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Social enterprise and local government

What is a social enterprise?

Social enterprises are fundamentally about using a business approach to achieve public benefit through defined social or environmental objectives. Many commercial businesses have social objectives, but social enterprises are distinctive. This is because their social or environmental purpose is central to what they do.

Social enterprises range from locally-based organisations to multi-million pound international enterprises. Social enterprise is an ever-increasing movement in the UK. The most recent government estimates suggest there are more than 55,000 social enterprises with employees in the UK. They have a combined turnover of £27 billion a year, contributing £8.4 billion to the annual gross domestic product (GDP).

How can social enterprise contribute to local government?

The 2006 Local Government White Paper 'Strong and Prosperous Communities' established a vision of partnership for local areas. Councils and their partners should work together to achieve the objectives set out in the Sustainable Community Strategy (SCS), agreeing targets with the government through the local area agreement (LAA). This vision gives communities a greater say in establishing their local priorities and greater control over their lives. It also introduces considerable changes to how public services are delivered to ensure they are as efficient as possible.

Social enterprises are well placed to respond to these objectives and can assist councils in the delivery of key policy priorities by:

enabling communities to take a more active role in shaping their local environments
developing people-led services
creating employment and embed skills and wealth at a local level.

In the white paper, government identified the need to improve the delivery of public services. This was to be by local government encouraging a diversity of suppliers across the public, private and third sectors. Social enterprises and other third-sector organisations are essential to a mixed market of providers. The white paper emphasised that this form of partnership working can provide a wealth of expertise and experience. This in turn can lead to innovation and cost-effective approaches to service delivery.

People-centred approach

Many social enterprises have particular knowledge of, sensitivity to and expertise about the communities in which they work. This makes them well placed to shape service delivery. Often they have the ability to access individuals who may feel unable to access traditional public service delivery models. As a result, social enterprises are able to build trusting relationships with service users and develop services specifically designed to meet their needs.

Social enterprises typically have a non-traditional ownership structure. This helps users and stakeholders – including local community representatives – to engage in governance of the enterprise and the design and delivery of the services provided. This results in tailored and better designed service packages.

Employees are often able to contribute to key decisions, resulting in greater staff satisfaction. A valued workforce results in a higher quality of care and or service provision. It can also increase efficiency through lower absentee rates.

People-centred approach in Newham, Grimsby and Sandwell

Unique Coffee Bar based in Newham is an award-winning social enterprise that provides services for young people who are experiencing difficulties at school. The coffee bar is run by a voluntary board of seven directors who are drawn from the local community, three of whom are young people who use the coffee bar itself.

Open Door is a health centre in Grimsby that was co-designed and co-created with the people it serves, who, due to their complex circumstances felt unable to access statutory services.

Sandwell Community Caring Trust has reduced staff turnover significantly having supported staff and empowered them to develop strong, longer-term relationships with service users.

Joined-up services

Public service needs rarely fit neatly into the 'silos' through which services have traditionally been delivered. A more joined-up approach to service commissioning is needed – which can also lead to considerable efficiency savings. Many social enterprises look beyond traditional public service delivery mechanisms to develop services in a more holistic way. A good example are those social enterprises that provide a number of different public services. These can include housing support, employment advice and healthcare – as all are important determinants of health and wellbeing.

Partnership working

Effective partnerships can reduce the duplication of resources and broaden the reach of a service. Not having to maximise shareholder dividends allows social enterprises to prioritise the needs of the communities and individuals they serve.

Partnership working in the West Midlands

P3, a social enterprise in the West Midlands, delivers contracts for a number of local councils to address social exclusion. In assessing a person’s service needs, the focus is not on one area of a person’s life but all interrelated aspects of it. Any solution offered is built around 10 outcome indicators. They look beyond specific mechanisms of public service delivery, such as health or housing provision, and instead look at the root cause of an individual’s problem. Thus any service provided addresses the full spectrum of a person’s needs.

P3 social enterprise – full case study

Strategic and sustainable procurement

Central to sustainable development is the consideration of the social and environmental impact of procurement. The Simms Report 2006 recognised that better engagement with suppliers, including the third sector and social enterprises, enables wider social and environmental benefits to be realised.

Social enterprises frequently deliver multiple outcomes across a wider range of objectives than a traditional, narrower approach to service delivery.

In many cases, they not only deliver the service they are contracted to provide but also additional benefits beyond the terms of the contract. This could include delivering a recycling contract while tackling long-term unemployment, or delivering environmental standards above those stipulated in the contract. Often the additional benefits social enterprises provide are not costed within a contract, preventing them from being factored in when contracts are being awarded.

Sustainable procurement: a definition

“Sustainable procurement is a process whereby organisations meet their needs for goods, services, works and utilities in a way that achieves value for money on a whole life basis in terms of generating benefits not only to the organisation, but also to society and the economy, while minimising damage to the environment.”

