Theory of Social Enterprise by E R Ginige (2015)

Here’s a good report to help you understand the context and evolving landscape of social innovation and social enterprise.

Social Innovation: what it is, why it matters and how it can be accelerated by Geoff Mulgan with Simon Tucker, Rushanara Ali and Ben Sanders; The Young Foundation; Printed by The Basingstoke Press

Come back here or write to us for more resources.

A Social Enterprise should be able to act like a business, but with the core mission of creating social or environmental impact. Companies limited by guarantee like most NGOs do not allow them to act like businesses. One of the main problems is that investors are not willing to invest their money in companies limited by guarantee due to complications in ROI, which is a major barrier for scaling and expanding your enterprise. Even simple things like the directors not being allowed to get a salary, gives no financial incentive for them to constantly grow the business. In order for an enterprise to be successful it needs to have a healthy level of autonomy. But with companies limited by guarantee, decision making is often slow and rigid. Social Enterprises are essentially businesses doing good. They not only create social and environmental impact, but also create economic impact. What we need is a balance. We are trying to create a new paradigm. And we want you to join us.

We are registered as a Private Limited company in Sri Lanka. But we are different because, we have actually incorporated the following two special clauses into our very constitution:

Dividend cap – At least 65% of the company’s profits MUST be reinvested back in the company and it’s mission. In other words the shareholders can only share up to 35% of the profits. This applies to the investors as well. This controls us from wanting to make more and more money for ourselves, and forget our social mission.

Asset lock – After paying back the investors, the remaining assets can only be transferred to a charity or another asset locked-body. This controls us from wanting to acquire more and more assets and distribute it among ourselves.

This model is based on the UK’s Community Interest Company (CIC) model and we are the first company in Sri Lanka to introduce this model of registration. This is the best approach for Social Enterprises in Sri Lanka until a dedicated registration model is implemented by the Company Registrar’s Office.

Our purpose is to build a thriving social enterprise sector in Sri Lanka by 2025. Our impact is measured by several criteria. For example we measure the number of social enterprises we support and the quality of our engagement evidenced by results. (Read Reports)

If our members are able to solve their problems, grow their enterprise, sell more of their products and essentially create greater impact, as a result of our support; we count it as our impact. The better our members do, the greater is our impact. We will also measure our impact by the number of new social enterprises we create and their success rate.

We measure the social, environmental and economic impact created by our members as one of our core services.

We also measure our impact by systemic and policy level changes which we create by influencing and working with the policy makers. For example we want to eventually have a special legal registration model coupled with economic policies such as special lending rates, social bonds and tax incentives. When we are able to achieve those milestones, we count them as our impact.

1. Complete support to create your very own Profile on our membership directory with professionally written information about your social enterprise, photos, business model, impact and current needs. Our membership directory will be shared widely on local and international platforms, making it easy for potential customers, business partners and investors to find you easily.
2. Once we verify you as a Social Enterprise using our simple definition, you can use our brand and tagline ‘Member of Social Enterprise Lanka’ [*Conditions Apply].
3. We will create various value addition services for our members such as discounts among members and external parties, access to events, exhibitions, and networking opportunities, special insurance schemes etc.
4. We will do a needs assessment for you to identify and prioritise your needs. Then we will organise different types of training and development programmes such as workshops, seminars, coaching, mentoring, consultancy etc. Some of these services will be free, while others will be charged.
5. We will build partnerships with potential business partners and investors for you.
6. We will measure your social or environmental impact using global standards helping you to demonstrate the real value of your business, and its future potential.
7. You will have priority access to our impact investment programmes.
8. You will be eligible for the annual Social Enterprise Awards.

There will be many more valuable services in the future, as we all grow together.