The Economics of Social Inclusion

Economic Empowerment & Building Social Capital

Introduction

Current debate in the social enterprise sector is revolving around whether the ‘community building’ approach to social inclusion is encouraging social enterprises in Australia to concentrate on a narrow band of social ventures which focus primarily on the social welfare of their participants, rather than the economic empowerment of their participants. The debate is attempting to link the policy issues arising from Julia Gillard's speech on social inclusion to what can be delivered by for-profit, community-owned or employee-owned social enterprises. Alan Greig analyses the social inclusion agenda being developed by the Australian Government and suggests that those involved in social enterprise development in Australia may need to focus on broadening ‘ownership and participation’ as an important new means for building social capital.

"There is developing debate on the role that profit distributing social enterprises can play in adding to social capital and social inclusion. This debate is arising from the fact that the winners of the "Social Enterprise of the Year Awards" for 2006 and 2007 in the UK were both for profit, community owned companies.



The 2007 winner, Divine Chocolates Ltd is a private company (incorporated as an unlisted public company), part-owned by a number of fair trade agencies and a Ghanaian cocoa farmers’ cooperative. Dividends are paid and distributed to the participating farmers.

Although half-owned by the Ghanaian farmers coop, Divine Chocolates has a very innovative "social enterprise" ownership structure for making and selling chocolate using the Ghanaian sourced cocoa, which involves an NGO, a private foundation, a charity and well-known public company, The Body Shop as shareholders. This social enterprise has performed so well that it has recently attracted significant social investment from an international financial institution.

Australia could do well from social enterprises developed along these innovative community ownership/social investment lines. Hopefully, the social inclusion agenda being developed by the Australian Government will not exclude them from being counted "in".

In 2006, the Social Enterprise of the Year Award went to Sunderland Home Care Associates, a private company owned by an employee benefits trust (or an ESOP - employee share ownership plan - as it is known in Australia). This success story was reported in the September 2007 edition of CCC eNews. Read more on Employee Ownership and Social Inclusion. These successful examples of social enterprise add a new element into the social inclusion debate in Australia - that of "economic empowerment".

Current debate in the community sector is revolving around whether the "community building" approach to social inclusion is encouraging social enterprises in Australia to only concentrate on a narrow band of social ventures that are primarily on about the social welfare of their participants rather than the economic empowerment of their participants. This latter aspect is an important social enterprise objective elsewhere in the world and one that the new Minister for Social Inclusion, Julia Gillard appears to be very keen to address in Australia. Read more...

The debate is attempting to link the policy issues arising from Julia Gillard's speech on social inclusion to what can be delivered by for profit, community-owned or employee-owned social enterprises. On this aspect, note especially the UK Minister for Social Exclusion's "Foreword" to the Report "Caring and Sharing: The Co-owned Route to Better Care" for the breadth of vision that she displays on this issue, which is way beyond understandings on this topic in Australia.

What do these examples demonstrate in relation to the key issue of building social capital?
The key to social capital is building "trust" within communities. These social enterprises build social capital by providing "a stake in system". A stake in the system builds faith in the system. Increasing faith - that things are going well and you are 'included' - builds trust and participation, not only in the social enterprises concerned, but also in the affairs of the wider community. Social capital can be built in quite unique ways as shown in these financially successful social enterprise examples.

Unfortunately, many social capital advocates in Australia see social capital in an adversarial relationship with financial capital, rather than complementary to it - or as is shown in these two examples, social and financial capital can be completely intertwined and grown with each other.
From the evidence presented, it is clear that you can build both social capital and financial capital together with genuine social enterprise development. However, there is a need for those involved in social enterprise development in Australia to focus on broadening "ownership and participation" as an important new means for building social capital.
Social capital might not be the exclusive preserve of the "not for profit" sector, as many in the charitable sector are arguing.

Alan Greig
Director, Ownership Strategies, The Mercury Centre
(The Mercury Centre is a member of the Australian Employee Ownership Association. The Mercury Centre has available an ESOP business model that is very similar to the Sunderland Home Care Associates example. This trust based alternative business structure is suitable for any collaborative enterprise or social business considering cutting their employees into the ownership of the business).