Young Social Enterprises Surge

The percentage of Australian social enterprises older than 10 years has almost halved since the start of the decade with a surge of young businesses in the market, according to new research.

Melbourne social enterprise Lentil as Anything. Photo: Nils Versemann

In 2010, 62 per cent of social enterprises had been operational for more than 10 years. In 2016 this figure has dropped to 38 per cent, with more than one-third of social enterprises operational for only two to five years.

The Finding Australia’s Social Enterprise Sector (FASES) 2016, from Swinburne University’s Centre for Social Impact (CSI) in partnership with Social Traders, surveyed 370 social enterprise practitioners, social enterprise intermediaries and policy makers. It’s the second time the FASES research has mapped the sector.

Director of CSI Professor Jo Barraket, who also led the first FASES research in 2010, said the number of new entrants into the social enterprise field was interesting and reflected a changing social sector landscape.

“There’s a reasonably high proportion of organisations under five years old emerging this time around,” Professor Barraket said.

“I think social enterprise… has got greater visibility than it did the last time we did the FASES study, I think there are more people and organisations that are self-identifying with the concept of social enterprise.

“We also hear, and there is some evidence through commercial research, that there’s a growing interest among younger people in aligning their career objectives with their personal ethics and so social enterprise and other forms of social business are seen as one vehicle through which that can be achieved. Although one thing many social entrepreneurs would caution is that it’s incredibly hard work, not for the fainthearted.”  

She also said social service sector reform was driving social enterprise at a charity and Not for Profit level.

“The introduction of the NDIS and the quasi-market development that produces, the stronger focus on outcomes-based funding mechanisms, and growth in interest in impact investing – I think all of those things are driving traditional Not for Profit organisations to look at social enterprise models as part of the way in which they function, not replacing but developing up new social enterprise options,” she said.   

Social Traders managing director David Brookes said social enterprise was an increasingly significant part of Australia’s economy.  

“Social enterprise in Australia is on the rise and already contributes between 2 per cent and 3 per cent of GDP and employs over 300,000 Australians,” Brookes said.

“We are well on the way to seeing social enterprise as part of the mainstream, recognised for its contribution to providing innovative solutions for employment and access to services for disadvantaged Australians.”

The research identified social procurement as the biggest opportunity for the growth and further development of Australia’s social enterprise sector.

Social procurement involves organisations choosing to purchase a social outcome when they buy a good or a service.

“The most interesting finding from the whole study is the stress on the need for market development by social enterprises with a particular focus on social procurement, which came through in every single focus group that we ran as the primary opportunity social enterprises saw for increasing their business and growing their impact,” Barraket said.

“Generally speaking there’s an absence of policy frameworks at all levels of Australian government to support social procurement, although there’s certainly examples of good practice happening. I think a more coherent policy commitment to social procurement would be an important first port of call for access for social enterprises.

“The Council of Australian Governments has made a great commitment around stimulating economic activity in Indigenous communities through procuring from Indigenous-owned businesses. It will be great to see a similar commitment to purchasing from social enterprises and also social benefit providers more broadly because not all social benefit is delivered by social enterprise.”

She said beyond government support, the internal capacity of social enterprises to access opportunities from governments, corporates and Not for Profits was a barrier to social procurement.

“Beyond that it’s also about social enterprises internal capacity to access opportunities for contracts from government and the corporate sector, and indeed from the Not for Profit sector,” she said.  

“Part of the issue… can sometimes be their organisational size. There’s potentially opportunities for working together or working across sectors in partnership around different market opportunities.

“Another factor… is the relational nature of all forms of procurement, so developing up relationship opportunities to connect with potential purchasers are the main things.”  

More than 80 per cent of respondents said that broader support from state and federal governments would encourage new growth opportunities for social enterprise.“We’ve had a history of some good policy commitments but generally a very piecemeal approach, not a coordinated approach,” Barraket said.

“At this stage, if we want to see social enterprise develop significantly, I would say we need a more consistent and explicit social enterprise development policy framework, which includes both policy and regulatory questions.

“It’s partly about investing into and growing the ecosystem that supports social enterprise development, and it’s partly about rendering visible, recognising and supporting social enterprises as a field of business activity.”

Barrket said it was uncertain whether the social enterprise sector would see the same level of growth as the past six years.

“On the one hand a lack of coherent government policy is probably a constraint, but on the other hand sometimes benign neglect can actually stimulate innovation and new activity,” she said.

“I’m not sure whether we’re going to see continued growth or whether what may start to happen is not so much an overall growth in social enterprise but growth in cross-sector collaborations and trying to embed social benefit objectives in supply chains between organisational types.”

The FASES research was launched at the Social Traders Masters Conference in Melbourne on Tuesday.