'Procuring the Future' – Sustainable Procurement Task Force, June 2006

Sustainable procurement requires an understanding of whole life costs, rather than a focus on the lowest price. Incorporating social and environmental factors into decision making makes it possible to maximise the effectiveness of public procurement in achieving wider outcomes. A number of councils are already delivering contracts in this way.

Strategic and sustainable procurement in Sheffield

Green Estate delivers a contract for Sheffield City Council that manages green spaces as part of a broader integrated environmental regeneration programme, linking:

skills training
local employment
community participation
green space creation and restoration
sustainable environmental management.

Innovation and market making

Social enterprises have a good track record in innovation and market making – often providing solutions to intractable social and environmental problems. They have repeatedly demonstrated their ability to challenge the status quo. This can be by bringing fair trade and ethical products into mainstream markets or developing new public service delivery models.

Social enterprises delivering local council services benefit from being able to operate outside the constraints of public sector structures and bureaucracy. They have greater freedom and flexibility in how they can develop and deliver services.

Some private sector organisations ignore some of the more complex needs of the user and the wider community and focus on the terms of the contract to meet the demands of shareholders. Social enterprises are not constrained in this way and are able to work in areas with low profit margins.

Innovation and market making in Tower Hamlets, Tendring and Lewes

Tower Hamlets Community Recycling has revolutionised recycling in inner city high-rise apartments. They have designed and manufactured dedicated door-to-door recycling vehicles that travel in lifts and sort recycled materials on the doorstep.

Rural public transport doesn’t attract many private sector companies, leaving rural communities isolated. Social enterprises have responded to this market failure. Tendring Community Transport (TCT) and Community Transport for the Lewes Area (CTLA) both provide transport services for rural areas that are poorly served by public transport.

Tackling regeneration, economic development and community cohesion

Social enterprises can address wider issues such as regeneration, economic development and wellbeing, and community cohesion.

Economic growth

Economic growth is often viewed to be the role of private business with economic wellbeing primarily falling under the responsibility of the state. Social enterprises can unite these objectives by:

contributing to economic growth by generating a significant proportion of GDP – particularly in the most deprived communities
contributing to economic and social wellbeing
providing support and employment for those disadvantaged in the job market
regenerating communities by bringing essential public services to under-served areas
developing unused land and buildings for the benefit of the community
providing high-quality employment in deprived areas.

They are simultaneously building social capital, putting communities in control and playing an active role in building community cohesion.

There are many social enterprises focusing on employment opportunities for the disadvantaged, emphasising the need for meaningful employment and working with those furthest from the job market. Rather than developing standardised training packages and employment placements, social enterprises take a more targeted approach to addressing the needs of the most marginalised individuals and groups.

Training and employment for the disadvantaged

Big Life Employment offers a range of training and employment opportunities to people who are often overlooked by mainstream employers. It offers tailored packages of support to help every individual reach their individual goal.

Social exclusion

Many social enterprises tackle social exclusion in the broadest sense – providing integrated solutions to issues such as homelessness.

Social exclusion in Middlesbrough

Community Campus provides support for young homeless people, between 16 and 25. It combines the provision of accommodation and housing with the development of skills, offering experience and qualifications through the property redevelopment branch of its organisation.

Many social enterprises base their approach to addressing social exclusion and regeneration on community ownership of buildings and land. By locking in land value, community ownership can support the development of mixed-income housing, vital local services and public space. This enables community involvement in local planning decisions, preventing people and businesses being priced out of an area. This can transform even the most deprived communities – energising local people and providing the long-term foundation for enterprise and renewal. Transferring an asset can empower a community by:

inspiring community pride and encouraging cohesion
providing a focal point for activity
allowing the community organisation to provide a sustainable social impact.

Community ownership of buildings in Hull

Goodwin Development Trust aims to increase the quality of life of its residents by providing employment, training, better public services and by strengthening the community and social cohesion. It sustains these activities through community asset base development. This combines new build developments with the refurbishment of old or disused buildings to provide facilities and public services on people’s doorsteps. It also helps Goodwin achieve financial sustainability to enable them to provide for future community needs.

How a council can enable social enterprise

There are three steps councils can take to enable social enterprises to compete for contracts. Not all of these will be relevant to all councils.

Step 1: Identify your local social enterprises

Regeneration, economic development or third-sector teams may already have contact with local social enterprises. Another good source of information is the local social enterprise networks and regional and or national social enterprise organisations. They can provide you with information on social enterprises that operate in your area – some may even be doing specific work on public procurement.

It is also worth talking to those with responsibility for developing social enterprise in your regional development agency (RDA).

Where you have identified social enterprises that can fulfil a need, find out whether or not they are already on your approved suppliers list. And make sure your supplier approval process is friendly to new suppliers.

