A Voluntary Code of Practice for Social Enterprises

A Voluntary Code of Practice for Social Enterprises

1. Introduction

1.1.    Social enterprise organisations in Scotland increasingly see themselves as part of a ‘community of practice’
1.2.    This paper is an initial draft of a ‘voluntary code of practice’ for this self selecting community (The Code)
1.3.    The Code is an assertion of the values and behaviours by which the SE community intends to define itself
1.4.     It is important that The Code remains voluntary – a peer group consensus. Any imposed and regulated set of rules, would introduce the wrong dynamic – top down authority – to be resisted.
1.5.     It is intended that The Code would be a ‘living’ document – in process of continuous revision – amendments formally adopted at an annual event (partly social).
1.6.     The Code should be ‘outward-facing’ – with a strong public profile.
1.7.     Elements of The Code fall naturally into two groups – minimum requirements – and desirable behaviours.

2. Minimum Requirements

A business which doesn’t meet these basic requirements is not considered a social enterprise.

2.1.    SEs are businesses operating in the  market – through the production of good and services – whose primary objective is to achieve social and environmental impact

2.2.    The constitution of an SE includes the legal requirement that profits are reinvested in the business or in the community – rather than distributed to owners/shareholders.  (CICs and some co-operatives allow limited payment of dividends).

2.3.    There will also be a clause to insure that on dissolution the assets of a SE must be redirected in accordance with the social or environmental objectives of the business.

2.4.     A SE can be the subsidiary of a registered charity – but not of a public body or private company.

3. Desirable Behaviours

This is an ‘aspirational’ list.  It’s unlikely that any SE will meet all these criteria.

3.1.     Social enterprise is part of the market economy – but it is an eco social market economy – which values social fairness and protection of the planet as preconditions of all economic activity

3.2.     These values define not only mission – but also business practices – which are expected to be ethical.

3.3.     They will be good employers – promoting fairness – paying a ‘living wage’ and having flatter pay structures than the private sector; a maximum ratio of 1:5 between highest and lowest pay is a useful guide.

3.4.     They are managed in an accountable and transparent way – involving workers, customers, directors etc.

3.5.     They aspire to record and ideally measure the social and environmental benefits of their work – to prove and improve social impact.

3.6.     They try to attract ‘patient’ investment from sources which support their mission – where the original sum is repaid but ideally no enhancement.

3.7.     They aspire to financial independence by maximising the percentage of their income from trading.

3.8.     They recognise the benefits of small/local scale – when circumstances call for growing large organisations – safeguards are put in place to preserve human scale.

3.9.     They work particularly well serving a local community – building social capital and self sufficiency.

3.10.  They recognise that they are part of a wider SE Community of practice.  Within the context of common sense and commercial confidentiality – there is a commitment to share information and experience.

4. Final Comment

The proposal is that this Code of Practice will be entirely voluntary.  When it’s ready it will be formally adopted – refined annually; but it will not be regulated or policed.  Individual SEs have the option of ‘adopting’ it – perhaps displaying a certificate – but its no more that a pact between members of a self selected community of practice.