Social enterprise was once a radical renewal movement within the third sector. Today, however, it’s not quite so straightforward. In March this year, Pamela Hartigan, director of the Skoll Centre for Social Entrepreneurship at Saïd Business School, summed it up when she said: “I am beginning to feel more and more uncomfortable with the term social enterprise.

"I believe these terms were very important at one point in time, but right now, what I’m finding across the world is they continue to foster this notion that social entrepreneurship is synonymous with palliative band aid approaches, rather than about promoting disruptive business models and approaches that address the root causes of a problem.”

True innovation, social or otherwise, has never met any standards

Social enterprise was once a whole new way of doing business. It was radical, it pushed the boundaries, it generated new ideas and new solutions. But now it’s becoming part of the system. As Italian academic Flavia Martinelli also notes in her 2012 essay Social innovation or social exclusion: “The recent success of the notion and its mainstreaming in policy discourse has paradoxically emptied it of its innovative dimension, exposing it to the concrete danger of becoming hollow – or, worse, instrumental – rhetoric”.

Organisations such as the UK's NESTA are using their funds to standardise social innovation by creating criteria for social innovation funding. Its Social Action Innovation Fund is a £14m fund run in partnership with the UK Cabinet Office. The fund defines ‘social action’ as something that is:
    •    carried out by individuals or groups of people working together
    •    not mandated and not for profit
    •    done for the good of others, individuals, communities and/or society 
    •    bringing about social change and/or value
    •    including the giving of time and money

NESTA only funds initiatives that fall into particular categories that NESTA and the Cabinet Office have decided are the biggest social challenges – ageing, health, employment of young people, 'impact volunteering' (as opposed to regular volunteering that doesn’t have any impact?) and unemployment.

Innovations are now put through a ‘compliance check’ but true innovation, social or otherwise, has never met any standards.

Would Nesta have backed the Grameen bank?

Let’s take what is perhaps the most famous social innovation, the Grameen Bank. In 1976, Professor Muhammad Yunus lent US$27 to 42 people – focusing on the poorest of the poor. This led to the innovation of microfinance and the foundation of the Grameen Bank in 1983.

The bank lent money without collateral, at very small amounts and at comparatively low interest rates almost exclusively to poor women (who were found to be more reliable in re-paying loans and used the loans more wisely than men). The bank - which still exists today - not only gives the poor access to capital, but allows them to be the owners of the bank and thereby benefit from any dividend payments.

Now let’s apply NESTA’s 'social action' criteria to this social innovation. While the Grameen Bank does deliver social change for the good of others (an astounding 60% of the 8 million people who have been given credit have found their way out of poverty) and does involve the giving of time and money, it fails as 'social action' because it is not a not-for-profit. This and the fact that Muhammad Yunus was not part of an organisation ‘working together’ suggests his project would be ineligible for funding under NESTA’s criteria.

Let’s imagine for a moment that Yunus had wanted to apply for funding from NESTA to launch his loan idea. If he had been forced to adapt his idea to fit the criteria required, we may never have seen the birth of microfinance. The beauty and success of the Grameen Bank is that it was completely unprecedented. It was not designed to meet any external requirements. 

And that’s exactly the point. The best social innovations in social services are unlikely to be dreamed up through a process of box-ticking or award applications. In 2006, Grameen Bank and its founder Yunus won the Nobel Peace Prize for efforts to create economic and social development “from below" – not from within the system.

The risk with government suddenly supporting social innovation and providing some public money to assist the sector is that governments are rarely (if ever) going to be interested in social innovation for the sake of stronger and healthier communities, full stop.

Like for-profit corporations they will be interested in how it can reduce government deficits and make public services cheaper and easier to deliver, based on a commitment to the fundamental tenets of neoliberal ideology – small government, free markets and lower taxes that especially benefit the wealthy. And one can be very sure that government funds into the social innovation sector will be targeted at those who innovate within the system, not innovate to change the system.

It’s not just conservative governments that are suddenly applauding the validity of social innovation, big companies are getting involved too. At the recent Skoll World Forum on Social Entrepreneurship one of the delegates, Daniel Fynn, co-founder of the Thankyou Group, was astounded when the host warmly welcomed Coca-Cola into the forum with the comment “they are doing great things in the social enterprise space”.

Along a similar line, Hitachi - a multi-million dollar organisation that produces technology products - is now claiming to be a global leader in social innovation, and is using social innovation in a global advertising campaign called ‘it’s our future’ to raise brand awareness. 

After attending the Skoll World Forum Fynn wrote:

Looking through the Skoll World Forum view of the world, if you’re an entrepreneur and your business has some slight link to social good, you’re a social entrepreneur; if you’ve succeeded in business and now have a foundation on the side, you’re a social entrepreneur; if you have a business that employs people (like every business in the world), your business is a social enterprise and if you do any form of business in the developing world, you can call your company a social enterprise. 

Social change is replaced with ‘for the good of society’ in such broad terms that any product or activity can be included, and the radical edge of social innovations is dumbed down.

It’s all about the money

A recent advertisement sought out an “exceptional individual” to “strategically steer” a “newly established social enterprise” with “creativity and innovation”. Sounds exciting doesn’t it? All the right words as well. And the social enterprise also has “ambitious growth plans”.

The purpose of the ‘social enterprise’ was then identified as “to identify public services that have the potential to be delivered by the community”, or as the advert goes on to say delivered “more cost effectively by the community, rather than by statutory public service organisations”.

Here is a clear example of a social enterprise that has been established for the purpose of delivering what were once called ‘public services’ in a more cost effective way to the community.

So what happens with the money saved by this exceptional individual strategically steering a new innovative social enterprise? More importantly who benefits from the savings? Suspiciously, it appears that it is not the local community who will benefit from the ‘savings’.

Social innovation in the public service sector is simply ‘privitisation’ in a socially acceptable form

If we consider the maths and who benefits from the savings, we can arrive at the following equation:

Small government = less spending = fewer and fewer public/community services provided by the government = lower taxes = (a little) more take-home money for workers and a lot more money for the wealthy = more money in the marketplace = more money for individuals to buy the public/community services that their taxes once provided for free = privatisation of public/community services = more savings to the government = an ideological victory!

Perhaps we need to consider that social innovation in the public service sector is simply ‘privitisation’ in a socially acceptable form. What it could also mean is that citizens are paying more for the same product – paying once through taxes, and a second time through the purchase of the ‘public’ service through a social enterprise.

In the UK, the National Health Service (NHS) is being targeted to help reduce the government deficit. Many departments have experienced sharp cuts passed off as efficiency savings. On top of this, the NHS is being “privatised by stealth” where the majority of new contracts in 2013 were awarded to private companies.

As a result the NHS is under increasing pressure to create more and more ‘social innovations’. We are seeing lots of new NHS spin-outs delivering public health services, but too often the there is no mention of the quality of the service to customers or where the savings go.

Here it appears that the criteria that sets any old organisation delivering services to the public apart from the rest is how much they can save doing so, and more importantly how much they can save governments.

Again, it is the money that appears to be calling the shots.

Dr Andrew Curtis and Tara Anderson are the co-founders and directors of the Dragonfly Collective in Australia.They have written this three-part analysis of social innovation based on their work at the University of Danube & the Centre for Social Innovation in Austria, and a range of other experiences in the UK and Australia.

Keep watching for the final part of this series explaining 'why the discourse matters' - coming soon.

Photo credit: James Cridland