Growing the economic impact of Scotland’s social enterprise

Social enterprises, charities and community and voluntary groups make a significant economic contribution to Scotland. Amidst the ongoing pandemic, aftermath of Brexit and the cost of living crisis, social enterprises, together with the social investment required to help them flourish, have never been more essential to our economic aspirations. Without the right support, investment and infrastructure, though, we will fail to maximise their economic potential.  

The Covid-19 pandemic has undoubtedly reframed the priorities facing governments worldwide, including our own here in Scotland, as they strive to develop economic strategies which address more than GDP. The Scottish Government’s recently published National Strategy for Economic Transformation sets out the priorities for Scotland’s economy as well as the actions needed to maximise the opportunities of the next decade to achieve our vision of a wellbeing economy. Social enterprise is cited as an important component of a successful entrepreneurial nation, delivering strong outcomes on fair work and benefits for local communities. However, the strategy perhaps does not go far enough in recognising the potential of social enterprise to transform our economy. If we are to achieve the Scottish Government’s vision of creating and sustaining an economy that works for all, the social enterprise sector must play a pivotal role in improved societal wellbeing, environmental sustainability, and economic success. 

It is our social innovators and social entrepreneurs who have the expertise, experience and vision to co-create and design solutions to some of our big social issues, from energy affordability and food sustainability to climate change and public health. We only need to look back over the past two years to glimpse the sector’s potential: there have been countless examples of social enterprises swiftly adapting to unprecedented change and maximising their impact within communities.

Social enterprises have always been at the heart of their communities and are more in tune with people most in need of the benefits brought about by economic transformation. They understand the challenges facing their communities first-hand and are well-placed to both create and advise on solutions which can help to overcome those challenges. The critical question therefore is how can we enable social enterprises to deliver those solutions to transform our economy?

A major factor in this enablement is the adequate supply of social investment. According to the recently published report by the Commission for Social Investment on the state of the UK’s social investment market, of all the devolved nations, Scotland has had the highest level of success in deploying investment into social enterprises in part because of the significant investment that the Scottish Government has put into infrastructure. This has enabled lenders and Community Development Financial Institutions (CDFIs) such as SIS to not only deploy investment but to stimulate demand.

Looking forward, if Scotland’s social enterprises are to play a role in our economic transformation, the supply of, and demand for, social investment is critical. Yes, investment must continue to come from both the UK Government and Scottish Governments, but we must also seek to encourage more institutional investment from charities, corporations, housing associations and family offices, as well as private investment from the high-net-worth investor community. In addition to a greater weight of social investment capital, we also need to see more innovation in the investment tools and products available to both investors and lenders. In recent years, Scotland has been more active in using some of the UK-wide instruments at its disposal to support social enterprises including social investment tax relief (SITR). Around a fifth of all investments made through this tax relief have come from Scotland. However, we need to think ahead of the game and develop the tools which will help to further stimulate the social investment market over the next ten years.  

As much as we try and continue driving innovation through the social investment space, for the sector to achieve exponential growth in economic impact, it must continue to mainstream its products and services within consumer and B2B markets. More specifically, one of the key features of an impact economy that is vital to its success is the ability and desire of consumers and businesses to purchase products and services from social enterprises.

Having been involved in and around the social enterprise space for well over a decade, I have always believed that for people to really get what a social enterprise is, they would need to be able to purchase products and services from social enterprises easily. Without this reach into mainstream markets, social enterprise will always remain niche.

There’s an important reason why this increased profile for social enterprise matters beyond just sales volumes. The beauty of the social enterprise model is that growth in sales mean growth of social and environmental impact – something that is undeniably more important as we rebuild from the pandemic against the wider background of the climate emergency.

Back in 2015, SIS began to develop a partnership with Asda – at that time part of Walmart and one of the largest retailers in the world. In part inspired by the proceeds from the single use bag levy, but more importantly the retail knowledge and expertise of a major retailer, we launched the Retail Academy programme. Whilst the Academy initially focussed on securing shelf space for social enterprises on Asda shelves (with some notable successes), the programme has since evolved for social enterprises of all kinds, shapes, and sizes to understand more of the retail opportunity.

Building on the learnings from these programmes, we recently commissioned new research into the rise of conscious consumerism and the opportunities and barriers this emerging trend poses for social enterprises.

At the outset of the research, all the signs pointed to a climate that was favourable for social enterprises to stand up and harness the increased media attention being brought to the public eye through (but not exclusively to) events such as COP26. However, what unfolded during the quantitative and, more so, qualitative research was a sector that was not responding to change or able to adapt in an agile fashion.

A consistent theme emerged that those running social enterprises felt under extreme pressure due to a lack of finance, resource, and direction, not least in following trends and executing commercial strategies to attract consumers.

2022 undoubtedly provides a landscape ripe for social enterprise to flourish; the consciously minded consumer, an increased focus by big business on ethical supply chains, increased spending on the high street, and a political focus on wellbeing at the heart of Scotland’s economic transformation are all factors which support the further evolution of the social enterprise sector.

But, as our report highlights, we must not assume that social enterprises can deliver economic transformation on their own. Action needs to be taken to encourage social enterprises to compete within mainstream markets and support them to navigate those markets. An increased supply of social investment is certainly one of those critical enablers but will not deliver the change that’s needed on its own.

There are two key areas that require attention: improving public perception, awareness and understanding of social enterprise, and improving support, networks and collaboration for social enterprises.

As B Corp certification is increasingly used as a selling point by commercial retail brands, social enterprises must demonstrate more clearly the localised impact they are making. The public needs to be brought into their stories, encouraged to step off the beaten track (perhaps only a street back) and into the spaces where real change is happening in their community. Our report highlights several key recommendations to enable this step change.

For social enterprises to compete on the high street, more support is required to help them better plan and execute their brands, delivered in the form of workshops, formal training, and skills development. Within the challenging retail environment, we also need to increase the opportunities for social enterprises to open stores in key retail areas by, for example, developing retail partnerships which bring social enterprises and retail spaces together. Finally, the creation of measurable standards and certifications for accreditation pertaining to goods with purpose will help to more readily identify social enterprise retailers among consumers.

Combined with continued investment in public awareness campaigns and a greater supply of social investment capital, these activities will all help to ensure that our social enterprises are best equipped to take advantage of the opportunities on offer from a society which is more receptive than ever to the benefits and values offered by this unique business model. If we can get those support mechanics right, we’ll start to see the true economic impact of social enterprise within Scotland’s new wellbeing economy.