A Social Enterprise Strategy for Scotland
Response of the Scottish Social Enterprise Coalition
General comments
The Scottish Social Enterprise Coalition (SSEC) welcomes the development of a Social
Enterprise Strategy by the Scottish Executive. We believe that social enterprise needs
an effective and well-resourced strategy in order to become an established and
successful part of the Scottish economy. SSEC also believes that the strategy should
provide a radical reshaping and repositioning of support for the sector, driving it up the
policy agenda and making a strong case for additional resources.
While the Coalition broadly agrees with many of the actions proposed in the strategy, we
do not feel that it goes far enough to delivering the step change in support required. The
strategy is weakened because it lacks committed resources, clear targets and crosscutting leadership. It also under-estimates the scale of the challenge facing the sector,
and hence the scale of policy transformation needed.
The original Parliamentary motion which called for a differentiated strategy asked that it
‘be aligned with the Department for Trade and Industry (DTI)’s strategy to support social
enterprise across the rest of the United Kingdom’. The DTI placed responsibility for
social enterprise within its Small Business Service and accelerated the sector’s growth.
We feel that unless the enterprise dimension of social enterprise is similarly embraced
there is a danger that the sector in Scotland will not achieve its full potential.
SSEC believes that the strategy should be delivered with high-level cross-departmental
involvement from both Enterprise and Communities portfolios, as well as drawing on
expertise from the sector itself. We believe that a model similar to that now used to
support the sector in England would be appropriate, with overall policy responsibility
housed within a cross-cutting department (Cabinet Office) and business support
provided through enterprise bodies (DTI and RDAs). We also want to see firm
commitments to secure sufficient resources to support the strategy in the forthcoming
Spending Review.
Crucially the Executive must realise that failure to invest in supporting the sector will
carry a price. There is a relatively high failure rate of small business start-ups in
Scotland – clearly at a level that is unacceptable for the social enterprise sector if the
Executive wants it to be an engine of public service improvement and community
renewal. Investment in high-quality, tailored support is needed in order to make the
sector robust and sustainable.
A Social Enterprise Strategy for Scotland
Response of the Scottish Social Enterprise Coalition
August 2006
Vision
The Scottish Social Enterprise Coalition’s vision for social enterprise is for it to be widely
recognised as an established and successful business model capable of delivering
significant social, environmental and economic benefits to all Scottish communities.
We therefore broadly agree with the vision set out in the strategy. However a vision is
only as strong as its links to implementation and we are concerned that the delivery plan
for the strategy will not do enough to deliver the required step change in support.
Terminology
The current definition of the social economy used by the Scottish Executive is
misleading and unhelpful. The Perceptions of the Social Economy report commissioned
by Communities Scotland highlights the confusion surrounding the current terminology.
Conversely, SSEC believes there is increasing recognition of social enterprise as a
distinct part of the economy, distinguished by its focus on trading and its use of profits
for maximising community benefit.
It is also recognised that there are key areas where social enterprise requires tailored
policy and support, notably in issues like finance, business support and skills
development. Because of these distinct attributes and needs it is essential that social
enterprise is recognised as a distinct sector and supported through a clearly
differentiated strategy.
The contribution of social enterprise
In broad terms the strategy recognises most of the major contributions of social
enterprise. The notable exception is the lack of reference to social enterprises’
contribution to the creation of social capital, which numerous studies have shown is a
key factor influencing the effectiveness of policy interventions and inoculating
communities against social and economic decline.
It is also worth recognising that there is still tremendous untapped potential for the social
enterprise model. Although to date it has been used successfully in areas such as
housing, recycling, employability and social care, there is potential for the sector to
develop in key growth areas and the strategy should aim to facilitate this. In particular
these include health, transport, childcare and community regeneration.
It should also be noted that the positive contributions of a social enterprise may be
diverse and simultaneously help deliver multiple objectives. For example, many social
firms which specialise in job creation for people excluded in the labour market would
often report health improvement as their biggest outcome. Similarly many recycling
businesses support community participation and employability aims as well as diverting
waste from landfill. There is a need to for policy makers to become more aware of the
potential to join up objectives through social enterprise.
Challenges for the development of social enterprise in Scotland
SSEC would concur with the key challenges identified by the strategy but feels that it
underestimates the scale of these challenges. The sector has experienced many years
of under-investment and existed in a relative vacuum of policy support.
A Social Enterprise Strategy for Scotland
Response of the Scottish Social Enterprise Coalition
August 2006
The following are some key factors which emphasise the true scale of the challenge:
Use of the social enterprise business model
 The two main routes into social enterprise at present are start-ups and voluntary
organisations developing into trading enterprises. The former route is precarious
and requires capital investment. The latter often involves root and branch culture
change and can take many years. Alternative routes to the sector (franchising,
acquisitions, merge-out from public/private sectors, etc) should be explored, but
there is little precedent for many of the key options and they cannot be expected
to grow the sector significantly in a short space of time.
 There are serious weaknesses and inconsistencies across Local Social Economy
Partnerships, particularly in their links to Community Planning Partnerships.
Community Planning Partnerships too have been heavily criticised for their
record of community engagement.
Increasing business opportunities
 There are as yet no known cases of public agencies in Scotland using flexibilities
in EU procurement rules that allow them to used social and environmental
clauses in contract specifications or to reserve contracts for supported
employers.
 Guidance on social issues and reserved contracts in procurement are both long
overdue and appear to be marginalised in the wake of the McClelland Report –
which itself is primarily concerned with issues of efficiency rather than added
value.
 Progress on full cost recovery has been extremely slow and it is likely to fall short
of achieving parity with the private sector who are afforded a contract regime of
long-term contracts with expectations of profit. There is no reason why social
enterprises should be treated differently to private providers in the commissioning
process.
Finance and investment
 Risk aversion is still a major issue in the sector, identified in the recent Social
Investment Scotland report Investment Capital for Social Ventures.
 Social investment is still a nascent phenomenon and it remains to be seen
whether there is enough interest to build investment funds suitable for the sector.
 Social enterprise models that allow for limited profit distribution are still ineligible
for many sources of grant funding.
Business support
 Start-up and pre-start up organisations have a very diverse range of support
needs and often require intensive tailored support.
 Scottish Enterprise network’s support provision is extremely difficult to access
due to their application of a segmentation policy aimed at supporting the high
growth end of business development.
 There are major inconsistencies in the delivery and availability of LEC and other
business development support across the country.
Raising the profile and demonstrating impact
 Efforts to market the sector are starting from a very low baseline.
A Social Enterprise Strategy for Scotland
Response of the Scottish Social Enterprise Coalition
August 2006

