Informe de resultados proyecto Comercialización

Findings Report Commercialisation for Social Value: Extending the Use of Social Enterprises in the supply chains of private organisations

March 2013

This publication is supported by the European Union Programme for Employment and Social Solidarity PROGRESS (2007 – 2013).

This publication is supported by the European Union Programme for Employment and Social Solidarity - PROGRESS (2007-2013).

This programme is managed by the Directorate-General for Employment, social affairs and equal opportunities of the European Commission. It was established to financially support the implementation of the objectives of the European Union in the employment and social affairs area, as set out in the Social Agenda, and thereby contribute to the achievement of the Lisbon Strategy goals in these fields.

The seven-year Programme targets all stakeholders who can help shape the development of appropriate and effective employment and social legislation and policies, across the EU-27, EFTA-EEA and EU candidate and pre-candidate countries.

PROGRESS mission is to strengthen the EU contribution in support of Member States’ commitment. PROGRESS is instrumental in: 

providing analysis and policy advice on PROGRESS policy areas;



monitoring and reporting on the implementation of EU legislation and policies in



PROGRESS policy areas;



promoting policy transfer, learning and support among Member States on EU objectives



and priorities; and



relaying the views of the stakeholders and society at large

For more information see: ec.europa.eu/progress The information contained in this publication does not necessarily reflect the position or opinion of the European Commission, which is the Contracting Authority.

Partners

2

Contents Executive Summary .........................................................................................5 1. Introduction ..................................................................................................8 2. Context ......................................................................................................10 2.1 UK ........................................................................................................10 2.2 Spain ....................................................................................................11 2.3 Italy.......................................................................................................12 3. Findings .....................................................................................................13 3.1 Communicating and evidencing social value........................................13 3.1.1 Evidencing Social Value ................................................................13 3.1.2 Communication and Marketing ......................................................14 3.2 Engagement, Innovative Networks and Co-production ........................15 3.2.1 Engagement ..................................................................................15 3.2.2 Innovative Networks.......................................................................16 3.2.3 Co-production ................................................................................17 3.3 Public Procurement ..............................................................................17 3.4 Motivations ...........................................................................................18 3.4.1 Price and quality ............................................................................19 3.4.2 Performance and ability to deliver..................................................20 3.4.3 Social cause ..................................................................................20 4. Recommendations .....................................................................................21 4.1 Evidencing social value, communication and engagement ..................21 4.1.1 Communication ..............................................................................21 4.1.2 Evidencing Social Value ................................................................21 4.1.3 Engagement ..................................................................................22 4.2 Collaboration and Co-production..........................................................23 4.3 Market Place ........................................................................................24 5. Further Research .......................................................................................26 5.1 Research ..............................................................................................26 5.2 Implementation.....................................................................................26 6. Conclusions ...............................................................................................28 7. Bibliography ..............................................................................................30 8. Appendix - Design / Methodology / Approach ............................................32 8.1 Engagement .........................................................................................32 8.2 Focus Group and Interviews.................................................................32 8.3 CBA ......................................................................................................32

3

8.4 Co-production.......................................................................................33 8.5 Test the Market ....................................................................................34 8.6 Price Comparison Study.......................................................................35

4

Executive Summary This report is based on research conducted during nine months as part of a project funded under the European Union Programme for Employment and Social Solidarity PROGRESS (2007 – 2013). The project has been delivered by partners in the UK (New Economy, Pathways CIC), Spain (Artmo Bene, FAISEM) and Italy (AltreStrade, Pragmata).

This project’s hypothesis is that a more dynamic and diverse market of public service providers will enable better targeted service delivery with better outcomes.

Specifically, this project’s objectives were to: 

Identify the actions required for social enterprises to become suppliers to larger commercial businesses;



Providing clarity on the cost effectiveness of social enterprises;



Helping to establish a joint dialogue between the commercial, public and social enterprise sectors

For this project we have used the definition of social enterprise provided by the European Commission: Social enterprises are positioned between the traditional private and public sectors.

Although there is no universally accepted definition of a social enterprise, their key distinguishing characteristics are the social and societal purpose combined with an entrepreneurial spirit of the private sector.

Social enterprises devote their activities and reinvest their surpluses to achieving a wider social or community objective either in their members' or a wider interest. 1 Social enterprises are currently facing significant challenges to their financial sustainability. These challenges include external factors, such as public spending reductions, a general shift from a ‘grant based sector’ to tender-type processes and increased competition within a more open market. Internal factors include: an overreliance on public sector grants and funding, lack of business planning, marketing and capacity.

Findings

1

http://ec.europa.eu/enterprise/policies/sme/promoting-entrepreneurship/social-economy/socialenterprises/index_en.htm

5

1. Social enterprises often fail to articulate and communicate their social value proposition in a way that demonstrates their unique selling points.

2. Social enterprises need to present themselves in a more commercial way. Social enterprises are often very good at describing their services and transmitting their passion; however, greater clarity is required on what services are being offered, what these can do to meet the client’s and / or commissioner’s needs and at what cost.

3. The main elements that motivate commissioners and other commercial buyers to contract from any organisation are (in order of priority): Price and quality, ability to deliver and affinity with a social cause.

4. Social enterprises need better data to demonstrate impact. Processes and methodologies that capture and measure social value, e.g. Cost Benefit Analysis (CBA) and Social Return on Investment (SROI), need to be developed and embedded in everyday activities.

5. There is little or no pre-tender engagement which makes it difficult for collaborative relationships to emerge. However, some organisations are already doing significant work in developing networks (e.g. Social Enterprise UK), which is encouraging.

6. Social enterprises and commissioners recognise the need to establish partnerships as a priority, to identify better solutions and services, e.g. through co-production.

7. Commissioners consider it is costly to engage with social enterprises, as often they are not up to the required standards to become suppliers (e.g. size, efficiency and lack of robust governance structures). Social enterprises in all countries expressed concern about their lack of expertise, skills and resources when bidding for tenders.

8.

