How the social enterprise movement will transform the future of government solutions

As a member of PUBLIC’s Startup Innovation team, I am deeply passionate about the startup landscape. Keeping up to date on emerging themes and trends each year is a principle for me and everyone at PUBLIC. Recently, I have taken a particular focus on the increasing focus on social entrepreneurship and the movement of many startups from traditional venture-based models to social enterprise operating models. After chatting with our network, I have come to understand why we see such a shift.

Firstly, let's define the difference between a startup and a social enterprise. Startups and social enterprises are both for-profit business models, but they differ in their mission and goals. Startups are typically focused on creating a profitable company, while social enterprises aim to solve a social or environmental problem while being financially sustainable.

One key difference between startups and social enterprises is often their funding source. Startups typically rely on venture capital and private equity, while social enterprises may also use grants and impact investing to help fund their mission. Impact investing relates to investing in companies, organisations, and funds to generate a measurable, beneficial social or environmental impact alongside a financial return. This has become increasingly popular as more investors realise the potential for positive impact and financial returns. Impact investing has grown by over 20% per year since 2012 and is expected to reach $2.2 trillion by 2024.

Outside of financial benefits, there are strong political incentives for moving to a social enterprise model. Social entrepreneurship has seen a significant increase in the UK in recent years, driven partly by political reasons. The UK government has placed a greater emphasis on the role of business in addressing social and environmental issues, which has led to a growing number of entrepreneurs looking to start socially responsible companies.

One of the main reasons for the increase in social entrepreneurship in the UK is the recognition that traditional business models may not be able to solve societal issues on their own. The government has recognised that it cannot tackle issues such as poverty, inequality, and climate change alone, and they have called on business leaders to take a more active role in addressing these challenges.

Additionally, the government has introduced several initiatives to support social entrepreneurship, such as the Social Investment Tax Relief (SITR) scheme, which provides tax relief to investors who invest in social enterprises, making it more attractive for investors to put their money into socially responsible businesses. Another initiative is the Small Business Research Initiative (SBRI), which offers funding and support to startups with innovative solutions to public sector challenges. 

Another reason for the increased social entrepreneurship in the UK is the growing demand from consumers for more socially responsible companies. A 2019 survey by Deloitte found that 86% of consumers in the UK said they were willing to pay more for products and services from companies that are committed to positive social and environmental impact. Moreover, companies that positively impact society and the environment can also benefit from a positive brand image and customer loyalty. This can lead to increased sales and revenue, as well as better employee engagement and retention.

Having had the privilege of working with social enterprises through our Govstart platform and challenge programs such as Tech For Our Planet, Safety Tech Challenge Fund and Prison Leavers Innovation Challenge, I have seen first hand how, by investing in socially responsible businesses, these organisations can not only generate a financial return but also support their mission of making a positive impact on society and the environment.

The trend of socially responsible business is not temporary but indicative of the long-term shift of people's expectations and requirements from organisations to help build a long-term purpose to create a better future for everyone. As a business leader, it's crucial to stay informed about this trend and consider incorporating a social enterprise model into your business strategy.