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  • CREATING AN ENABLING, SUPPORTIVE ENVIRONMENT FOR THE SOCIAL ENTERPRISE

    SECTOR IN IRELAND

    Submissionto:TheIrishLocalDevelopmentNetwork

    Producedby:

    DrBrigaHynesKemmyBusinessSchoolUniversityofLimerick

    June2016

  • AcknowledgementsThe author acknowledges the valuable input of Oliver Herbst(Oliver.Herbst@ul.ie) inpreparingthisdocument.His insightsandcommentary,informedbyhis researchon thesocialentrepreneurship sector,haveadded totheunderstandingofthedynamicsofthesocialenterprisesector.Wewouldalso like to thankall theparticipantswhocompleted the survey forthisstudy.

    Authordetails:DrBrigaHynes,KemmyBusinessSchool,UniversityofLimerick

    Email:Briga.Hynes@ul.ie Telephone:061-202619

  • FOREWORDAs Chairperson of the Irish Local DevelopmentNetwork (ILDN), I amdelightedthatwenowhaveasignificantpieceofresearchsuchasthis,whichconfirmsthevaluablerolethatLocalDevelopmentCompanies(LDCs)playinsupportingsocialenterprisesintheircommunities.As local enablers forour communities, eachofour49 LDCmembershaveandcontinuetoplayanimportantroleinsupportingthedevelopmentoftheirarea.The concept of creating an enabling and supportive environment for socialenterpriseisnotatheoreticalconstructbutarealitybeingdeliveredbyLDCsonan ongoing basis. This report confirms that LDCs are playing a central role increatingand supporting socialenterprises,which in turnareprovidingaviableplatform to deliver services and products where market conditions such asgeographywillnotallow.The maintenance of services to marginalised communities through the socialenterpriseconstructhasanessentialcommunityvalueinthatitstrengthensthesocialcohesionthatiskeytobuildingsustainablecommunities.Settingupasocialenterpriseisnotwithoutitschallenges.Thisreportidentifiesanumberoffinancial,legalandotherareas,suchasdependenceonvolunteersforrunningabusinesswitha commercialdimension. This iswhere LDCshaveandcontinue to play a key role in supporting the proper management of theseorganisations.Thesesupportsarenotoftenrecognised,butthisreportprovidesthe empirical evidence and analysis of the enabling role of LDCs for the socialenterprisesector.Finally, Iwould like to thankDr BrigaHynes of KemmyBusiness School in theUniversityofLimerickforherwork,aswellastheILDNSocialEconomyWorkingGroup for overseeing thedevelopment of this important report on the role ofLDCsinsupportingsocialenterprisesinIreland.MariePriceBolgerChairperson,IrishLocalDevelopmentNetwork(ILDN)

  • ExecutiveSummarySocialenterprises in Irelandoperateacrossawiderangeofbusinesssectors, inurbanandruralaswellassociallyandeconomicallymarginalisedlocations.Theyvary in size from small independent operators to larger community-basedenterprises.Although they are important drivers of social, economic and environmentalchange, it isnoteasytodemonstratethemanybenefitsthattheyprovide,asameansofvalidatingtheirexistenceandjustifyingsupportforthem.However,theresultsofthisempiricalstudy,involvingrepresentativesof20LocalDevelopment Companies, provide insights into the contributions of the socialenterprisesector,thechallengesencounteredinarrivingattheirsocialmission,and the supports required to start and scale social enterprises in a moresuccessfulmanner.Theprimaryconclusionsthatarisefromtheresearchare: Theconceptofsocialenterpriseisnotwellunderstoodgenerally.Amongthe

    variousstakeholders,thedefinitions,valuesandmeasuresofsuccessvary.

    Socialenterprisesprovideacombinationofsocial,economicandenvironmentalbenefitstoindividualsandregionsinneedofregeneration.

    Start-upandestablishedsocialenterpriseshavesimilarexternalchallenges,particularlyinrelationtolegalandgovernancecomplianceissues,andsourcingandaccessingfunding,whethertostartuportoscaleupthesocialenterprise.Therearecallsforthefundingframeworkstobesimplified,andfortherelatedadministrativeproceduresforapplyingforfundingtobeimproved.

    Internally,forthestart-upenterprise,issuesarisewithvalidatingthemarketopportunityandwithstaffing.Fortheestablishedsocialenterprise,thechallengesrelatemoretomanagementandgovernance,andtherecruitmentofboardmembers.

    Thecurrentlandscapeofsupportsforthesocialenterpriseislargelybasedonmainstream,micro,smallandmediumenterprisepolicy,withoutacknowledgementofthedifferentiatingcharacteristicsofthesocialenterprise,especiallyinareasoffinancing,governanceandperformancemeasurement.

  • Asocialenterprisepolicyneedstobedevelopedwiththeaimofestablishingavibrantandsupportiveenvironmentforsocialenterprisestostartupandscaleup,leadingtoabalancedpipelineofsocialenterprisesinIreland.

    Arisingfromtheresearchfindings,recommendationsinsixareasareproposedtoinformamorededicatedsocialenterprisepolicy,asoutlinedbelow.1.Enhanceawarenessof,educationabout,andpromotionandrecognitionofsocialenterpriseactivityItisnecessarytopromoteamorerealisticandcomprehensiveunderstandingofthemotivations,characteristicsandbenefitsofsocialenterpriseactivitythroughthefollowingactions: Establishingandresourcingadedicatedsystemforsocialenterprises,ora

    championentitythatisrecognisedasthegotoentityforinformationordealingsonsocialenterpriseformationordevelopment.ItsownershipwouldbebestplacedinLocalDevelopmentCompanies,giventheirimpactonthedevelopmentofthesocialenterprisesectortoitscurrentstatedespitelimitedresources.