Social enterprises and commissioners seem to have the desire to work with each other. Social enterprises can provide specialised services to commissioners and other commercial buyers; and by increasing their commercial links social enterprises improve their profile and sustainability.

9. Commissioners look for robust governance structures that ensure the performance of social enterprises and reduce the perceived risk of contracting from a small organisation.

10. It is often the case that social enterprises receive grants or subsidies that cover some of their costs, artificially lowering their prices. However, when grants or

6

subsidies are no longer available, social enterprises fail to remain competitive and sustainable.

Recommendations 1. Social enterprises must improve the way they articulate their social impact, beginning with strong internal reporting and increasing peoples’ skills in terms of evaluating social value and communicating this to commissioners and other potential buyers.

2. Social enterprises must dedicate time and resources to the development of refined business models, strategies, marketing and communication plans. Costs and pricing structures need to be clear within the organisation to be transmitted to potential buyers.

3. Social enterprises need to be more proactive in the development of relationships with commissioners, public organisations, private companies and other social enterprises to be better integrated within the supply chains of these organisations. Relationships should be established before there are any procurement opportunities.

4. Collaboration must be seen as a business strategy. Partnerships with other social enterprises, or private companies could enable organisations to take advantage of economies of scale.

5. Co-production should be further explored by the social enterprise sector and commissioners; parties can re-design services and find solutions by working together.

6. The social enterprise sector and commissioners need to communicate and engage better to integrate the supply chain for the services and products that both are interested in.

Â

7Â

1. Introduction This report is based on research conducted during nine months as part of a project funded under the European Union Programme for Employment and Social Solidarity PROGRESS (2007 – 2013). The project has been delivered by partners in the UK (New Economy, Pathways CIC), Spain (Artmo Bene, FAISEM) and Italy (AltreStrade, Pragmata). This project was developed as an innovative and informative study to help understand how social enterprises can be better integrated into public and private sector supply chains.

For this project we have used the definition of social enterprise provided by the European Commission: Social enterprises are positioned between the traditional private and public sectors.

Although there is no universally accepted definition of a social enterprise, their key distinguishing characteristics are the social and societal purpose combined with an entrepreneurial spirit of the private sector.

Social enterprises devote their activities and reinvest their surpluses to achieving a wider social or community objective either in their members' or a wider interest. 2 This project started from the premise that a more dynamic and diverse market of public service providers will enable better targeted and more successful service delivery and better outcomes. More specifically, this project looked to: 

Identify the actions required for social enterprises to become suppliers to larger commercial businesses;



Providing clarity on the cost effectiveness of social enterprises;



Helping to establish a joint dialogue between the commercial, public and social enterprise sectors

The report is structured in the following way: section two briefly describes the context social enterprises face in each country, section three focuses on methodology; section four presents the project’s findings, section five offers recommendations followed by areas of further research finalising with concluding remarks.

2

http://ec.europa.eu/enterprise/policies/sme/promoting-entrepreneurship/social-economy/socialenterprises/index_en.htm

8

North West, England

Veneto Region, Italy Valladolid, Spain

Andalucía, Spain

9

2. Context 2.1 UK According to the Annual Survey of Small Businesses UK 2010, there are around 68,000 social enterprises in the UK, which collectively contribute at least £24bn to the economy and provide employment for approximately 800,000 people (SEUK). In the UK, partners engaged with social enterprises offering a wide range of services and adopting different forms, for example, co-operatives and community interest companies (CIC).

Social enterprises are currently facing significant challenges in the way they obtain funding to implement and manage their projects. These challenges include external factors, such as public sector spending reductions, which have increased competition for funds within the sector. Internal factors, such as an over-reliance on public sector grants and funding, lack of business planning, marketing and capacity.

In recent years, there has been a shift in central Government policy and service delivery. The UK Government has opted for a more decentralised approach to service delivery, prioritising social value and a more efficient use of public resources, linked in part to austerity measures. This approach has led to several Government policies that directly impact the delivery of services within the social enterprise sector. 

Since 2010, the Government has emphasised the importance of the ‘Big Society’, focusing on community empowerment, giving local councils and neighbourhoods more power to take decisions and shape their area (Cabinet Office, Big Society).



The ‘Work Programme’ creates a structure that allows greater freedom to tailor the right support to the individual needs of each benefit claimant seeking employment. It seeks to ensure value for money by basing payments largely on results, paying service providers from the benefits saved from getting people into work (DWP, The Work Programme).



The ‘Social Value Act (2012)’ requires public bodies in England and Wales, including local authorities, to consider how the services they commission and procure might improve the economic, social and environmental well-being of an area (Social Enterprise UK).

Social enterprises face a more dynamic and competitive marketplace as a result of recent policies (especially the Social Value Act). Demonstrating Social Value will not

10

be exclusively conducted by social enterprises; private companies will also be required to start including this in their value proposition when bidding for commercial contracts. This presents challenges and opportunities to social enterprises as it increases the importance of social value in procurement processes.

2.2 Spain Spanish partners focused solely on working with Special Employment Centres (SEC) and Occupational Centres (OC), two different models of sheltered workplaces for adults with disabilities. These models were developed after the implementation of the Law on Social Integration of Persons with Disabilities (LISMI, 1982).

The main goal of the employment integration policy was to: 

Integrate people with disabilities into the mainstream employment system or,



Incorporate them into the production system by means of sheltered employment (Art. 37).

These organisations operate in a similar way to other commercial companies but are subject to specific regulations and benefits. For example, most of their labour force must have some sort of disability, whilst the Government may subsidise up to 50% of the guaranteed minimum wage and up to 100% of employers’ contribution to the workers’ insurance.

Social enterprises have become the main channel for people with mental health conditions to engage with the labour market as they provide employment and recruitment support. In recent years, the number of people with disabilities hired through a social enterprise has significantly increased, from 29,706 in 2008 to 40,970 in 2011 (37%). These 40.970 contracts represent the 66% of the total contracts made to people with disabilities (INTRAS, 2007).

