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Social Business – Fusing Capitalism and Socialism to Change the World

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The biggest challenge and opportunity we face today in the 21st century is hanging on to the 19th century mental models we’re programmed with; that politically we must define ourselves distinctly as either “Left” or “Right” wing and vote accordingly.

A by product of this is that we persist myths like the idea we can only have a Socialist or a Capitalist society with associated stereotypes – We can care for people but it will bankrupt the government, or we can have a prosperous economy but only if we punish the disadvantaged for their crime of being poor and force them to eat from food banks.

Social Business – A New Mental Model

Social Business will flourish hand in hand with an evolution of our democracies that rejects these ill fitting models, and instead recognizes the obvious factor of a ‘rising tide that floats all boats’. Every one prospers more when every one prospers.

In short Social Business is the fusion of Socialism and Capitalism, an operating model where we combine the best of both worlds to better achieve the goals of both.

For example, without sound business practices that robustly manage finances social organizations go bust too, but equally if we allow the personal greed aspect of capitalism to run amok unfettered without social due dilligence then there will be consequences there too.

Generating a profit isn’t inherently immoral. For any organization to succeed they need to invest in infrastructure, staff and so forth and this all costs money. An example of the business practices is that the more capital they can leverage the more social benefit they can achieve, what is defined as ‘Social Impact’.

Similarly you don’t need to set up a charity if you have a will to do good, and doing so can limit how much you achieve. Especially for smaller ones they have to spend most of their life in endless grant application writing cycles trying to raise the funding required to operate their organization, meaning they spend little of their time on their social goals.

While steps have been taken, such as creating CICs – Community Interest Companies, to enable a hybrid commercial/charitable organization type, there’s no law that says a business must generate profits solely for the personal financial benefit of its owners, in a form that demands they generate their personal wealth at the expense of building a better society.

In short you can set up and grow an entirely commercial company that makes you personally wealthy AND greatly improves the lives of others. That is Social Business. The ideal that some must lose for others to win is one of those 19th century myths, as is the concept that you must live a life of hardship to help others.

Best Practices

It’s a relatively new concept but has been underway for a few years now and a wealth of resources are available to help conceive and launch a Social Business.

Social Venture Development – Business model planning resources for new social ventures include the Social Lean Canvas, Social Business Model Canvas, and Mission Model Canvas, utilizing best practice resources such as this guide for Social Enterprise design.

Social Impact Reporting – The Centre for Good Governance offers this comprehensive Social Impact planning guide, the US Dept of Commerce also published this set of guidelines, and AllStreet produced a catalogue of case studies that illustrate the principles. The Social Value Lab has pioneered ground-breaking best practices, such as Social ROI, and similarly the Social Value Portal has developed a Social Maturity Index.

Social Stock Exchange – The Social Stock Exchange epitomizes the trend, bringing the age old tradition of market trading to the trend.

Social Impact Funding – Firstport

In Scotland organizations such as Firstport are pioneering these exciting and transformational trends, with CEO Josiah Lockhart recently announcing how they are going from strength to strength in terms of their capital and social impact investing capability:

Integrating the Third Sector – The Socio Economic Duty

The critical point Josiah makes is the potential indeed necessity for collaboration with the public sector. For organizations such as Local Government the key legislation this relates to is ‘the Socio-Economic Duty’.

As Holyrood reported Nicola Sturgeon is trail blazing the implementation of this program, an obligation that the public sector also seeks to better society through their own activities notably procurement.

The Scottish Government sought consultation input to this policy, which describes:

The Scottish Government’s plan to introduce the socio-economic duty was set out in the Fairer Scotland Action Plan (October 2016), with time for consultation and further development of guidance on how the duty should be operationalised. Subject to this consultation, the Scottish Government plans to commence the duty by end 2017.

This will expand the scope of this market massively, because while Social Impact Investing is growing and bringing larger capital flows to the sector, it’s still relatively ad-hoc and is dwarfed by the regular, huge levels of spending by the government.

Spending that encompasses everything from IT through roads and construction, highlighting a key distinction and the nature of this evolution and the nature of the opportunity.

For example Ready for Business offers this list of available RFPs relevant to social organizations but as you can see this is a very small subset. What the Socio Economic Duty will bring is an expectation of this effect for all RFPs, all the spending that includes IT and construction, not just those intended solely for Social Enterprises.

In the same way they enhanced RFPs to reflect Sustainable Procurement, rewarding suppliers that embed better environmental practices, so this step will see the equivalent evolution to bring about ‘Social Procurement’.

Scotland Can Change the World

This Scotsman article describes what is a global opportunity for Scotland. Social Business will grow internationally and change the world, and by being first to master these practical steps such as integrating it into government procurement, our nation can seize the day and be a pioneer of the trend, putting us on the global stage as a simultaneous consequence of greatly improving our own society.

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