proprietary technology.

Social Finance

One of the big challenges for social enterprise is growth. Partly, this is because they face limited access to risk and growth capital, and to highly specialist technical knowledge, but it is also a reflection of the fact that as social enterprises grow, they often face difficulties in balancing conflicting pressures. Much has been written about social returns on investment, triple bottom lines and ‘blended value’  but how to how to ensure that the interests of investors remains subordinate to the social mission remains a critical question for social enterprise.

Information

Improving market information can help consumers differentiate between organisations and products which cause social and environmental harm and those which do not. This puts pressure on businesses to act in more ethically and environmentally responsible ways. 

Cards and currencies

Over the past thirty years there has been a widespread growth of store cards and points systems in the commercial sector. Air miles and Nectar points are now part of daily life.  They create their own protected economies with discounts for particular products and services from specified places. The growth of parallel mechanisms to favour the social economy has been primarily geared at promoting the local economy. There remains scope for a considerable expansion of these methods to promote social and environmental goods and services.

Training and formation

There is growing interest and investment in the development of financial resources for social enterprise. As yet, very few resources have been devoted to labour market development. However, skills and formation within the field of social enterprise is critical to the growth and development of the sector.

Markets for social goods

New markets for social goods (or ‘bads’) can also play a role in accelerating social innovation.