It is important to mention that even though supported employment is in line with the European Commission policies for social integration (Bellver, 2001) there are still significant challenges to overcome as the Spanish Government still spends more on segregated services than on social integration (INTRAS, 2007). In practice, the current compensatory contribution system offered to companies not only discourages direct hiring of people with disabilities but also reinforces the sheltered employment sector (INTRAS, 2007). It promotes practices more associated with charities than with sustainable social enterprises.

11

2.3 Italy Italian partners worked mostly with social cooperatives (SC), which represent the most common type of social enterprise in Italy. Due to legislation, the basic feature of SC is the pursuit of good employment conditions for its members, through the offer of services and products aimed at improving the local community through individual development and the social integration of individuals. Another important feature is the fact that these organisations are not for profit. Two different kinds of social cooperatives are provided for by law: 

Type “A” - provide services in the healthcare, educational and social fields.



Type “B” - provide products and workforce and at least 30% of their employees have a disability.

Since 2005 there has been a shift in focus for the sector as the Government has been pushing for more commercially-oriented social enterprises. These changes include having a broader focus and a democratic structure, re-investing profits, and producing reports that demonstrate social sustainability. According to recent studies, very few social cooperatives (approximately 4% during 2011) have changed their status to this new type of social enterprise (Andreaus, 2012), evidencing resistance to a paradigm shift.

According to recent surveys, in 2011 there were approximately 11,808 social cooperatives in Italy employing around 383,000 people (Andreaus, 2012). Most of these social cooperatives are SMEs with an annual turnover of less than €250K. In recent years there has been a tendency for social cooperatives to collaborate and form consortia in order to have more financial stability and political weight when dealing with public bodies as well as increased scalability when bidding for public tenders.

Recent legislation (D.I.n. 163/2006) is aimed at recognising the role of social enterprises within the economy and society by promoting the participation of social enterprises in public tenders. This initiative also encourages public bodies to consider the possibility of arranging tenders exclusively for social enterprises and to incentivise participants to demonstrate value for money. It is considered that social clauses in public procurement are still in need of optimisation due to critical issues related to lack of controls that ensure the completion of social clauses (Brunato, 2010).

12

3. Findings The findings of this report are presented under the following headings: 

Communicating and evidencing social value;



Engagement, innovative networks and Co-production;



Public Procurement;



Motivations

3.1 Communicating and evidencing social value One of the most significant findings identified during this research project is that social enterprises need to better understand their social value proposition – i.e. the benefits of what they do. They also need to improve the ways they communicate this to demonstrate their unique selling points and ability to deliver. It was identified that social enterprises and potential buyers often use different terminologies which makes it more difficult for both sides of the supply chain to engage with each other.

3.1.1 Evidencing Social Value It is important for social enterprises to point out both the economic and social value of their organisation to help commissioners and other commercial buyers understand the company’s mission and track record. Social enterprises, commissioners and private companies that were engaged during this project acknowledged the fact that social enterprises need to articulate their messages and present themselves in a way that makes it accessible to people outside of the organisations and the wider sector.

This is particularly due to the challenge of information asymmetry: both the public and private sectors face differences in terminology, ethos and limited engagement.

It was found that social enterprises often lack data that measures and demonstrates impact beyond the use of anecdotal evidence. Commissioners stated that the use of individual success stories is constructive; however this has to be substantiated and tailored to each specific tender exercise in order to be relevant.

Social enterprises need to develop administrative processes that capture and continuously measure social value. This should be embedded in everyday activities in order for social enterprises to capture robust evidence and be able to communicate this to commissioners.

Social enterprises are currently using a mixture of methods to demonstrate social value. For example, in the UK some providers (usually larger organisations with more

13

resources) have started to use Social Return on Investment (SROI) which allows the measurement and accounting of social value and incorporates social, environmental and economic costs and benefits into decision making. There are other methodologies available such as a Cost-Benefit Analysis (CBA) tool developed by New Economy (made available to Social Co-operatives in Italy and Special Employment Centres in Spain as part of this project) and social audit. Key Performance Indicators (KPIs) are also welcome by commissioners and other commercial buyers; however, social enterprises should include only relevant KPIs as long lists demonstrate a lack of strategic thinking.

Many social enterprises treat this as an individual activity; however, both sectors acknowledge this has to be an ongoing process. In many cases, this is due to limited capacity, lack of the specific skills and limited access to tools that measure and communicates social value. This finding has been consistent for social enterprises operating in the three countries that took part in this study.

3.1.2 Communication and Marketing Commissioners and social enterprises recognise the need for social enterprises to present themselves in a more ‘business-like’ way when bidding for tenders. Social enterprises are often very good at describing their services and transmitting their passion; however, greater clarity is required on what services are being offered, what these can do to meet the client’s needs and at what cost.

Typically, larger firms lack full information on what very small operations can provide to their supply chains in terms of specific support for particular groups; therefore, social enterprises need to increase their presence and make themselves more visible. Commissioners expressed that social enterprises often fail to communicate their offer in a way that is tailored to the potential client; this was further confirmed through a hypothetical pitch exercise, ‘Test the Market’ event described in the appendix. Partners identified that social enterprises need to increase their abilities to present their products in a way that is both understandable and attractive to commissioners. This is important to address as we found that both sectors seem to have the desire to work with each other. Social enterprises can provide specialised services to commissioners; and by increasing their commercial links social enterprises improve their profile and sustainability.

It was also found that social enterprises need to improve their communications and marketing strategies. Currently social enterprises have limited presence and are not

14

very visible to bigger organisations; some commissioners engaged during the focus group sessions (notably in Italy) mentioned that they had no previous knowledge of the wide range of services provided by the social enterprise sector. Additionally, some social enterprises still present themselves as voluntary organisations or charities rather than as sustainable businesses. Experiences in Spain show that this may deter commissioners and commercial buyers from contracting from social enterprises as some do not take these types of organisations seriously; focus has been changing and social enterprises emphasise on the enterprising aspects of the organisation.

This is a challenge but also an opportunity for social enterprises to improve their communications strategies and raise awareness on their products, services and track record. In Italy, for example, Community Boards that support co-production and discussions about service needs are currently being developed.

