How social enterprises are building a more inclusive Australian economy
Tuesday 5 December 2017
- Analysis for The Conversation by Dr Erin Castles, Research Fellow, Faculty of Business and Law and Professor Jo Barraket, Director, Centre for Social Impact Swinburne
Social enterprises employ twice the rates of Australians with disability and female managers as mainstream small businesses. Our study of Victorian social enterprises also found 12% of jobs are held by previously long-term unemployed people (those who have been out of work for more than 12 consecutive months), and 2% by Indigenous Australians.
This shows that social enterprises are an important vehicle for the development of an inclusive economy - one that broadens economic participation, is more equitable, stable, and sustainable.
Social enterprises are organisations that aim to address social issues, such as homelessness or social exclusion, using strategies from business. For example, by running cafes to train and employ homeless or disadvantaged youth, social enterprises can harness business for social outcomes.
Around one third of board positions at social enterprises are held by women, compared to less than one quarter in mainstream businesses.
Social enterprises also attract significant amounts of volunteer support - around 251 hours per enterprise per year. This creates further opportunities for those marginalised from the mainstream workforce, fostering training opportunities and a sense of community.
These statistics are likely conservative, as many social enterprises do not yet track employment, diversity and trainee statistics.
And this is only one part of the story of social enterprises - until recently there was little hard data or research on the sector or its impact.
Not all social enterprises are focused on job creation, many tackle other social and environmental challenges such as reducing environmental impact through recycling, providing services for small communities (such as petrol), and creating responsibly sourced and produced products and services.
But our research shows social enterprises face a lack of resources for marketing, skills development for employees, and accessing finance. Many social enterprises are young non-profit organisations and struggle to fund their own growth.
Challenges faced by social entrepreneurs
The majority of social enterprises have between one and 200 employees, and are structured as not-for-profits. This is part of the reason why the barriers faced by social enterprises are often financial - many lack the necessary operating structures or skills to attract the right kind of partners or financing.
For example, CERES Community Environment Park, an environmental education and technology demonstration park, was completely reliant on grants when it was founded. However, facing the loss of government funding, it was forced to adopt other revenue streams, such as a farm-to-table veggie box delivery service.
The costs for social enterprises to access finance are generally high, as they must first develop scalable businesses and apply for investment. The loans and investments in social enterprises are often small, even though investors and lenders have to do the same risk analysis and due diligence as they would with any other business. This pushes up the cost (interest rates, for example) of accessing finance.
There is some movement to make it easier to support and invest in social enterprises. New organisations are providing programs for social entrepreneurs to build the skills required to grow their businesses and attract investment.
The impact investment sector (made up of investors that focus on social and environmental alongside financial returns) is also growing. And there are now grants available to help social entrepreneurs build capacity and secure investment capital.
Read more: What is the impact of ‘impact investing’?
There are 20,000 social enterprises in Australia, and this number is growing. This growth is in part driven by local and state governments, as well as some large corporations, deciding to source goods from companies that meet social and sustainability criteria.
Social enterprises are poised to grow, as they appeal to entrepreneurs, policymakers and investors who are interested in creating more sustainable, dynamic and inclusive economies.
One barrier to growth remains under-capitalisation - a lack of financial resources. A more inclusive economy, built on social enterprises, requires more investment in business skills (such as marketing and winning new contracts), and better measurement and communication of the social impacts being achieved.