Findings ReportCommercialisation for Social Value: Extending the Use of Social Enterprisesin the supply chains of private organisations

March 2013This 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

 

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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

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8.4 Co-production.......................................................................................33

8.5 Test the Market ....................................................................................34

8.6 Price Comparison Study.......................................................................35 

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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 over-

reliance 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/social-enterprises/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.

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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/social-enterprises/index_en.htm 

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Veneto Region,

Italy

Valladolid,

Spain

North West,

England

Andalucía,

Spain

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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

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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.

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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).

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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

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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

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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.

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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.

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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.

  

 

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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

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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).

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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 co-

produce 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, co-

production 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.

29  

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-enterprise-

network/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-sociali-

della-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

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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-services-

social-value-act

18. Social Enterprise UK, (2013). ‘The Social Value Guide’

19. Slay J. and Robinson B. (2011). ‘In This Together - Building knowledge about co-

production’. 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/wp-

content/uploads/2010/04/exsum_reportiris_socent_1-ENG.pdf

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

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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 one-

day 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-to-

one meetings; each meeting was organised and facilitated by AltreStrade and

34

35  

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.