Finally, commissioners mentioned that for them to consider a proposal, social enterprises must be able to communicate and demonstrate how they will achieve targets, deliver outcomes, manage risk, monitor and evidence social value.

3.2 Engagement, Innovative Networks and Co-production Consultation with social enterprises, commissioners and other commercial buyers suggests that there is a need for an innovative approach regarding engagement between the two sides of the supply chain as well as within the social enterprise sector.

3.2.1 Engagement Social enterprises and commissioners do not usually interact with each other prior to applying for bids in tender exercises. There is little or no pre-tender engagement which makes it difficult for collaborative relationships to emerge between the two sectors. Commissioners expressed that it would be useful for social enterprises to be more proactive and engage with them before there is an advertised contracting opportunity, allowing for the development of commercial networks. Additionally, commissioners mentioned that most organisations they engage with during ‘meet the buyer’ events (network events where suppliers and buyers have the opportunity to interact with each other) are private companies. Commissioners saw pre-tender engagement as an opportunity for social enterprises to manage their relationships more effectively and improve their engagement with commercial buyers. This offers

15

the potential to improve relationships between the two sectors and allow for a more integrated supply chain.

3.2.2 Innovative Networks Partners identified a need to grow trust between social enterprises, commissioners and other commercial buyers. Trust building is important to the development of regional and local networks; currently, these are very informal and competitiveness between regions and the sector in general has hampered the sharing of best practice. This is very important as networks and infrastructural support are thought to be vital to social enterprises (Phillips, 2006; Sharir and Lerner, 2006; Thompson and Doherty, 2006; Hynes, 2009).

Differences in terminology and ethos have stopped social enterprises and commissioners from working across sectors; barriers can potentially be overcome by addressing these challenges.

There are organisations that are already doing significant work in developing trust and networks. These operate nationally or regionally and represent the sector at a wider level, building relationships between social enterprises, the public and private sectors. An interesting example is Social Enterprise UK (SEUK) whose members come from the social enterprise sector, private businesses and public sector organisations. They operate at a national level and focus their work in running campaigns, lobbying on behalf of the sector, conduct research, build networks and raise the profile of individuals and social enterprises within the sector. SEUK also run programmes designed to improve skills around health care commissioning, social investment, social franchising, business leadership and education (SEUK website).

Also operating in the UK, Social Enterprise North West (SENW) is an established regional network aiming at raising the profile of social enterprises in the North West of England, encouraging mutual support between organisations, sharing of best practice, inter-trading, training and development opportunities (SENW website).

Additionally, in Spain there is an association in the region of Andalucía, where social enterprises pay a membership fee and are able to access information regarding other businesses in the sector, including name, contact details and a brief description of the organisation’s specialism. Members are also offered opportunities for networking.

16

3.2.3 Co-production Anecdotal evidence found by all partners suggests that relationships are more robust when there had been a co-production element in the development of a product or service.

For co-production, we use the definition provided by the New Economics Foundation which defines it as the delivery of public services in a reciprocal relationship between service providers, the public and private sectors and beneficiaries (New Economics Foundation).

During the co-production event, focus group sessions and a partner meeting in Spain, both social enterprises and commercial buyers described how they wanted to go beyond traditional relationships which are purely transactional and without significant collaborations; and move to a situation where both sides of the supply chain interact and collaborate. Through co-production, both sides of the supply chain can identify better solutions and services to final beneficiaries. For example, commissioners can share specific needs, expected outcomes and financial constraints and work with providers to identify solutions that fit within that framework.

Few cases were identified where effective partnerships had been developed between a social enterprise and a commercial buyer. However, FAISEM in Spain had worked closely with Tunstall, a multinational company. Both organisations identified common social goals and, from there, developed a service to be delivered by FAISEM. This has been a successful partnership that allowed FAISEM to grow and to increase the number of people they support to obtain employment, thereby overcoming social challenges such as being marginalised from society.

3.3 Public Procurement During the co-production event that took place in the UK, commissioners described how they currently find themselves in a difficult situation. Policy is pushing commissioners towards engaging with social enterprises and delivering social value; however, finance departments are trying to cut costs and are more inclined to purchase services from organisations that offer the lowest prices. Therefore, there is a disconnect between the leads in procurement processes (usually finance departments) and the policy agenda that aims to drive social value out of contracts; this includes contracting with social enterprises and co-operatives.

Â

17Â

In the case of Italy, some social enterprises raised concerns over the transparency of tendering exercises.

It was found that social enterprises in the three countries (UK, SP, IT) face different political contexts (e.g. lack of subsidies in the UK when these are available in Spain and Italy). However, to a greater or lesser extent, there is a general shift in all countries from a grant based sector to competitive tender-type processes; increasing competition for social enterprises in a more open market that includes private companies. Another shift that is beginning to take place in public sector commissioning in all three countries, is a change in focus on what is expected regarding contracted services; providers are now required to deliver outcomes as well as outputs. They are expected to provide evidence on the long term impact projects will represent for beneficiaries.

Commissioners consider it is costly to engage with social enterprises, as sometimes they are not up to the required standards to become suppliers. This is often regarding size, efficiency, lack of robust governance structures and management processes, such as, IT security.

Social enterprises in all countries expressed concern about their lack of expertise, skills and resources when bidding for tenders. This makes it very difficult for social enterprises to compete with other private organisations that have better skills, resources and experience in these types of processes. Social enterprises recognised that there is a need for standardisation (e.g. common evaluation methodologies and common terminology) in the process of bidding for tenders, allowing them to be more effective when new opportunities arise.

During the co-production and ‘Test the Market’ events it was observed that social enterprises need to improve the way they present information in their proposals as these need to be tailored to the specific audiences they are addressing. A checklist designed to advise social enterprises when bidding for tenders was co-produced between commissioners, social enterprises and specialists in business support during the co-production event in Manchester, November 2012 - this is available as a separate practical tool.