    ProgressingthedevelopmentofaSocialEnterpriseBrandorofabrandingofthesocialenterprisesector,andestablishingawebsitethatistheshopwindowforthesocialenterprisesectorinIreland.

    Developingcasestudiesorstoriesandtestimonialspresentingrolemodelsandadvocatesofgood-practicesocialenterprises,soastogenerateconfidenceinsocialentrepreneurshipandgiveitlegitimacyinlinewithmainstreammicro,smallandmediumenterprises.

    Deliveringtargetedsocialenterpriseinformationandknowledge-sharingeventssuchasanationalstakeholderconferenceforsocialentrepreneurship;forexampleTheIrelandSocialEnterpriseSummit;arrangingseminarsandworkshopsregionallyinvolvingmultiplestakeholdersengagedwiththeprogressionofsocialenterpriseactivity.Participationandcollaborationingeneralmicro,smallandmediumenterpriseeventsrunbyLocalEnterpriseOffices(LEOs)andEnterpriseIrelandwillalsoheightenawarenessanddeepentheirintegrationwiththemainstreammicro,smallandmediumenterprisesector.

    Government support for the social enterprise sector must be tangible. It issuggestedthatanationwideSocialEnterpriseSupportCentrebeestablishedtostreamlinetheservicesofferedandtheactivitiesoforganisationsengagingwith

  • social entrepreneurs in a more formalised manner, thus leading to additionaleconomiesofscaleandsynergybetweenproviders.Morestrategically,considerationshouldbegiventodevelopingSocialEnterpriseHubsthatprovideinnovationspacestohelpbothstart-upsocialenterprisesandgrowingenterprises,offeringcommonresourcesandadministrativesupports,aswellasassistanceinareassuchasmarketing,governanceandnetworking.2.EstablishasupportivefinancialinfrastructurethatacknowledgesandrewardsthemultiplecontributionsofthesocialenterprisesectorCurrent social enterprise funding mechanisms need to be reconfigured toaddressthedifferentsocialenterprisebusinessmodelsandthevaryingstagesofsocialenterprisedevelopment.Thisrequiresthefollowing: Changingthemindsetsoffunders(publicandprivate)andequallyofthe

    socialentrepreneurastowhatrolefundingandfundersshouldplayinstartingupandscalingupthesocialenterprise.

    Enablingthesocialentrepreneurtobecomeinvestor-readyasopposedtojustgrant-ready.ThisrequiresincreasedavailabilityoftraininginFinancialPlanningandFinancialManagement,SourcingFundingandManagingCashFlow.

    Creatingalevelplayingfieldbetweensocialenterprisesandmainstreammicro,smallandmediumenterprisesforaccesstofunding,bycompensatingforormodifyingpublicfundingcriteriatoensurethatsocialenterprisescanaccessequivalentfinancialresources.

    Facilitatingamoveawayfromdependencyongrantandwagesubsidisationtoasituationwheresocialenterpriseshaveagreaterincentivetoproduce,trade,generaterevenueandreinvestsurpluses.

    Identifyingandtestinghowcontemporaryfundingorsocialfinanceintermediaries(angelinvestors,diaspora,individualinvestors,venturecapitalists,crowdfunding)arepredisposedorwillingtoprovideloans,guaranteesorquasi-equitytosocialenterprises.

    Providingmoreequitableaccesstosocialentrepreneurstosecurepublicprocurementcontractsbymodifyingthecontractualstipulationsforsocialenterprises.

    Itisimportanttokeepinmindthatitisnotenoughtoincreasefundingwithoutimprovingtheallocationmechanismstoensurethatfunding isputtogooduseand tocreateabetteralignmentbetween theexpectationsof fundersand theneedsofsocialentrepreneurs.

  • 3.ViewgovernanceandleadershipasapracticeratherthanasetofindependenttasksThe followingactionswill alleviategovernancechallenges,whichareaprimarybarrierforsocialentrepreneurs. Clarifyingtothesocialentrepreneurwhattheconceptofgovernancemeans,

    tolessenthefearsandtrepidationsassociatedwithit.Socialentrepreneursneedtounderstandthateffectivegovernanceisnotjustaboutrules,bureaucracy,andthestiflingofprogress.

    Focusingattentiononearly-stageandstart-upsocialenterprisesthatareconsumedwithestablishingapresenceinthemarketcanleadtogovernancearrangementsbeingneglected,oronlyconsideredwhenconcernsareraisedbyfundersorpublicservicecontractors.

    Devisingandimplementingbettermentoringongovernancemanagement,coveringsourcing;recruitingandassemblingaboardofdirectors;managingandleadingtheboardofdirectors;managingconflictintheboard;rules,policiesandproceduresformanagingboardoperations.

    Thesocialentrepreneuralsorequiresguidelinesandinstructionsontheprocessof recruiting a board of directors, reviewing board performance, managingconflict,andmanagingtheinterdependenciesbetweenboardandmanagement.Theincreaseddemandforgovernance-relatedservicesincreasestheworkloadfor Local Development Companies; resources need to be allocated to them todelivertheseservices.Further,trainingingovernanceshouldbemadeavailableforindividualsworki