How Bank of Scotland & The Sunday Times got it so wrong.

Today is the deadline for the Bank of Scotland £6 million, Social Entrepreneur Awards in association with the Sunday Times.

Some months ago, amongst a flurry of PR, and a hum of excitement from the Social Enterprise Community, BOS & The Sunday Times announced with open arms that "Whether your organisation is a charity, voluntary organisation, church or any other not-for-profit organisation, large or small you are eligible for these awards"

Hang on ...
any other not-for-profit organisation?

I have long been of the unwavering opinion that so·cial en·ter·prise (n.) is responsibly-profitable enterprise* and that as long as that organistaion is dedicated to creating social value, its structure is unimportant. A quick check with the Social Enterprise Coalition and Social Enterprise Magazine indicates the consensus falls firmly on my side.

I, however, don't have £6 million to donate to the cause and, sadly, those who do at Bank of Scotland are only recognising the social benefit of what is described in their Ts and Cs as:

"not-for-profit organisations, meaning organisations which are not capable of distributing profits generated by the organisation or capital back to shareholders, members or other participants in the organisation;"

A short sighted approach if ever there was one. Non-profits, as the definition above testifies, cannot release capital. This, you might speculate, would put off investors and you'd see a 5x ROI on that guess. Not being able to raise finance through investment leaves non-profits on the scrounge. So in this sense I see the appeal of offering millions of pounds in prize money to an organisation that can't raise it's cash any other way. BUT, and here is the point that so often gets missed, how sustainable is this? What happens when th organisation needs more cash down the line? Just how scalable are non-profits and are they really going to contribute to the growth of the economy in the same way that a Social Enterprise producing equal social value, only constituted in a way that makes them eligible for investment capital, would?

Whether structured as non-profits or for-profits, social enterprises should be measured by their ability to tackle pressing problems with innovative solutions and their capacity to grow and scale whilst exponentially improving the status quo.

Are bank of Scotland supporting scalable Social Enterprise?
No.

Are they likely to discover and finance the next "Divine Chocolate" or "Big Issue"
No.

Both Divine Chocolate (Enterprising Solutions "Social Enterprise of the Year" 2007 ) and The Big Issue (John Bird, Ernst & Young "Social Entrepreneur of the Year" 2008) are incorporated as Limited Companies and are therefore capable of "distributing profits back to shareholders". Consequentially this would render them both ineligible for qualification as a "Social Enterprise" under The Bank of Scotland / Sunday Times definition.

It is extremely disappointing to see that the UK is still so backwards in its thinking regarding Social Enterprise. If we are ever to take a lead in this vital sector it needs to be universally recognised that Social Enterprise is not a synonym for non-profit, and there is no difference between social value created by donor funds and social value created with internally generated surplus.