3.4 Motivations Commercial buyers, commissioners and public bodies from all countries commented that the main elements in order of priority that motivate them to contract from a social enterprise or any other organisation are:

18

 Price and quality  Ability to deliver  Affinity with a social cause

3.4.1 Price and quality Price is often the determining factor behind a commissioner’s decision to purchase from a given organisation. In the UK, current public spending cuts as a result of austerity measures have given commissioners and public bodies further pressures to keep costs down and buy the services from organisations that offer the most competitive prices.

Social enterprises in Spain face another challenge related to the price of their products. Buyers are not only looking for the most competitive prices, they also expect social enterprises to be significantly less expensive than private companies, as many receive subsidies from the government under the Law on Social Integration of Persons with Disabilities (LISMI, 1982).

Focus group sessions and interviews indicated that the situation is similar in Italy in the sense that price competitiveness is the key driving factor for commissioners and other commercial buyers behind the contracting of services to an external provider.

In many cases, social enterprises find it difficult to identify the exact costs of their products and services, making it harder for them to provide accurate prices to potential buyers. It is often the case that social enterprises receive grants or subsidies that cover some of their costs, artificially lowering their prices. However, when grants or subsidies are no longer available, social enterprises fail to remain competitive and sustainable.

As a result of three price comparison studies conducted by partners it was found that even though social enterprises provide high quality and specialised services, they still need to be more competitive in terms of price. In some cases in the UK social enterprises provided high quality services in more standardised ways than private companies but at higher prices, even when receiving subsidies.

In the case of Spain, the service compared showed that social enterprises offered significantly lower prices; however, this was due to the impact of the Government subsidy. By contrast, in the UK, whilst at face value the prices for the services provided by private and social enterprises are similar, they are based on different

19

pricing structures; therefore, this is not a like for like comparison. When compared like for like, in most cases social enterprises were priced slightly higher.

3.4.2 Performance and ability to deliver During three events conducted as part of this project (Focus Group, co-production, Test the Market), it was identified that after price, the most important factor driving the decision of a commercial buyer is the assurance that the contracted organisation will be able to deliver. During the focus group sessions in the UK, commissioners expressed the view that the most important motivation for working with a social enterprise is performance. Research from all countries found that for most buyers it is not relevant who provides the services (social enterprises, voluntary sector, private companies, etc.) as long as they can deliver.

Additionally, commissioners and other commercial buyers perceive that there is a significant risk in working with a small organisation in comparison to working with a large company. In the case of small social enterprises one person might be vital for the delivery of the project, and if for any reason that person is not able to finish the work, it can easily fail to achieve agreed outcomes. Buyers look for robust governance structures that ensure the performance of social enterprises and reduce the perceived risk of contracting from a small organisation.

3.4.3 Social cause Corporate Social Responsibility is usually not considered by commissioners and other commercial buyers to be a determining driver of procuring from social enterprises. Buyers tend to fulfil their social goals through other types of activities for example, supporting charitable causes - rather than contracting social enterprises solely for these purposes. Buyers stated that they could commission the delivery of social value from social enterprises or private organisations as long as there are common social goals.

Â

Â

20Â

4. Recommendations From the research and consultation conducted for this project, we can make some initial recommendations; this can potentially improve the way social enterprises develop business models, communicate their social value offer and engage with commissioners and other commercial buyers.

4.1 Evidencing social value, communication and engagement 4.1.1 Communication 1. Social enterprises must dedicate more time and resources to the development of practical business skills in order to come up with more refined business strategies. This includes business models and planning, marketing strategies and communication plans that make them more visible to potential buyers. In order to develop marketing and communication strategies, it is essential that social enterprises clearly understand their core business model and how it delivers social value. Additionally, costs and pricing structures have to be clear within the organisation to be transmitted to potential buyers. Social enterprises should seek publicly availably business support; for example, in the UK there are a number of organisations that provide support specifically tailored for social enterprises, some are free of charge others operate as consultancies. Generic business support is also available.

2. When communicating with buyers, social enterprises need to articulate what they do in a clear way, without assuming that commissioners know some of the background regarding their work. Messages should be comprehensible and certain information should be prioritised (e.g. product, price, current clients).

Social enterprises must demonstrate how they will deliver outcomes and mitigate and manage risk.

4.1.2 Evidencing Social Value 1. Social enterprises need to constantly consider the impact of their organisation and the articulation of such. They must begin this with strong internal reporting and increasing peoples’ skills in terms of capturing and communicating social value. This is particularly useful for social enterprises to be ready to bid for contracts from commissioners as opportunities arise.

2. Someone within the organisation can lead the process of measuring and communicating social value; this should then be passed on to other employees as it must be embedded in all activities. However, systems and processes have

21

to be designed and established in a way that allows them to be improved and developed by new people entering the organisation and are not dependant on any individual.

3. Social enterprises must recognise that evaluation and measurement of social value is not only useful to demonstrate track record and evaluation methods to buyers and individuals outside of the organisation; data obtained from these exercises can better inform the way services are developed and re-assessed.

4. Once measurements of social value are in place they must be made visible, for example, external audiences should be able to easily identify these measures on websites and reports.

5. Social

enterprises

can

benefit

from

securing

validation

from

external

organisations on evaluation methods; this increases the reliability of the analysis and commissioners’ confidence as the report will be standardised and consistent.

Costs vary depending on the extent and complexity of the model, for example, in the UK the SROI Network charges approximately £750.00 for a full assurance, it’s important to note that SROI training is widely available internationally (SROI Network).

6. Additionally, organisations should monitor and evaluate the effectiveness of their service through measuring customers’ satisfaction. This can make their proposals more attractive as they can evidence track record and ability to deliver services effectively.

4.1.3 Engagement 1. When bidding for a tender opportunity or pitching to potential buyers, it is essential to understand the audience and demonstrate how the services social enterprises provide fit within the corporate mission of commissioners and other commercial buyers. This is true for every organisation selling products and services and is not exclusive to the social enterprise sector. Social enterprises need to better understand customers’ needs; more research has to be done to know the customers’ value base, drivers and who will benefit from services provided.