There are few incentives for organisations to adopt impact measurement and
social reporting as a standard practice.
Of course, this is not to say that the aspiration to meet these challenges and deliver the
vision should be revised or compromised, rather it should strongly underline the need for
a radical step up in terms of policy support and investment. Recognising the true scale of
the challenge will also prevent placing an unrealistic burden of expectation on the sector.
Strategic objectives
We agree with the strategy’s five strategic objectives.
Priority actions
SSEC agrees with many of the proposed actions but feels the strategy would benefit
from more detail, more focus and less of a ‘scattergun’ approach.
We feel that key priorities should be:

Mapping of the sector, which should be led by the needs of the sector and
include detailed information on levels and sources of trade, finance and business
support.

A decision around a successor to Futurebuilders, which should aim to create a
significant, long-term investment fund shaped by the needs of the sector and
helping social enterprises to access key market opportunities.

Increasing the role of ETLLD and Enterprise Agencies in accelerating the growth
of the sector. They should take leadership for marketing social enterprise as a
business and career option and encourage aspiring business leaders to ‘go
social’. They should also develop a bespoke research and development
resource for social enterprise.

Actively championing the role of community benefit clauses in procurement
across the public sector – with a commitment from the Scottish Executive to lead
by example through its own procurement practice.

Giving social enterprises a bigger and more strategic role in planning and
shaping public services, both at Executive and Community Planning levels.
There also needs to be a clear high-level commitment to a mixed economy of
provision in public services – backed up by a target of delivering at least 10% of
local and national public spending through social enterprise.

Addressing the issue of pre-Business Gateway business support is vital, and
needs to be addressed in greater detail. It should focus on pump-priming social
enterprises so a higher proportion progress to segmented LEC support. There
needs to be a clearly defined role in this for specialist sector-led support. The
idea of a voucher scheme may be a positive solution for this, but it will need to be
piloted, and include some element of brokerage as it is unrealistic to expect
early-stage enterprises to easily identify their own support needs. Brokerage will
also help protect against abuse of the system.
A Social Enterprise Strategy for Scotland
Response of the Scottish Social Enterprise Coalition
August 2006

There is also a strong case for increasing targets for Gateway/LEC support to the
sector. They should be ambitious and aim to encourage social enterprise growth
– not just meeting levels of existing local social enterprise activity.

Remedial action is needed to address the ‘exclusion’ of social enterprise from
key policy agendas such as employability, regeneration, rural development, etc.
The social enterprise sector should also be better valued and more closely
involved in policy development across Government. This should lead to
Memoranda of Understanding between the Scottish Executive and leading social
enterprise representatives.
Implementing the strategy
Implementation of the strategy should be overseen by a cross-departmental body,
reporting to both Enterprise and Communities ministers. The strategy also should be
monitored by a group with a more focused remit than that of the Social Economy
Advisory Board.
If Local Social Economy Partnerships are to be key delivery partners for the strategy
then they must become more robust, more accountable, develop more consistent
practices and have a direct feed into Community Planning Partnerships.
We also feel that the strategy should be driven by ambitious targets that recognise the
scale of the challenge and are backed by realistic resources.
Other comments
The Scottish Social Enterprise Coalition sees the delivery of an effective and wellresourced strategy for the sector as our top priority. We see the existence of a draft
strategy as a hugely significant moment for the sector and are appreciative of the work
that has gone into developing this draft. We are also supportive of many of the actions
set out in the draft strategy but remain unconvinced of its ability to deliver. The key is
making sure that the strategy is able to ‘punch above its weight’ because until now social
enterprise has been starved of supportive policy and it will need extra effort to redress
the balance.
We are happy to meet further with all of those involved in developing the strategy to
discuss our comments in greater depth.
Diane Henderson
Chair
Scottish Social Enterprise Coalition
45-47 Albany Street
Edinburgh
EH1 3QY
0131 557 1516
[email protected]
www.ssec.org.uk
A Social Enterprise Strategy for Scotland
Response of the Scottish Social Enterprise Coalition
August 2006
Scottish Social Enterprise Coalition members involved in developing this
response:
CBS Network
CEiS
CESEL
Community Enterprise Ltd
Community Recycling Network Scotland
Cooperation and Mutuality Scotland
Development Trusts Association Scotland
FEAT Enterprises
Forth Sector
Scotland Unltd
Senscot
Social Enterprise Academy
Social Firms Scotland
A Social Enterprise Strategy for Scotland
Response of the Scottish Social Enterprise Coalition
August 2006