Richard Patey, director at Profit is Good, has said charities cannot be social enterprises as they are not businesses.
Speaking to civilsociety.co.uk, Patey said that the social enterprise sector was part of the private sector. He added that charities were not social enterprises as they are not businesses.
“Charity and business are completely different vehicles for creating social value and a charity cannot somehow evolve into a social enterprise when it hits an arbitrary percentage of its income from trade,” he said.
“We see the real danger being charities hijacking the movement. Surely ‘large private sector providers’ identifying as ‘social-purpose’ companies such as A4e means that the social enterprise movement is achieving its mission.”
Earlier this week, Social Enterprise UK chief executive Peter Holbrook warned that there was a danger that the social enterprise term would be hijacked by businesses that aren’t social enterprises.
Holbrook was referring to recent BBC Newsnight coverage of the Social Enterprise Schools report, published this week by the Policy Exchange think-tank.
The programme included details on social enterprise UK member and charity the London Early Years Foundation (LEYF) which was featured in the Policy Exchange report.
Holbrook said that the report had incorrectly described LEYF as a private company wanting to use the social enterprise model. This claim was reported on BBC Newsnight.
Holbrook said: “The story blurred the lines between the private sector and social enterprise, which is an important concern for our sector. Private companies exist to make a profit for their owners and shareholders, whereas social enterprises exist to make a profit in order to tackle social issues. The social purpose is enshrined in a social enterprise’s governing documents and takes precedence.
“A private company simply reinvesting 50 per cent of its profits back into the business does not make it a social enterprise.”
Holbrook also said that the way the BBC programme was edited did not reflect the true characteristics of social enterprise such as a clear social mission in governing documents, and majority control in the interests of social mission, and different organisational structures.
“The London Early Years Foundation is a charity – not a private company wanting to use the social enterprise model as outlined in the Policy Exchange report and its social mission has always come first. It has evolved into a social enterprise. It was not set up to make a profit. It was set up to make a positive difference to the lives of children.”
He warns that there is a danger that the social enterprise term will be hijacked by businesses that aren’t social enterprises.
“We need to be very clear about the difference between the private sector and social enterprise,” he says. “Many charities and not-for-profits are now badging themselves as social enterprises and our sector is growing. It is a real asset to the UK.
“It would be dangerous for our sector if social enterprise was adopted by the private sector as a convenient badge to take advantage of current trends.”
Read more on the social enterprise debate in February's issue of Charity Finance online -
Social enterprise: Bridging two worlds
Neither fish or fowl - what exactly is social enterprise