2. Social enterprises must be proactive in the development of relationships with commissioners, public organisations, private companies and other social enterprises to be better integrated within the supply chains of these organisations. This can potentially allow social enterprises to form consortiums and increase the scale of their operations for specific projects; this is a key recommendation as commissioners find working with consortiums very effective.

22

3. Relationships should be established with commissioners before there are any procurement

opportunities.

Allowing

social

enterprises

to

understand

commissioners’ cost structures, preferred method for evidencing social value (commissioners may be biased to specific models depending on what they look for in providers), social goals and target beneficiaries. Increased understanding of the customer will allow for better and more informed bids. Early engagement can also increase commissioners’ understanding of services provided by social enterprises and how these can help them deliver outcomes; more presence can increase the likelihood of a social enterprise being contacted by a commissioner when new opportunities arise.

4. Commissioners should be more proactive and approach social enterprises before the tendering process to develop relationships. They could be more open about the information that goes to tender, giving organisations more time to prepare.

Standardisation of the bidding process will be useful as many social enterprises do not have the knowledge or capacity to complete bids in an appropriate way.

4.2 Collaboration and Co-production 1. During the life of this project, collaboration and co-production have been recurring themes across all partners. The social enterprise sector will benefit from developing a more collaborative approach; a number of different ways of accomplishing this were discussed during various events. These included joining with other social enterprises for a specific tender to increase scale; and sharing resources in order to hire expert or required skills (e.g. marketing, finance).

2. Collaboration must be seen as a business strategy. Social enterprises could join together with organisations within the sector, or private companies to develop economies of scale and increase capacity to bid for tenders they could not take up by themselves. Partnerships should be flexible to adapt to changing contracts; they should be able to expand and contract according to the needs of the market and specific tenders (i.e. explore temporary partnerships).

3. Co-production must be further explored by both sectors; parties can re-design services and find solutions by working together. Co-production is important to understand what can be achieved within commissioners’ budgets and the provider’s expertise, maximising resources and delivering social value more efficiently. More work needs to be done by both sides of the supply chain to identify a common approach and common terminology to better deliver and evidence social value.

23

4. Social enterprises can face the challenge of lack of resources and low business skills due to the high costs of acquiring them in the market. As a potential solution, social enterprises could share funds to jointly contract services and the expertise of marketing managers, solicitors, and other business professionals; they can work together and share the costs of hiring these professionals. Social enterprises could explore establishing consortia to have the capability to jointly purchase the expertise that they need; centralise competencies, set up and use the same skills and tools across the sector. This in turn could help to standardise processes and allow for a more effective diffusion of best practice.

5. Innovative ways of collaborating should be explored within the sector; for example, organisations could take advantage of information sharing platforms and exchange ideas, best practice and methodologies for evidencing social value. This could build social capital and networks.

6. Additionally, to improve collaborative efforts, social enterprises need to develop their abilities to initiate and manage business networks. Social enterprises could develop skills to make better use of social media and e-networks – as well as more traditional local meetings. This can help them create consortia not only with other social enterprises but also with other private companies.

4.3 Market Place 1. There is a gap between the social enterprise sector, commissioners and other commercial buyers in terms of lack of communication, engagement, awareness and supply chain integration. This can be addressed by intermediary organisations that help social enterprises promote their services in a way that meets the commercial sector need. A notable example discovered during our research in the UK is The Connectives, an organisation that provides support for commercial companies to leverage social outcomes and social enterprises to achieve commercial outcomes. One of their main areas of focus is around brokering new relationships bringing businesses together, enhancing supply chains and supporting procurement teams.

In Italy, partners recommend the establishment of community boards, which could promote a free exchange of experiences and best practice. These could take the form of networks, formed from specific community needs and should use common indicators to identify projects and products that deliver social value and can be transferred to other territories or organisations. This can be promoted through current legislation (National Law n. 33/2009 on production districts and network of enterprises).

Â

24Â

2. The commissioning landscape constantly changes. This further supports the arguments made earlier in this section about engaging with commissioners as early as possible and on a continuous basis; allowing them to understand the role of social enterprises within their supply chains.

3. Preparing a bid consumes significant amounts of time and resources; social enterprises must prioritise tenders, focusing on applying for the right contracts.

Initially, social enterprise could focus on contracts that require services that lie within their core business and value proposition but also need to develop growth strategies to expand their service offer.

4. Social enterprises can join together and as a sector lead on helping commissioners and other buyers to better understand social value, what it can do to the communities and lives of people receiving a service as they possess local knowledge of communities and expertise in delivering social outcomes.

25

5. Further Research It is important to acknowledge this is a pilot research project and initial recommendations will need further research in order to be substantiated and widely applied.

5.1 Research 1. Both sectors must continue to resolve the issues of how to work together and coproduce social value, share knowledge within the sector and both sides of the supply chain.

2. It is essential to place commercialisation in the context of social value, it is important to ask some of the following questions: 

How is social value commissioned?



Can social value be delivered?



Should social value be co-produced?



Can social value be monetized?

3. Co-production is a concept that is increasingly becoming more relevant in the delivery of public services and the establishment of commercial relationships.

Further efforts should be made to increase understanding of the development of partnerships between sectors and co-production of products and services.

4. More research should be conducted regarding the effectiveness of open databases and online platforms to share information (i.e. current legislation, methodologies for evidencing social value, best practice).

5.2 Implementation 1. Social enterprises need to continue to improve their performance in terms of internal processes, particularly the development and refinement of sustainable business models.

2. Social enterprises must continue to work in pre-tendering engagement and refinement of skills to be prepared to respond to tenders promptly.

3. Both sides of the supply chain and intermediaries should continue to promote a more diverse market place which can enable more innovation, better services and ultimately more social value.

4. Both sides of the supply chain, intermediaries and the public sector should keep identifying ways to promote the exchange and debate of ideas.

5. Commissioners, social enterprises and the public sector should continue the debate of price vs. quality – the discussion should be elevated beyond ‘best price’

26

and ‘value for money’ (important to consider the value perceived by final beneficiaries).

