Social enterprise

Social enterprise is attempting to change the world by harnessing the innovation and discipline of business to tackle poverty, climate change and other challenges.

Peter Holbrook, chief executive of Social Enterprise UK and chairman of the Social Enterprise World Forum, says these businesses’ “primary purpose is to tackle a social or environmental problem”. That distinguishes them from a stock-market-quoted company, whose legal responsibility is to its shareholders first.

Pants to Poverty, which makes underwear using Fair Trade-certified cotton and guaranteeing workers a decent wage, is a riposte to the sweatshops of Bangladesh. Its products are premium but some consumers are willing to pay for minimum welfare standards.

Social enterprise works even better in the developing world, where the state is less effective. “There is huge appetite for social enterprises in Latin America and Africa,” Holbrook says.

In Brazil, a charity founded a business making battery-powered hearing aids that can be recharged by sunlight, reducing their cost for millions.

“It would take a lot of philanthropy to solve that problem,” he says. “We have to get beyond philanthropy. To be sustainable means making a profit.”

But government can play a role. The UK leads the world, with 62,000 social enterprises, employing 800,000 people and contributing £24bn to the economy, according to 2011 figures.

The new Localism and Social Value acts require public authorities to consider not just value for money but how much would be retained in a community when awarding contracts.

New forms of finance are emerging too. Big Society Capital, an investment fund launched in 2012, has £600m to help create a market. Some investors in the US and UK have embraced social impact bonds, which pay out if the business funded reduces government expenditure.

Even Russian oligarchs are interested. Vagit Alekperov, the Lukoil head worth $14.8bn, has talked to Holbrook about funding social enterprise.

Andrew Bounds