Step 2: Build a social enterprise supply base

At its simplest, engaging with social enterprises and letting them know you’re a willing customer could be all they need to start bidding for work. However, a more proactive approach may be required if you are engaging with social enterprises that have:

not considered supplying the public sector before
limited experience of competing for contracts
concerns about the costs and time involved.

It is perfectly legal to work with social enterprises to help improve their ability to respond to contract opportunities as long as no individual enterprise gains an advantage in competing for a specific contract. There are a number of ways in which you can do this, many of which will be familiar to anyone trying to encourage procurement from small and medium enterprises (SMEs).

Raise awareness – let social enterprises know about opportunities and encourage them to bid for contracts by working with social enterprise support organisations and business networks like the local Chamber of Commerce.

Give them access to you – arrange regular ‘meet the buyer’ days and establish a ‘local provider forum’, as they are a good way to engage with social enterprises in your area.

Advertise opportunities to tender – early information about what contracting opportunities are coming up and open advertising of opportunities are essential steps to improving access. Where contracts exceed the EU thresholds they can still be advertised locally provided no extra information is given in the advertisement and the advert is placed no earlier than the notice in the Official Journal of the EU.

Revisit your financial regulations – financial regulations and other contract requirements can be a significant barrier for many social enterprises. For example, a requirement of several years' trading history excludes younger social enterprises. There are risk management issues to consider but it is important that any conditions are proportionate to the risks associated with a contract. It is often possible to relax requirements for lower-value contracts where relatively little risk is involved.

Don’t automatically aggregate contracts – government guidance emphasises that small firms may not be able to bid for very large contracts. This can lead to a less competitive marketplace. Further advice on aggregation is available from the Office of Government Commerce (OGC).

Small Business-Friendly Concordat: Good Practice Guidance – on the Communities and Local Government website.

Smaller Supplier...Better Value? – on the Office of Government Commerce website.

Encourage sub-contracting – publish details of prime contractors and contracts on your website and organise ‘open supplier meetings’ where potential prime contractors and sub-contractors can get together. It is even possible to encourage prime contractors to work with social enterprises to achieve additional social and environmental benefits through their supply chains. Consortia bids are another way in which small businesses can tackle large procurement projects.

Provide feedback to unsuccessful applicants – direct the enterprise to relevant support so that it can compete more effectively next time. Nottingham City Council, for example, reviews tenders where social enterprises were unsuccessful in order to explore the scope for refocusing the wording of contracts, and provide business support where appropriate.

Step 3: Strategic commissioning and procurement

Some councils are leading the way by taking a truly strategic approach to the delivery of goods and services through social enterprises. Below are a number of examples of social enterprise-friendly commissioning and procurement.

Some councils have developed specific frameworks for working with social enterprises:

Sheffield City Council has a strategy in place for expanding opportunities for social enterprises in the procurement process, including sub-contracting with partner organisations.
Tower Hamlets Council has developed a new commissioning framework and code of practice accompanied by a capacity-building programme that examines options for consortium bids.

An organisation’s corporate strategy and its links to the procurement strategy will be a critical factor in any creative approach to social enterprise. These are essential documents because they provide the framework for further action. For example, one can:

include community benefits as part of the core requirements of a contract
work with social enterprise SMEs as part of a broader strategy to develop a diverse supply base
use the community strategy to galvanise colleagues in your department and across the organisation to develop truly innovative approaches to service delivery.

Outcomes-based commissioning is another good way of encouraging innovative service provision. There is growing acceptance that public policy should be guided by the outcomes it seeks, rather than specifying how providers should go about their work. Social enterprises are extremely successful in achieving social and environmental outcomes because they are focused on providing services that are tailored to the needs of the community.

Indeed, commissioners can design the process to incentivise providers to maximise environmental and social outcomes in the presentation of the tender itself. This ‘added value’ is seen as a core aspect of the delivery of the service and weighted accordingly.

Finally, many councils and other public bodies are moving towards longer-term contracts. This is important in helping smaller providers to achieve sustainability and enabling them to plan for investing in their staff and resources. This in turn improves the quality of the service they are able to provide.

Case studies

The social enterprises featured here provide a wide range of public services and vary in size and turnover. What they have in common however, is an enterprising approach to achieving social aims.

The case studies provide examples of social enterprises that are successfully working in partnership with councils to deliver joint priorities. They also show how these businesses provide a range of high-quality services that respond to the needs of their users and the wider community.

Community Campus and Middlesbrough Council

Goodwin Development Trust and Hull City Council

Green Estate and Sheffield City Council

P3 and Derbyshire, Erewash, Sandwell and Wolverhampton Councils

PJ Community Services and Croydon Council

South Shropshire Furniture Scheme and South Shropshire District Council