27

6. Conclusions The main purpose of this research project was to increase understanding and raise awareness on various challenges social enterprises are currently facing across the UK, Spain and Italy, in terms of engaging in more commercial activities and integrating the supply chains of commissioners, public and private organisations.

The key aims were: 

Identify a set of actions and recommendations required for social enterprises to become suppliers to commercial businesses;



Providing clarity on the cost effectiveness of social enterprises;



Helping to establish a joint dialogue between the commercial, public and social enterprise sectors

Findings Through primary research, consultation and wider engagement with the sector, it was found that both sides of the supply chain face significant challenges when communicating and engaging with each other as many times there are differences in terminology, size and ethos. Social enterprises need to improve how they communicate with individuals outside their organisations, demonstrate social value as well as increase their presence in the market place.

Research highlighted the need for both sides of the supply chain to increase efforts in co-producing products and services that deliver social value.

Commercial buyers, commissioners and public bodies consider price, quality, ability to deliver and affinity with a social cause the most important factors that motivate them to contract from a social enterprise or any other organisation. Research also suggests that buyers look for robust governance structures that ensure the performance of social enterprises and reduce the perceived risk of contracting from a small organisation.

Recommendations In order to develop marketing and communication strategies, it is essential that social enterprises clearly understand their core business model and how it delivers social value.

28

Social enterprises should constantly consider and understand the impact of their organisation and how to articulate it. To do so, social enterprises must develop strong internal reporting and make use of different evaluation methodologies.

Moreover, data obtained from evaluation exercises can better inform the way services are developed and re-assessed.

Social enterprises need to better understand potential customers’ needs and demonstrate how the services they provide fit within their corporate mission.

Additionally, social enterprises should be proactive in the development of relationships before there are any tenders to be better integrated within the supply chains of commercial organisations.

Collaboration should be seen as a business strategy, partnerships should be flexible to adapt to changing contracts. Furthermore, social enterprises could share funds to jointly contract services and the expertise of business professionals. Finally, coproduction must be further explored by both sectors; parties can re-design services and find solutions by working together.

There is an important role for intermediary organisations that can help social enterprises promote their services in a way that meets the commercial sector need.

Additionally, the social enterprise sector can lead on helping buyers to better understand social value, what it can do to the communities and lives of people receiving a service.

Further Research Social enterprises and commissioners should continue to resolve the issues of how to work together and co-produce social value, share knowledge within the sector and both sides of the supply chain.

More research should be conducted regarding the effectiveness of open databases and online platforms to share information. Social enterprises need to continue work to improve their performance in terms of internal processes, particularly the development and refinement of sustainable business models.

Finally, commissioners, social enterprises and the public sector should continue the debate of price vs. quality and determine social value taking what is best for the final beneficiaries as the main consideration.

Â

29Â

7. Bibliography 1.

Andreaus M., Carini C., Carpita M. and Costa E., eds. (2012). ‘La cooperazione sociale in Italia: un overview’. EURICSE Working Paper, n. 27/12. URL: http://socialenterprise.guardian.co.uk/social-enterprisenetwork/2012/dec/20/challenges-social-enterprises-italy

2. Baines, S., Bull M. and Woolrych, R. (2010)."A more entrepreneurial mindset?

Engaging third sector suppliers to the NHS". Social Enterprise Journal, Vol. 6 Iss: 1 pp. 49 – 58 3. Boyle, D., Coote, A., Sherwood, C. and Slay, J. (2012). ‘Right Here, Right Now – Taking co-production into the mainstream’. New Economics Foundation, The Lab, NESTA 4. Brunato G. (2010). ‘Le clausole sociali della L. 381/1991, in FARCELA: percorsi di inserimento al lavoro Maurizio Bergamaschi (ed.)’. Aracne Editore. URL: http://www.situabile.org/web/wp-content/uploads/2011/04/Le-clausole-socialidella-legge-381_1991.pdf 5. Bull, M., Crompton, H. (2006),"Business practices in social enterprises", Social Enterprise Journal, Vol. 2 Iss: 1 pp. 42 - 60 6. Cabinet Office, (2012). Big Society - http://www.cabinetoffice.gov.uk/big-society 7. CENSIS, (2012). ‘Primo rapporto sulla cooperazione in Italia’. Sintesi, Fondazione CENSIS, Roma. http://www.legacoop.it/multimedia/allegati/SintesiPrimoRapportoCensissullacoop erazioneinItalia.pdf 8. CLES Consulting, (2006). ‘The Social Enterprise Sector in Greater Manchester: A Research Report’ 9. Department for Work and Pensions (2012) The Work Programme http://www.dwp.gov.uk/docs/the-work-programme.pdf 10. Eurofund, (2013) Social Clauses http://www.eurofound.europa.eu/areas/industrialrelations/dictionary/definitions/so cialclauses.htm 11. Fundacion INTRAS, (2007). ‘The current employment situation of people with mental health problems in Spain: prevailing programmes and models’ 12. Pioneers Post, What is Social Value and how do we account for it? Quick Guides 13. Progetto Excelsior (2012) http://excelsior.unioncamere.net/xt/flash.geoChooser/scegli-archivio.php 14. Public Services (Social Value) Act 2012

30

15. Serco, (2012) ‘Increasing the Use of SMEs and the VCS in Public Service Delivery’ 16. Situabile, (2012) - http://www.situabile.org 17. Social Enterprise UK, (2013). Social Value Act http://www.socialenterprise.org.uk/policy-campaigns/campaigns/public-servicessocial-value-act 18. Social Enterprise UK, (2013). ‘The Social Value Guide’ 19. Slay J. and Robinson B. (2011). ‘In This Together - Building knowledge about coproduction’. New Economics Foundation 20. Venturi P. and Zandonai F., eds (2012). ‘Social Enterprise in Italy. Plurality models and contribution to growth’. IRIS Network Report, Edizioni altreEconomia, Milano, 2012. URL: http://www.irisnetwork.it/wpcontent/uploads/2010/04/exsum_reportiris_socent_1-ENG.pdf

31

8. Appendix ­ Design / Methodology / Approach The project was delivered using a three stage process which included primary and secondary research; as well as a series of events that explored current thinking within the sector and workshops that provided skills for evidencing and communicating social value. Stage one included initial engagement with the social enterprise sector and commercial buyers, focus group sessions and interviews. Initial findings from stage one informed subsequent events part of stage two which included the delivery of cost-benefit analysis workshops, a price comparison study, an event focused around co-production and test the market pitch sessions. Stage three includes the publication and dissemination of findings, toolkits and other reports produced during the life of the project.

