Social enterprise trading arms are a great way for charities to commercialise and become more sustainable in the process.
The Co-operative's latest annual Ethical Consumer Markets report tells us that the UK is close to breaking the £50bn barrier in terms of ethical spending and that half of all consumers avoid products based on a company's reputation for "responsibility". Businesses see this as an opportunity to tailor goods to a social market, but could it represent more of an opportunity for charities to tailor sales to a commercial market?
This isn't simply a matter of whose brand is better placed to sell a responsible or ethical product or service – a high street business or a high street charity. It is more about whether the insight and expertise charities gain in going about their work makes them better positioned to deliver higher quality, socially focused products and services. To be a really effective charity, you will often need a combination of an expert understanding of a problem, unparalleled insight into the populations you are serving and a route to market to those populations and a trusted brand when you get to them.
Is it potentially easier for charities to figure out how to commercialise their expertise than it is for corporations to figure out how to do more good?
Charities have been selling their logos – and at times their principles – to corporations for a long time, but today's consumers are looking for more than a cause-related-marketing campaign. They want to do business with organisations that do well by doing good. Whether those be fast-moving consumer goods, health or educational products or financial services, charities have assets that are commercially viable and can inform product and service development, they just don't always know it.
Many charities are already charging for services and building out commercial product and service lines that sit parallel to their core business. Many more also engage in the high street shop-type commerce, which builds off their brands and goodwill. But the potential of the marketplace greatly outweighs the current gains. There is true risk for charities entering into more corporate activities, but there are also real rewards for those who can be successful. Age UK Enterprises, for example, is drawing upon its expertise in understanding the needs of older people to develop quality products for over-50s, such as travel insurance and mobility aids. Such activities led to a trading income of over £20m in 2011/12.
The Social Investment Consultancy's (TSIC) top tips for making a success of charity enterprise are:
• Talk to your current donors. It may that new capital is available to finance your plans if there is a vision of sustainability at the end of them. Donors want to fund this.
• Be prepared to spend – starting a new business stream need not cost a fortune, but it will cost something. Charities need to be commercial about recruiting the best staff for the job (not just re-assigning current staff who are already paid for) and investing in real quality control, branding and marketing. If you aren't prepared to spend, think again about starting.
• Most important – play to your strengths – build the business around what you uniquely know and the markets you can uniquely reach. Any business launched by a charity should have a head start on any commercial business in the same field, because of its core work. If it doesn't, it's not leveraging your assets.
Posted by Jake Hayman
Jake Hayman is chief executive for the Social Investment Consultancy. TSIC's research, which analyses the growth of various models of charity revenue generation and includes interviews with 50 senior charity leaders representing more than £500m in annual revenues will be launched this month. It will first be previewed at the Oxford Jam social enterprise (un)conference on 11 April and will be launched formally at Toynbee Hall on the evening of 16 April.
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