8.1 Engagement Most organisations engaged with this project came from the North West of England; the Veneto region (Vicenza and Treviso) in Italy; and Valladolid and Andalucía in Spain. Chosen target sectors were: workforce integration, mental health service users

and

supported

employment.

Social

enterprises

and

private

sector

organisations were engaged through New Economy and Pathways CIC in the UK, Artmo Bene and FAISEM in Spain and AltreStrade and Pragmata in Italy, with the support of Federsolidarietà, an organisation that represents social cooperatives.

8.2 Focus Group and Interviews During Phase 1, which focused on buyer and producer insight, partners conducted interviews and focus group sessions with social enterprises, commercial buyers and public bodies during the month of July 2012.The main themes explored included: 

Understanding of social enterprises



Motivations for buying from social enterprises



Reasons for not currently using a social enterprise



Understanding of added value or social value associated with social enterprises



Perceptions of the way that social enterprise promote and market their products

8.3 CBA New Economy developed and continues to refine a Cost-Benefit Analysis (CBA) model that can identify the fiscal, economic, and social value of project outcomes,

32

and specify which public agency sees this benefit. This model has been shared with agencies across Greater Manchester and for the purpose of this project; three oneday seminars for social enterprises were delivered during November 2012 in each of Italy, Spain and the UK. Participants in Italy came from social enterprises from Padova and Treviso; in the UK from social enterprises located in the North West of England; and in Spain from Special Centres of Employment, part of the ADECEM (Asociación Empresarial de Centros Especiales de Empleo) network.

The model was well received by participants; 

In the UK social enterprises that attended the training have stated they have begun to use the methodology in current tender exercises.



In Italy, interest raised by the seminar led to the development of a working group that includes social enterprises and representatives from the Universities of Padua and Bologna collaborating towards building an initial overview of existing literature in Italy regarding CBA and databases to apply the model within the national context.

8.4 Co-production Each partner delivered an event aimed to explore market positioning for social enterprises that were seeking to win commercial contracts, thereby entering the supply chain of public and private sector organisations.

In these events, social enterprises worked together with commissioners, public bodies and business advisers to identify ways to strengthen collaboration.

In the UK, the event took place on Wednesday 28th of November 2012. This event had the participation of five members of social enterprises, two commissioners and was facilitated by So-Mo, a consultancy specialising in Co-Production. The event followed an action learning approach to co-produce a checklist that contains practical information focused on meeting the requirements that commissioners look for in selecting winning tenders. Key themes included:



Describing what you do and who are the beneficiaries



What is your social value proposition



How do you evidence this?



Systems & managing risk

33

In Italy, a meeting took place on the 23rd of July 2012 with participants from CC, PB and SE; facilitated by AltreStrade and Pragmata, with the scientific collaboration of Professor Gian Piero Turchi (University of Padua). This meeting covered three issues: 

Share feedback from the focus groups with commercial buyers



Detect common areas of miscommunication and misunderstanding between commissioners, social enterprises and public bodies



Detect areas where social enterprises need to undertake further work to address the concerns of commercial buyers

In Spain, the session took place on Thursday, 6th of September 2012 in Valladolid. It was organised by Artmo Bene and FAISEM, attendees from SEs introduced topics for discussion and engaged in further discussions with representatives from private organisations. The meeting covered the following topics: 

The role of social enterprises in facilitating the transition from social to private employment for people with mental health conditions, changes in the context, society and legislation



Importance of quality of services/products, productivity and innovation



Main motivations for contracting from a social enterprise (price, quality and added value of social cause)



How to overcome the current crisis

8.5 Test the Market In the UK, the event took place on Tuesday the 15th of January 2013. Six social enterprises participated, and panel members came from New Economy and EDS (Economy Development Services) a results-driven regeneration consultancy, drawing upon over 25 years of experience in the public, private and voluntary sectors. This session provided an opportunity for social enterprises to present products and services to a panel of experts in a hypothetical pitch situation. Each organisation was asked to give a 10 minute pitch based on current business proposals and received constructive feedback to improve the way they communicate their social value offer, products & services. Feedback reports were sent to all participants after the event took place.

In Italy, sessions took place from October to November 2012 and held five one-toone meetings; each meeting was organised and facilitated by AltreStrade and

34

Pragmata. The aim of these events was to promote a dialogue between both sectors which can be the first step in order to develop future partnerships. Another objective was to identify and analyse critical elements in the dialogue between social enterprises and commissioners, as a base to develop guide-lines for implementing it.

In Spain, sessions took place from October to November 2012; these consisted on commercial visits where representatives of Artmo Bene visited six social enterprises and assessed the way they communicate their products, services and social value proposition.

Artmo Bene, INTRAS and FAISEM, organised a feedback session on the 14th of December after the Co-production and Test the Market events to discuss challenges social enterprises currently face and potential solutions.

8.6 Price Comparison Study Within the project, partners undertook a comparison study to identify and analyse pricing by social enterprises and CCs. Pathways CIC developed the methodology for the study; each country focused on one service provided by both social enterprises and private companies and conducted a like for like price comparison and analysis of reasons why pricing is different.

In the UK, the report focused on a price comparison between the private sector and social enterprises for the delivery of mental health services of counselling and cognitive behavioural therapy.

In Italy, the price comparison study was about employment promotion services for people with disabilities.

In Spain, the analysis targeted social enterprises and private companies that provided cleaning services. Social enterprises that provide these types of services usually employ people with mental health conditions.

Â

35Â